How to do financial planning in your early 20’s

With the financial up and down in individuals life, it is sole important to do right financial planning that would support as a walking stick in his/her hard times.

A better early money planning make you financially free in your mid-age. It helps you fulfill your dreams, overcome bad fortune, fight inflation etc.

But how to make an early and right planning regarding your finance. What to do and what to not, How and where to Invest. We are here to cover out all of these in this post.

Do and Don’ts in your 20’s

First of all build healthy spending habit, means you should know the value of money and spend it wisely. Generally youth at their starting 20’s waste the money like water.

Avoid taking loans unless super necessary specially at your twenties. Whenever you take loans, you get bound in a way.

Education and health loan can be considered at some point as it is a human investment. But never take personal loans, loans for car, for house or other big stuffs at your twenties.

This is because, at your twenties, which is basically a struggling period for majority, no one expects you to be rich, to have your own car or house. It is ok not to have your own car or house at your starting twenties. It’s ok not to go in luxurious restaurants with your friends and chill out.

If you are taking education, please take it at your own head instead of your parents. Good thing is that education loans come at low interest rates.

The funda is quiet clear, avoid taking any loans, reduce your expense to get luxurious moments and invest that saving. Definitely you will find yourself financially free after some time as compared with your friends who spend money at non-necessary things and not invest.

How to Invest in your 20’s

The sooner you would Invest, better would for you. 20’s is one of the best era of your life to invest. As this period of time a person has comparatively less financial responsibilities. This is the time for any person to learn the value of money and its earning way. 

If you would invest in your 20’s, definitely you would see its results in your your coming 30’s and would feel comparatively more financially free. Here we are going to give you some of the best way to invest in your 20’s.

Investment in Education

Some of you might thought that, oh this is not the money making investment. But believe education is one of the best Investment in your 20’s. Invest in higher education, learn some cutting edge skills.

Skilled knowledge eventually brings the money. It is the base on which 30 to 40 years of your professional life depends. These days people are making millions from there knowledge and skills either working for someone or doing freelancing.


Insurance is the type Investment which gives you return at your bad times . It is actually a planning for something that is unseen.

Any bad thing can happen in life as life is full of un-expectancy. This is how the life goes. Taking Insurance is actually making you and your family secure financially by Investing some amount regularly.

So there are only two types of Insurance I would recommend you to take at your 20’s, first life Insurance and second health Insurance.

If you are young, which is definite in your twenties, and don’t have any bad habit, you can easily get term Insurance at a very affordable premium. 

Money making Investment

When you are in your early twenties, definitely you just enrolled in your job, this means, you are getting lower salary and hence low taxes on it. Some may even out of this tax slab. This means you are getting highest in-hand salary in terms of percentage.

Also, as you are just a beginner, no one is expecting you to have cars, big flats, and living above the normal life. It is ok to look like average in your starting days of earning. You should take advantage of this and Invest your monthly savings.

Optimal Investment Ratio : Though you can Invest as much as you can, but there is a basic rule in finance. That is, Invest atleast 20% of your in-hand monthly salary.

Which means, if you are getting $1000 monthly in-hand from your job or any Income source, then Invest atleast $200 monthly.

Where to Invest in your 20’s

As oppose to the old age Investment where an Individuals intention is to conserve the money and don’t take any risk of loosing money, Investment at youth is comparatively more flexible.

At your early twenties where you have just stepped into the Investment market, you can take the risk. Just keep remember, more risk is equal to more profit.

At this age you have invested for the next ten to twenty years, you will face various up and down in the market and hence your in your money worth too.

The basic rule is that, just Invest in something and stick to it. Don’t panic with the current net worth of your asset. It may collapse and rise several times.

At your twenties, I would not recommend you to Invest in Fixed Deposits. Rather I would suggest you to Invest only in Stock and Bonds. You can also consider cryptocurrency as it is super popular these days. Just keep remembering its volatility.

Stocks : This is a kind of growth-oriented investment where you buy the asset share of an organization whether private or government by paying the amount worth of asset value.

You make huge profit in your investment if the share of that organization goes high. It also has risk of reduction in your investment value if the stock prices goes down.

Bonds : It is a kind of Fixed-income investment where you invest by lending money to the company or government for a set period of time in-exchange for regular interests on the investment.

You earn interest on your investment amount from the first month of issuing and that interest adds to the bond and increase further in compound way.


Here are some tips on how to do financial planning in your early 20s:

  • Set financial goals. What do you want to achieve financially? Do you want to buy a house? Save for retirement? Pay off debt? Once you know your goals, you can start to create a plan to reach them.
  • Create a budget. This will help you track your income and expenses so you can see where your money is going. Once you have a budget, you can start to make changes to save more money.
  • Pay off debt. If you have any debt, make a plan to pay it off as quickly as possible. The interest you pay on debt can add up over time, so it’s important to get rid of it as soon as you can.
  • Build an emergency fund. This is a savings account that you can use to cover unexpected expenses, such as car repairs or medical bills. It’s a good idea to have enough money in your emergency fund to cover 3-6 months of living expenses.
  • Start saving for retirement. The earlier you start saving for retirement, the more time your money has to grow. Even if you can only save a small amount each month, it will add up over time.
  • Invest your money. There are many different ways to invest your money, so it’s important to do your research and find an investment strategy that’s right for you. Investing can help you grow your money over time.
  • Protect yourself. Get insurance to protect yourself from financial setbacks. This could include health insurance, car insurance, and homeowners insurance.

It’s also important to develop good financial habits in your early 20s. This includes things like paying your bills on time, avoiding impulse purchases, and living within your means. By following these tips, you can set yourself up for financial success in the years to come.

Here are some additional tips for financial planning in your early 20s:

  • Talk to a financial advisor. A financial advisor can help you create a personalized financial plan that meets your specific needs and goals.
  • Take advantage of free resources. There are many free resources available to help you learn about financial planning. These resources can include books, websites, and online courses.
  • Don’t be afraid to ask for help. If you’re struggling with your finances, don’t be afraid to ask for help from a friend, family member, or financial advisor.

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