Money Trouble in Your 20s? Back to the Basics (2024)

FAQs

Is it normal to struggle with money in your 20s? ›

Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn't paying you enough, you're struggling to make rent, have no savings, and are being crushed by debt.

According to financial therapists, most money problems are rooted in self-esteem, trauma recovery, or scarcity mindset issues. Getting to the emotional root of your money problems is key to getting the clarity you need to change.

One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.

According to a 2019 CNBC income survey, the average 20- to 24-year-old makes $30,628 annually, while the average 25- to 34-year-old makes $43,524 annually. Averaging the two gives $37,076, a healthy starting point. That equates to about $3,000 in gross income a month before taxes.

The 20s are a time of transition and change, and this can be a difficult and stressful time for many people. The pressure to succeed in career, relationships, and finding a sense of identity can take a toll on mental health. Many young adults experience feelings of anxiety and depression during their 20s.

Being broke in your 20s doesn't mean you blew through a fortune, but that you're working with what you have and are trying to live your best life. Between trying to work and live on your own, you don't want to turn into a monotonous machine that only pays bills.

Lack of self-restraint will make you expose yourself to bad financial decisions and the eventual financial plan failure. As any wise investor would know, wealth is created not by taking one good financial decision but by keeping yourself from bad financial decisions.

The biggest reason you might end up broke is simply math: You're spending all that you're earning — or more. Plenty of less-than-ideal money moves could put you in this position. Maybe you're buying unnecessary things or overspending to keep up with friends over fear of missing out.

You are often broke either because you don't earn enough or because you spend more than you earn. There are three money skills you need to develop; money making, money keeping and money growing skills. You can't keep or grow money you don't have.

Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.

How do you pay yourself first? ›

"Paying yourself first" simply involves building up a retirement account, creating an emergency fund, or saving for other long-term goals, such as buying a house. Financial advisors recommend measures such as downsizing to reduce bills to free up some money for savings.

50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).

Average Savings by Age 25

The Federal Reserve doesn't provide a specific metric for savers in their 20s. Instead, it compiles savings information for Americans under 35. The Fed's most recent numbers show the average savings for the age group that includes 25-year-olds is $11,250. The median savings is $3,240.

If you are between ages 25-29, the average is $49,388 and the median is even further behind at $7,512. If you are between the ages of 30-34, the average net worth is $122,700 and the median net worth is $35,112. Between the ages of 35-39, the average is $274,112 and the median is $55,519.

One's late twenties and early thirties, from an emotional perspective, are therefore the worst part of life. It's during these years that people experience the most negative thoughts and feelings and experience the most mind wandering, a psychological state that has been shown to be detrimental to well-being.

The onset of adolescence, generally between 12 and 14, is the hardest age for a teenage girl. The hormones of puberty cause her to feel her emotions more intensely but she has not yet developed the reasoning skills to know how to handle them.

Yes, it is common to experience feelings of loneliness in your 20s. This can be due to various factors such as changes in life circ*mstances, differences in personal values and interests with friends or family, or difficulty in making new connections.

Peak years are generally thought to be late 40s to late 50s*. The Latest figures show women's peak between ages 35 and 54, men between 45 and 64. After that, most people's incomes typically level off. Promotions favor younger people with longer futures*.

Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.

Is 25 too late to start your life? ›

Is 25 too late to start over? No, 25 is not too late to start over. In fact, it's a great time to reassess and refocus your career goals.

People who have faced severe financial difficulties in the past may develop chrometophobia, because they may have been traumatized by the situation and fear it may occur again, explains Dr. Daramus.

Poor budget choices and failure to follow simple basic financial principles can send even the richest people with a high net worth into debt.

In a survey conducted in 2019, 86% of Americans said that they were either broke or had been in the past. According to 28% of millennials, overspending on food led them to that point. In general, people considered having only $878 available either in cash or a bank account to mean they were bankrupt.

The amount of money needed to be considered financially stable is subjective and depends on a person's individual situation. But generally, having a net worth of $1 million or more can indicate that someone is financially stable or secure and has a good grasp of money management.

If you're earning $100,000 per year, your average monthly (gross) income is $8,333.

How much is $4000 a month hourly? ›

$4,000 a month is how much an hour? If you make $4,000 a month, your hourly salary would be $23.08.

$5,000 a month is how much an hour? If you make $5,000 a month, your hourly salary would be $28.85.

Yet, while it's critical to pay all your bills on time, saving for your future can't always take the back seat. When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial health.

