Alamy In your 20s, you’ve got a lot of advantages over your older coworkers. You’re young and full of energy, your health is probably the best it will ever be, and your costs are far more flexible than they will be later when you’re juggling children’s activities, a mortgage, and aging parents.
The downside, though, is that in your 20s, you’re likely still building your credibility in your chosen field. As a result, your salary is likely on the smaller side of what you can be taking home once you’ve truly established your career. With that smaller salary comes less of a margin for error when it comes to making ends meet.
Still, by following these four tips, you can take advantage of your 20s to help yourself much more easily cover your costs — both now and later.
1. Think like a broke college student. At its core, making ends meet means having enough income to cover your costs of living. The lower you can keep those costs, the easier it is to cover them, even on an entry-level salary. Even if on paper it looks like you can “afford more,” living cheaply while you can is the most effective way you can make ends meet.
Some broke college student-like lifestyle options include: driving a reliable, used car; living with one or more roommates; bargain-hunting for clothes in thrift stores; and cooking in bulk and relying on leftovers. The secret to this lifestyle is that you’re covering key essentials in life (food, clothing, shelter, and transportation) in a way that minimizes your costs. The less you spend on essentials, the easier it is to make ends meet overall while still having a life.
2. Finance your own big purchases. Once you have a steady paycheck, it starts to get tempting to think of spending in terms of “I can afford that — it’s just $100 a week or $400 a month in payments.” The reality is that you need to keep your eye on the total price you’re paying — the “sticker price,” plus any sales tax you pay, plus any interest you pay to finance the purchase.
If there’s a big-ticket item you want to buy (like a new car), set up a savings account and transfer what would have been the payments until it has enough to cover the purchase price plus sales tax. Then go out and buy it with the cash you’ve saved.
You’ll save on interest charges (and maybe even earn a little interest along the way), and your cash flow won’t be any worse than had you bought on the payment plan.
(But why not get low-interest financing on that new car, you might ask? First, you’re in your 20s: Without a long, strong credit history, you’re less likely be able to catch that low advertised rate. Second, walk onto the car lot with cash instead of looking for a loan, and the dealer will almost certainly offer you a rebate.)
As a bonus, should your tastes change or should life throw you a curve ball while you’re socking away cash for that big ticket purchase, the beauty of cash is that you can change what you use it for.
3. Budget for fun. Life’s too short to pinch every penny, and a budget that leaves no room for fun is one that you won’t likely follow for very long. Once your basics are covered, make sure there’s money from your income that you set aside to enjoy life. Then stick to that targeted spending level. After you’ve made the switch, you’ll probably find you’re enjoying yourself more when you no longer have to worry about the after-party debt hangover.
4. Earn a few extra bucks. Remember that the two parts to making ends meet are your spending and your income. There’s nothing wrong with picking up an extra shift or two or working overtime if you’re hourly or with moonlighting if you’re salaried. Every little bit of extra income helps, and if that extra cash puts you over the top to where you can reliably make ends meet, then it puts you a step ahead of everyone who’s still struggling to figure that out.
An extra job or overtime is also a great way to start aggressively paying down any debt you have. The faster you wipe out that debt, the less you pay in interest. In addition, once the debt is completely gone, you free up the entire payment amount to put towards the rest of your life.
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Following these four tips can get you to the point where you’re reliably making ends meet today and well on the path towards a lifetime of financial freedom. Perhaps best of all, you’ll quickly notice the improvement. Once you reach the point where you’re reliably making ends meet, you’ll feel like a huge weight has been lifted off your shoulders and feel the tremendous stress melt away.