If you’d told me four years ago I’d be working as a marketing director for a wealth management firm, I would’ve laughed. In my dreams, I was in a big advertising agency in New York, LA, or Chicago. But, life has a funny way of working out – for the better, I believe. Not only do I truly love my job, but it gave me an advantage most people my age don’t have – knowing the critical things to do with your money in your 20s.

A Generation Lost?

As an almost-27-year-old, I can confidently say I’m learning the right way to build the foundation for a successful financial future. But unfortunately, many in our generation aren’t. And while we’ve been dubbed the generation who thinks they “know it all,” there’s a lot we don’t know. Especially when it comes to money.

And it’s not because we aren’t smart. It’s because there’s a lot of bad advice out there. Thanks, in large part, to a media over-saturated with talking financial heads, and an internet where you can drown yourself in financial information overload. Perhaps that why a lot of people our age struggle to find their footing when it comes to money. We don’t know where to find the right answers, let alone what the right answers even are, so financial matters fall to the bottom of the priority list. Or we put them off altogether, because we’re under the misleading impression that there’s always plenty of time to catch up.

Pile on top of that skyrocketing student debt, crippling credit card debt, absorbing all the other costs associated with “adulting,” the early stages of your financial life going from simple to complex, and you have the perfect financial storm. A storm that can cause you to easily fall into the traps, and start your financial journey on the completely wrong foot.

10 Critical Things to do With Your Money in Your 20s

When you hit your mid-20s, you start asking, “What do I do?” Do I save money, or pay off debt? When should I start investing? What kind of account should I invest in? How much money should I be saving? If I don’t start saving now, I can always catch up later, right? How do I organize and prioritize my goals? Heck, someone just tell me the first step to even take!

I did, and luckily, the right answers were just a short walk down the hall. And I want to share some of those answers with you, in the hopes they’ll help you on your way to building a solid financial foundation.

Here are 10 critical things to do with your money in your 20s:

1. Save your money. I can’t stress this enough – save your money people! Pay yourself first, every month, and you’ll be much further ahead than most. If you fail to save your money, everything else in your financial life has to work that much harder to pick up the slack. An ideal savings rate to aim for is 10% – 15%. And that’s not an outrageous number that can’t be reached – I know, because I’ve done it. I’ve saved as low as 10% to upwards of 19% of my income annually over the last few years.

2. Limit your credit card spending. There’s a good rule of thumb I’ve been told by the adivsors in our office – if you can’t pay for it in cash, you probably can’t afford it. We live in a right now society. But, waiting to buy something until you have the cash to afford it will always pay off more than impulsively spending money you don’t have. And if you do have credit cards, pay them off in full every month. I’ve limited myself to one credit card, and mentally set a monthly limit for myself that I don’t exceed. Anal? Maybe. But I have no credit card debt.

3. Don’t lock up your money. One of the biggest mistakes I see people our age make is dumping all their money into their 401k. You’re locking that money up, at a time in your life when you’re going to need as much liquid money as possible. When I first wanted to start investing, my advisor I work with in our company wouldn’t let me. That’s because you have to build up your liquid savings first. Then you should start investing. And in my case, I’m not investing in a qualified account – instead, my money is in a non-qualified account similar to the allocation of a 401k or IRA. So, if I need it, I can get it. 401ks aren’t bad – in fact, they’re an important tool for retirement. But you need to make sure you fill your buckets in the right order. Otherwise, you can get into trouble down the road and be tempted to take out loans on your 401k.

4. Protect yourself. This is probably the last thing on anyone’s mind when you’re in your 20s. It was definitely the last thing on my mind. But, this is the most ideal time in your life to protect yourself. Chances are, you’re never going to be as healthy as you are right now. And you never know what’s going to happen if you wait. For example, I put it off, and then was diagnosed with ulcerative colitis in 2014. As a result, I got a lower rating on my life insurance policy, which means increased premiums. But the point is I’ve protected myself, and when I have a family one day, they’ll be taken care of should something happen to me. You can easily lock in your insurability when you’re young with an inexpensive term life insurance policy.

5. Fill up your short-term bucket. In the world of finance, your money is generally divided between three buckets – short-term, intermediate, and long-term. Your short-term bucket is your cold hard, liquid cash that sits in your savings account at the bank. Fill up this bucket first, before any other bucket. You should always have 3-6 months of liquid cash reserves to get you through the hiccups when life happens – like when I had to pay $600 to put all new tires on my car this past spring. Or had to spend $1,500 on new furniture when I moved. And the great thing is since I have savings, I can pay for things like this without using my credit card.

6. Eliminate bad debt. Bad debt is high interest, short-term debt – like credit card debt. If you have it, make paying it off a top priority. Carrying debt directly affects your ability to save and invest. And paying out interest rates of 15% and higher is crazy! Think if the money you invested made 15% – we’d all be a lot happier. You also shouldn’t be investing when you have high amounts of short-term debt. Chances are, the interest you’re making isn’t more than the interest you’re paying out. Note – if your short-term bucket is full, you shouldn’t have to rack up credit card debt.

7. Prioritize your financial goals. Nothing with money happens overnight. You have to understand it’s a journey, and it always will be. Write down your top financial goals at this moment in time. Then determine which bucket they belong in – short-term, intermediate, or long-term. Once you do this, then you can start formulating an action plan to achieve that goal, and start deploying your money appropriately. It’s helpful to talk through your goals with someone who’s already achieved them, like your parents.

8. Start investing. The earlier you can start investing, the better. The longer you wait, the less time your money has to grow. But remember, do it the right way. Eliminate short-term debt, build up your liquid savings, and then start exploring the idea of investing. You may want to think twice about putting your money in a qualified account right now. Keeping it in a non-qualified account gives you access to that near-liquid money, should you need it. Then, you can always put it into a qualified account down the road once you’re more settled. You should also consider talking to a professional investment advisor before you invest. Not just going out there and trying to figure it out for yourself. Robo-platforms have made investing easy and convenient as well.

9. Sign-up for a software that helps you manage your financial life. I’m talking about a one-stop software that shows you every piece of your financial puzzle. Not a robo-investing platform that only focuses on one area of your financial life. Finances are complex, it can be hard to understand what you have and how it all works together. That’s why aggregating everything into an organized, easy to understand format is crucial in helping you make smarter decisions. We offer JB Wealth Builder to our clients, which shows them their current financial position in real-time. Another example of a software like this would be Hello Wallet.

10. Consider hiring a financial advisor. I would’ve never known the right way to build my financial foundation if I didn’t work at Jarred Bunch. Sure, I could’ve asked my parents for help, but even they would be limited in the advice they could give. To navigate the complex world of finance and investing, and to ensure you build a solid foundation, you’ll probably need the help of a professional advisor. Talk to your parents and friends about who they work with – you want to make sure this is someone you trust. Also, make sure they are truly an advisor, not a broker. You can learn more about the difference here.

Why Does it Matter to You?

Your 20s are an important time in your financial life. It’s the stage that sparks your financial growth, and sets the pace for the rest of your life. Getting it wrong now can have detrimental effects down the road. The tips discussed here are a good way to help you start your journey in the right direction.