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money milestones
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In this article, we’ll be covering what major money milestones you should aim to accomplish in your 20s. The idea for this article came after a friend of mine wanted to know what else she needed to get done in her 20s to achieve financial freedom.

Now, when you’re starting off at the age of 20, I feel like the college and education system just don’t really teach you that much when it comes to managing the adult world of finance. So, this article is meant to be a one-stop shop for all of your financial needs to get a solid financial foundation going.

I hope that you share this article with a friend who might need it, and then it becomes a resource for you in the future that you can reference at any point in time. With that being said, let’s get started.

This article first covers what it takes to build a financial foundation in chronological order, and that means we need to start with the first financial milestone which is to

1. Pay Off Debt or Stay Out of Student Debt

Chances are, if you graduate college you’re likely going to have some student loans, and you might even have some credit card debt. The average student loan debt in America is $39,000, and oftentimes if you’re going to a four-year institution or even a two-year institution after transferring from community college, you’ll likely take on some student loan debt.

One of your first major milestones in your 20s is to figure out a plan to pay off this debt. Usually, federal student loan interest rates are between 4 and 6%, and you’re going to have many of your friends probably tell you that you can get an average of 8% on your money by being invested in the market. They’re going to say things like “why are you paying off your debt when you can just invest it and get a higher return?”

While you can earn 8% in the market, many people often forget that you can also lose that money as well if the market doesn’t do as hot. When it comes to paying off student loan debt, try to prioritize it over investing because at least you know it’s going to give you a guaranteed 46% return on your money. And the sooner you get rid of student loan debt, the quicker that weight is going to be lifted off of your shoulders, and you can afford to take on more risks in life.

Why You Need to Pay Off Debt

The point of paying off debt is more so that you can afford to take these risks in your 20s uninhibited. When you’re debt-free, you might take a chance on a start-up or a risky business venture that could net you maybe a 50x return in the future. But when you’re burdened with debt, you’re basically a slave to that debt, and you have to continually service it. This means that you might have to compromise your best learning years by being forced to take a job you might not enjoy.

If you’re at the point in your life where you still haven’t entered college yet, you may want to reconsider if a four-year institution is actually worth it for you, because taking on massive student debt, in the long run, is going to be hard. Also, you can just go to a community college for two years, and then transfer into that same four-year institution in your junior year.

By the time you graduate, it’s all the same anyway no one really cares that you went to a community college your first two years. They’re just going to see where your diploma came from, and if it’s the same as all your peers, then there you go.

Alright, the next milestone you should be hitting which should help with the first milestone of paying off debt is to

2. Get a Job Where You Can Earn income and Get Experience

In your 20s, you want to try out as many jobs as possible, and earn income at the same time. One of the things that you should strive for before the age of 30 is that you’ve hopefully found a career that you love and that you can work in for a while because the highest earning potential usually comes from being in the same industry for a long time.

Think of it this way, would you rather hire a plumber that has one day of job experience, or someone who’s seen 20,000 clogged toilets in the span of 30 years. You’ll probably want that second plumber because he knows exactly how to fix your pipes in a fraction of the time.

The people that can demand the most amount of money in the market typically have been in their jobs for a long time. In our 20s, we want to figure out what that is, or at least hone in on exactly what that’s going to be. Now if you don’t find your job for life in your 20s that’s no sweat either, this milestone is more about getting experience working.

Having experience is one of the most valuable things you can learn because it’ll also teach you how important it is and how hard it is to make money. Assuming you get a job, the next major milestone in your 20s to hit is

3. Trifecta

Basically, am going to call this milestone the Trifecta milestone, and it consists of the following; number one delayed gratification, number two staying out of credit card debt, and number three building your credit wisely. So let’s break this down, typically, your 20s is when you’ll get your first credit card. Now, credit cards are not evil per se, but they can really help you build your wealth in the 20s, especially if you use them correctly.

That means you want to pay off your credit card in full so that you don’t fall into the recurring cycle of owing money on your credit card. Credit card interest rates are on average around 18%, so these can really kill your financial foundations if you aren’t responsible for your spending with credit cards.

If you are able to stay responsible with your card, you’re gonna be able to build some solid credit. The biggest benefit of having a great credit score is getting a lower interest rate on loans, and financing for homes, and cars. Having a good credit score can also help you get approved, for rentals faster.

Now, a lower interest rate, I know it sounds like a boring benefit but on a mortgage, for example, the difference in just a 0.5% interest rate is absolutely crazy. On a loan amount of $400.000 with a good credit rating, you might qualify for a loan rate of 5% which amounts to $373,000 in change and interest over 30 years.

