Why Frugality Is So Important in Your 20’s by Dan from DINK’S

March 19, 2018 Mallory 1Comment

For many 20-somethings, the period of time after college graduation and before other responsibilities kick in is an opportunity for fun and exploration. With a first real job and salary, 20-somethings are often tempted to focus on taking vacations, buying things that they couldn’t afford before, and simply enjoying their young adulthood. While all of these things can be part of your 20’s, frugality should play a pretty significant role in your financial mindset during this time in order to better prepare you for your future.


Your 20’s are the time that can set the tone for your financial health throughout your life. The average consumer should accomplish several things at once, or at least get started on these goals, during his or her 20’s. If you can get organized while you are relatively young, you will set yourself up for a more secure future.


Save for Retirement


Retirement seems pretty far off when you are just getting started in the working world. But if you ask any 40 or 50-something, retirement comes faster than you think, particularly when it comes to saving. That is why it is so critical to start putting as much as you can into your retirement savings when you are young.


One of the best ways to save for retirement is to start young. Even if you can only put away relatively modest amounts into your 401(k) or IRA accounts, each dollar that you save will have the opportunity to grow over the next 40 or so years that you are working. More importantly, the interest that you earn on your savings will also earn interest — which means that your retirement savings will grow even faster over time. Start putting away as much as you can now, so that you don’t have to worry about playing catch up when you are older.


Establish Credit


When you are fresh out of college, you probably won’t have much of a credit history. Your 20’s are an ideal time to build up your credit score so that you will be in a much better position when you are ready to make big purchases down the road.


Your credit score is based on a number of factors, such as your history of making on time payments, your debt to credit ratio, and the amount of outstanding debt that you have. It is vitally important to your overall financial health, as it determines what interest rate you will be able to obtain on loans and other financial products. Building up your credit score now, when you are young and have relatively few financial obligations, is crucial.


Pay Down Debt


Many 20-sometimes start their working lives with a significant amount of debt, primarily from the high cost of college. Paying off this debt as quickly as possible is critical to building up net worth and freeing up cash to be able to save more, make investments, and make other financial decisions, such as purchasing a house.


Paying off debt can be difficult, particularly if you have a relatively low salary. However, it is easier to pay down debt while you do not have a mortgage, children or other obligations that often come as you get older. Get ahead of these debts now to avoid falling behind on them later.


Potentially Start a Family


Starting a family requires a fair amount of economic security. Being frugal in your 20’s is an important way to position yourself to be able to get married and/or start a family in your 20’s or 30’s.


Paying down your debt, establishing your credit, and saving for retirement are important steps in setting yourself up for the type of financial security necessary to consider starting a family. For many people, being frugal in their 20’s paves the way to starting a family, whether that means getting married or having kids.


Putting It in Perspective


While it may be more fun to spend your first paychecks on taking trips, going out to eat, or outfitting your apartment with the latest technology, being smart with your money in your 20’s can pay dividends later in life. When you focus on paying off your debt, saving for retirement, and establishing your credit, you will be in a much better position in the future. That is why it simply makes sense to be frugal throughout your 20’s — you will be more likely to enjoy yourself in your 30’s, 40’s and beyond.


By guest author Dan from He’s a personal finance blogger who started up a website with his wife, June. If you’re interested in their dual income, no kids journey, check out the blog sometime.

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