Paying yourself first is considered the golden rule by financial planners. You can accomplish it by taking as little as $50 to $100 each payday and putting it into an investment vehicle, such as a savings or retirement account.

Our recommendation is to prioritize paying down significant debt while making small contributions to your savings. Once you've paid off your debt, you can then more aggressively build your savings by contributing the full amount you were previously paying each month toward debt.

Getting by on $1,000 a month may not be easy, especially when inflation seems to make everything more expensive. But it is possible to live well even on a small amount of money. Growing your income.

Here's an explanation for how we make money . Many Americans spend a pretty penny each month to keep a roof over their heads, food on the table and a means of transportation. Other items commonly found in household budgets include education, child care, health care, retirement savings and entertainment.

If you're in your 20s, experts recommend that you should save anywhere from 10% to 25% of your income. For many, that just isn't feasible. If so, you can save as little as 5% and build from there.

At least 53% of Americans admit they don't have an emergency fund, according to a recent poll conducted by CNBC and Momentive. That figure skyrockets to at least 74% for those with a household income below $50,000 per year.

It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints like, wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.

How much does an average 20 year old have saved? ›

Of “young millennials” — which GOBankingRates defines as those between 18 and 24 years old — 67 percent have less than $1,000 in their savings accounts and 46 percent have $0.

Only 2% of 25-year-olds make over $100k per year, but this jumps to a considerable 12% by 35. That's a whopping 500% increase in the share of people making $100k or more. 21% of 66-year-olds make $100k per year or more.

1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More.

Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn't paying you enough, you're struggling to make rent, have no savings, and are being crushed by debt.

Pew found that 60% of 25-year-olds were “financially independent” in 2021, compared to 63% in 1980. The analysis highlighted five frequently cited milestones of adulthood: having a full-time job, being financially independent, living on their own, getting married and having a child.

There's angst, discovery, unpredictability and a sense of self-realization. It's the time we truly leave childhood behind and enter a whole new world of responsibility. It's also a time that demands quick decisions about careers, relationships, finances and a lot more.

Financial experts typically recommend saving up three to six months' worth of necessary expenses in order to have a healthy, fully-funded emergency account. So, there's no specific number that a person in their twenties needs to have in their emergency fund — it should be based on their necessary monthly expenses.

How much money should you have saved in your late 20s? ›

Many experts agree that most young adults in their 20s should allocate 10% of their income to savings. One of the worst pitfalls for young adults is to push off saving money until they're older.

One's late twenties and early thirties, from an emotional perspective, are therefore the worst part of life. It's during these years that people experience the most negative thoughts and feelings and experience the most mind wandering, a psychological state that has been shown to be detrimental to well-being.

Being 20 is that awkward age because it's when many of us start to realize what we want in life. Just because you are 20 it doesn't mean anyone has the right to rush you, or make you feel like you need to be at a certain place in life and have it all together.

Although the 20s are typically considered the years of exploration and having fun, depression in young adults is not uncommon.

From age 18-24, only 1% of earners (7% altogether) earn $100k per year or more. This makes these age groups by far the lowest earners in the US. Americans make the most income gains between 25 and 35. Only 2% of 25-year-olds make over $100k per year, but this jumps to a considerable 12% by 35.

Share: You should generally save between $6,000 and $12,000 before moving out. You'll need this money to find a place to live inside, purchase furniture, cover moving expenses, and pay other bills. You'll also want to have enough money saved up for an emergency fund before moving out.

Alice Rowen Hall, director of Rowen Homes, suggests that “individuals should aim to save at least 20% of their annual income by age 25.” For example, if someone is earning $60,000 per year, they should aim to have $12,000 saved by the age of 25.

Many have graduate degrees with educational attainment serving as the main distinguishing feature of this class. Household incomes commonly exceed $100,000, with some smaller one-income earners household having incomes in the high 5-figure range.

Is 10K a Good Amount of Savings? Yes, 10K is a good amount of savings to have. The majority of Americans have significantly less than this in savings, so if you have managed to achieve this, it is a big accomplishment.

Of “young millennials” — which GOBankingRates defines as those between 18 and 24 years old — 67 percent have less than $1,000 in their savings accounts and 46 percent have $0.

Is 100k in savings a lot? ›

But some people may be taking the idea of an emergency fund to an extreme. In fact, a good 51% of Americans say $100,000 is the savings amount needed to be financially healthy, according to the 2022 Personal Capital Wealth and Wellness Index. But that's a lot of money to keep locked away in savings.

Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.