Now, pretend you have a slightly worse credit score, and that means you qualify for a five and a half percent interest rate. Over the course of 30 years, that same loan is going to cost you about $417,000 in interest. That actually amounts to a difference of $44,000 over the course of the loan.

That’s crazy because getting a good credit score is not that hard as long as you pay off your bill on time and you stay out of too much debt. Now, here’s the thing though, about that you can never miss a payment. So to illustrate how important this is, If you make 99% of your payments on time, you basically get a B. So, literally with a credit score, you cannot afford to miss any payments at all and that’s why you should always have auto-pay when you can.

Delayed Gratification

The last part of this trifecta milestone is simply delayed gratification, if you can delay your impulse purchases in your 20s, you’re going to have an easier time compounding your wealth for the future. That’s simply due to the fact that one dollar today is going to be worth more than one dollar in the future. The more capital that you can accumulate when you’re young, that means the bigger the base is going to be that you’re going to have when it comes to investing and compounding your wealth.

So let’s pretend we have two persons A and B, they both don’t invest from the ages of 20 to 30, but at least they save money. Person A saves up $500 a month, by the time they’re 30, they have $60,000 ready to invest. Person B on the other hand, save up $750 a month, so they have $90,000 by the time they’re 30 and ready to invest.

Now pretend at the age of 30 they both start to invest in the market and they get eight percent until they retire and they both do the same thing. By the time they’re 65, person A is going to have an $887,000 ending balance, while person B is going to have over $1,330,000. That’s a difference of $443,000 just because person B was able to save a couple of hundred dollars more per month than person A from the ages of 20 to 30.

So the next time you’re looking at buying those Gucci slides, think twice because by delaying that purchase you might be able to afford something way nicer later on in life like a pair of Crocs. That was a joke, hopefully, you got it.

4. Saving Goal

The next big milestone in your 20s you should accomplish is having a savings goal either for a house, a wedding, a dream vacation, or taking a risk like starting a new business. Having a savings goal, I think forces you to create a budget, and that way you can work backward from the goal itself. A big part of your 20s is navigating the fact that you’ll be making an income, and your goal is to not spend all of it.

In fact, if you can live below your means, it’s almost always a good idea because it kind of goes back to this idea of delayed gratification. By living below your means, as you start to earn more income, you’re going to be able to save for big goals like that down payment on a home, a wedding that you’ve always wanted, or an engagement ring.

Personally, I’ve been spending roughly the same amount of money every single month since the year 2019 because I track it in my expense tracker app. Basically, my income relative to my expenses was not that great, In fact, I was barely saving any money after taxes.

But as my income personally grew, my expenses have always stayed roughly the same, and I’ve been living like I’ve been making the same amount of money every year. Result of that, I now have a lot of money invested, I was able to achieve this because I just really haven’t changed my lifestyle that much.

The thing with increasing your lifestyle and buying new clothes or new shoes is that they’ll make you happy for like a temporary amount of time, but after that initial honeymoon period ends your happiness level is right back where it started. So in your 20s you really want to focus on the things that make you happy, that aren’t tied to spending more money, and that’s going to go a long way in your life.

But now, you’re probably wondering what’s the right amount to save? The next major milestone you should hit is

5. Building a Budget

Now, many financial experts recommend the 50, 30, and 20 rule which helps you to distribute your income. We’ll get right into that, but first, I want you guys to do the following it’s going to take you about an hour or two but it’s going to be well worth it.

Basically, you’re going to go into your bank statements and your credit card statements, and just comb through them. Categorize each expense into a need versus a want, if it’s an expense like rent, utilities, car insurance, or health insurance, that would be a need. If you have discretionary spending like Jamba juice, waffle house, or Netflix that would go into the want category.

The 50, 30, and 20 rule states that your income should be divided 50% into needs, 30% into wants, and 20% into savings. So that means if you’re making about $5,000 a month, $2,500 would go towards your needs like rent and utilities. $1,500 would go into discretionary, and $1,000 should go towards saving for future investments.

Speaking of investments, the next part of the article is the fun part assuming that most of you guys have most of your debt out of the way, a working budget, an income, and at least an emergency fund. This is where you want to start

6. Investing For The Future

You can do so by starting a retirement account. In America, there are two types of retirement accounts that most people will want to open. The first is the Roth IRA which is an individual retirement account, and the second is a 401k which is an employer-sponsored account.

Now both of these accounts have a Roth and a traditional version. The main advantage of having a Roth IRA is that your earnings and profits are growing tax-free, which means when you retire and you withdraw all the earnings on this account, you won’t pay any taxes on it at all. That’s what the Roth portion of the IRA denotes, it’s tax-free when you retire, but when you put in money it’s actually taxed.

