Make the most out your salary
Life in your 20s is about learning to stand on your own. It's full of many firsts—living on your own, a full-time job and the financial responsibility of caring for yourself without Mom and Dad.

It's is an exciting time—a new chapter. However, the blessing of youth is partnered with inexperience, which is glaringly apparent in an entry-level salary. The real struggle is figuring out how to live within the confines of that salary and establishing smart money management habits. This is especially true if you've never had any financial guidance or education. The truth is that there isn't a magic fairy that deposits money in your bank account if you fail to resist temptation at the shoe salon and overdraw your account.

The good news is that you're young, you're at the bottom of the heap and things can only get better! Until they do, you can manage your money wisely, have a good time and build a healthy savings account!

A Good Dose of Reality

You'll need to manage your financial expectations. Most likely, you won't be starting this chapter at the same comfort level as your parents. Remember, you're just starting out, it took them 20 to 25 years to establish themselves at their current financial level.

Set your financial goals

Set Your Financial Goals

Whether it's paying off your student loans, purchasing a car or saving for your first home, you need to establish clear financial goals. Write them down on a note card or a sticky. Put it on your bathroom mirror or fridge so you have a constant and daily reminder. By doing this, you are making saving a priority—and hopefully you won't be tempted to make unplanned purchases.

Organizing Your Finances

It's shocking to realize all the costs involved with living on your own. You'll want to create a spending plan. By doing so, you'll be able to identify where you can find extra money to sock away in your savings account. While everyone has different budgetary needs, it's always a good rule of thumb to keep your mortgage or rent costs at 30 percent of your take-home salary. Food costs should be about 12 percent; transportation at about 15 percent; insurance at 5 percent; 401(k)/retirement savings at 6 percent; and an emergency savings fund at 5 percent. The rest should be used to cover any medical expenses, debts, clothing, entertainment and other miscellaneous expenses.

Keep Your Expenses Low

While you're establishing your career, your goal should be to cover the costs of all monthly expenses, pay off debt and save as much money as possible. Live within your means. (You may need to get creative!)
  • Minimize your expenses by sharing your living space. Get a roommate or consider living with Mom and Dad. You'll not only reduce the cost of your rent, you'll save on utility costs.
  • Cut out unnecessary, pricy expenses like high-end cable packages. Opt for a mobile phone instead of a home phone.
  • Try not to eat out. You don't have to become a recluse, but you do need to keep your food expenses in check. Eat breakfast at home, pack your work lunch and limit your dinners out to once per week at a reasonably priced restaurant.
  • Skip expensive vacations and take advantage of free events in your town.

    Paying off student loan or credit card debt

Pay Off Student Loan or Credit Card Debt

In order to accomplish this goal, always make your payments on time without incurring any additional debt. If you really want to get this monkey off your back, try to make more than the required minimum monthly payment. If you're able to do that, you'll not only speed up the time it takes you to get out of debt, but reduce the total cost of debt you generate from finance charges.

Save Money

Invest in your company's 401(k). Start your retirement savings as soon as possible and don't touch the money until you retire. The savings will be debited directly from your paycheck. You won't even miss it! You'll be amazed at what a difference it makes by starting your retirement savings at a young age.

Start a short-term savings account to cover unexpected expenses. You can even begin by taking your spare change every day and setting it aside. At the end of the month, put it in a savings account. Don't feel overwhelmed by how little you have. It takes time to build a healthy savings—the important part is getting it going!

Avoid Credit Cards

If you want to buy something but know you could never afford it without a credit card, you shouldn't be buying it! Be patient. Rewards are much sweeter when they are earned.

Living within your means doesn't mean banning fun. Instead, make it a challenge to find a resourceful way to spend your hard-earned dollars. Doing it with spirit and adventure makes you look wise, and your nonexistent credit card balance will cushion you from bad economic times.

Clarky Davis is the author of the Debt Diva Blog and the Debt Diva's 2008 Financial Guide . She offers budgeting and money management advice based on her own experiences and over five years working in the debt management industry, and is additionally a spokesperson for CareOne Services, helping consumers gain control over their debt.

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