Four Essential Steps to Elevate Your Finances in Your 20s

Your twenties are notoriously intimidating – take it from me. With new learnings thrown at you from every angle, like taxes, 401Ks, and bills, many people (including myself) are beginning their careers with little guidance on how to set up their finances. The best thing I did at this stage was learn about my finances, which made me more confident about my future and less stressed about the present.

Let’s break down some of my best tips to take control of your finances in your twenties and how the AAA Daily Advantage Visa Signature® Credit Card can help you get there.

Create an Emergency Fund

Life is unpredictable; many of my twenty-something friends have abruptly lost their jobs or switched living situations. I want to protect myself in the case of a sudden change, so I’ve dedicated the last few years to building up four to six months’ worth of money in an emergency fund for an added sense of security.

I recommend setting up monthly automatic transfers to a savings account and using your cash back rewards as another savings method. The AAA Daily Advantage Visa Signature® Credit Card earns you 5% Cash Back on grocery purchases, which you can redeem and transfer into your emergency savings account.

Build Your Credit

With my parents’ guidance, I opened my first credit card at 18 but still didn’t understand what credit was and how to build it. I always paid my balance on time and built up my credit score, but after graduation, I decided to close that card and open a new card with better benefits. Soon after, I realized my mistake – I lost all that credit history and tanked my credit score! If I’d spent more time learning about credit history, I could’ve saved myself from losing years of progress.

I recommend building your credit early with a no annual-fee, cash-back rewards credit card and keeping it open for as long as possible! One excellent option is the AAA Daily Advantage Visa Signature® Credit Card. This card has no annual fee, no foreign transaction fees, and high cash-back rewards on frequent spending categories like groceries and gas. For people in their twenties looking to build credit and get rewarded for everyday spending, this card is a great option.

Open a Roth IRA

At 20, I started investing in my Roth IRA. Today, my money has returned over 14%. The money you save in a Roth IRA can earn you interest on the interest it earns in your account, a concept commonly referred to as compound interest.

It might sound strange to think about retirement in your twenties, but when it comes to investing, time is your best friend. Even if you only put a tiny amount of money in your retirement account, it can grow exponentially and set you up for future financial success!

Track Your Spending

When I first moved to New York City after college, my finances overwhelmed me – I even started to doubt my decision to move to one of the most expensive cities in the world. I wasn’t making a lot of money, and it felt like the only way to meet people and have fun was to go out with friends, buy clothes, and dine at expensive restaurants. I was overspending every month until I ultimately decided to track every dollar I spent.

I started tracking my spending with a simple Excel sheet where I summarized all my expenses. Soon, it gave me insights into my spending patterns and allowed me to identify where I overspend. After a few months of diligent tracking, I stopped going over budget and created a clear path for reaching my financial goals. It only takes me 10 minutes per week to track, so there are no excuses for me not to do it!

Your twenties are a time of change and self-discovery; there’s no better time to set yourself up for future success. You’ll never meet anyone who says they wished they waited longer to take control of their financial life. The time to start is now, and with these four simple steps, you’ll be well on your way.