Now, this benefit is so good that the government limits how much you can contribute to it. If you’re under the age of 50, you can only contribute $6,000 a year to your Roth IRA. If you’re over the age of 50, you can contribute $7,000 a year. An extra thousand as a catch-up mechanism.

The other notable thing is that you need to contribute to the Roth IRA as I said with after-tax dollars. So in a traditional IRA, money going in is going to be pre-tax, but coming out you will be taxed on it. In a Roth IRA, it’s the exact opposite, money going in is going to be taxed already so when you withdraw it they’re not taxed at all.

Earned Income

In order to contribute to a Roth IRA, you need to have what’s called earned income which means that you need to get your income working for someone else, yourself, or from a business that you own. You can open up a Roth IRA at any brokerage like Fidelity, Schwab, Vanguard, Wealthfront, or Acorns, and all these brokerages should make it really easy for you guys to sign up for one.

Once you sign up for one though, you want to transfer money from your normal bank account to your Roth account, and then the final step is to actually purchase some investments in the account. We’re going to talk about what to invest in shortly, but first, let me cover the 401k really quickly.


The 401k traditional Roth is an employer sponsor account, which means you can only start it if you work for an employer that offers it as one of their employee benefits. Many corporations will offer this type of retirement account, and it’s pretty common across most companies. You can contribute a portion of your paycheck into the 401k, and this account has a much higher contribution limit of $20,500 per year in the year 2022.

Anything you contribute to this account in the traditional 401k is pre-tax dollars which means that you get taxed later on, but basically, you defer your taxes to later. For many people, their income and therefore their tax rate is going to be lower at retirement, so they’re paying a smaller amount of tax on the money in the future, and that’s why they would want to defer their taxes until later.

Now, because this is a retirement account, you’re going to be taking penalties for withdrawing any funds from it before the age of 59 and a half. After the age of 59 and a half, you can withdraw penalty-free.

Biggest Advantage

One of the biggest advantages of the 401k is that if your employer matches the contribution, that’s basically like free money. A lot of employers these days offer a 401k match which is a benefit if you work at a company. Oftentimes if you contribute 5% of your paycheck to your 401k, companies will match your contribution up to a certain amount. That means it’s like free money for you and your retirement in the future.

If your employer offers this, it is an absolute no-brainer you must do it because it is free money again and it is going towards your future anyway.

The last thing to note is that, yes you can have a 401k and a Roth IRA at the same time. After you have either one of them or both of them, you need to figure out where to invest the money. For most people investing in an Index fund or ETF is all that you need to do.

Index Funds

An Index fund is a type of pooled investment that you can buy in your retirement account or brokerage account. When it comes to index funds, an index fund is basically a pooled investment that buys into many different other investments. For example, if you were to buy an S&P 500 index fund, by buying that one fund you would own a small percentage of every stock in the S&P 500, thus you track the entire index.

That would automatically provide you with diversification because your investment is now spread across the top 500 companies in the US. And by buying an index fund, It’s actually way cheaper than buying into each of these 500 companies individually on their own. Index funds are usually safer bets in a retirement account because based on the average over the course of the past 80 years index funds have been proven to return about 8% a year.

Ticker Symbol

Some years are going to be higher than others, but on average you can expect your money to grow and compound over time. The index fund I love is the ticker symbol VOO, it’s vanguard’s S&P 500 ETF.

While this is not financial advice, you can invest in what you like. There are a ton of ETFs and index funds out there, if VOO or your ETF is not available in your 401k, just look for another type of index fund that invests in a lot of companies in the united states, and you should be at least pretty good.

For those of you buying index funds, you want to make sure that you hold them for the long term. If you make huge changes whenever the market fluctuates, you might miss out on some gains. Bank of America found that since the 1930s if you sat out the 10 best days per decade, your returns would be just 45% versus the alternative %20,000.

They also found that the probability of losing money over one day in the stock market is a little worse than a coin flip at %46. but the probability of losing money in the market declines to just six percent if you are invested for at least 10 years.

JP Morgan’s Discovery

Another reason why it’s crucial to stay invested is that usually, the best days in the market follow the worst days and it’s truly impossible to perfectly time the market, that’s why time in the market is much more important. JP Morgan found that seven of the best 10 days in the market occurred within two weeks of the worst 10 days of the market.

For these reasons when the markets are down, just don’t touch your investments and especially if they’re in retirement account you can just buy them and basically forget about them. Chances are in 30 to 40 years, the market will be much higher than what it is right now, and anything you bought in your 20s will seem like a great deal then. Peace and Happy Hustling!

Related: Best Investments by EVERY Age | How To Invest

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