These Are the Biggest Financial Hurdles for 20-Somethings — Here’s How to Navigate Them

If you’re in your 20s, you’ve probably noticed that you have different financial challenges than many older people in your life. You’re at a point in your life where you’re often in the position to make a lot of high-level financial moves — but you might not have much financial experience.

So if you’re in your 20s and wondering what financial tripwires are waiting for you, keep reading to learn about five common issues and how to resolve them.

1. You Don’t Have a Career Yet

You may have a job, but depending on your field or industry, you may not yet have an established or sustaining career. And that’s what employers often want to see — education and experience.

“I believe the biggest near-term financial hurdle facing 20-somethings is securing and retaining well-paid employment, ideally in one’s desired career path,” says Gary Hoover, an associate professor of finance at Flagler College in St. Augustine, Florida.

Hoover says that a solid paycheck is becoming even more important with today’s relatively high cost of living. But if you’re working in an entry-level position, it isn’t like you can just leapfrog several rungs up the corporate ladder.

What may help: Often, what’s appealing to employers isn’t just having an education, but having the right education. If there are any certification programs you can take to make the case that you have the right training for a job, Hoover suggests pursuing those “value-enhancing opportunities.”

Any time you train for a career or take a class to further your education, “that increases the value of your human capital,” Hoover says.

Getting extra education or training takes time and money, but at least, he says, you’re investing in yourself.

2. You’re Underpaid

If you’re underpaid, your career likely isn’t very established yet. And you’re probably needing to make important financial decisions while not making a ton of money.

“People in their 20s are often in a lifecycle stage that is defined by low income and high debt as they are navigating a transition to adulthood, getting their first job and having student loans or other debt,” says Saundra Davis, director of financial planning programs at Golden Gate University’s Ageno School of Business.

What may help: First, Davis says not to beat yourself up. This is the decade, she says, of wealth accumulation.

Davis adds that it’s important to “normalize” your situation and realize that if you’re living paycheck to paycheck, it doesn’t make you a failure. This is completely normal for people in their 20s.

[Tips to Avoid Living Paycheck to Paycheck]

But Davis says that 20-somethings will do themselves a favor by spending mindfully and assessing what various financial decisions are likely to lead to.

“Pay attention,” she says. “Before making any financial decisions, identify what you know about the topic and how it impacts you.”

If you don’t know much about the topic, Davis says to research it thoroughly.

3. You Have No Credit History

In your early 20s, you probably don’t have much of a paper trail proving to lenders that you’re responsible with your money. And that can mean it’s harder to get a lower interest rate on credit cards, a mortgage, or acar loan.

What may help: Be patient and make sure you pay your bills on time.

[What to Do if You Fall Behind on Bills]

To see your credit score climb, “All it takes is maintaining good habits like paying bills on time and not overextending credit limits,” says Beth Hunsaker, assistant director of the Financial Wellness Center at the University of Utah.

You probably also should get a credit card early in your 20s, rather than wait until your late 20s. “Starting young is important to build good credit since it can take a few years to achieve a good score,” she says.

[U.S. News Editors Share How to Avoid Credit Score Drops in the New Year]

You don’t have to spend much on any credit card to impress lenders. You should simply pay your bill in full and on time every month.

Generally, credit scores go up when you’re not spending more than 30% of your total available credit. So, if you have a credit card that has a $500 available credit limit and you never or rarely borrow use $150 of it and pay it off every month, you would see your credit score rise over time.

Hunsaker also suggests creating a safety net with three to six months of necessary expenses in a savings account.

With an emergency fund, Hunsaker says you have a lifeline if unexpected expenses pop up, instead of propping yourself up with your credit cards, which could lead to debt if you don’t repay your balance on time.

4. You Have No Way to Buy or Rent a Home

According to Zillow, the average price of a home in the U.S. is $357,469.

“If you’re in your 20s, one of the biggest hurdles you may face includes buying home.This can be a financial catastrophe for someone who is young and joining the workforce,” says Jordan Mangaliman, an investment advisor representative and CEO of Goldline Financial Services in Fullerton, California.

“It also doesn’t help that rent costs have increased nationwide,” Mangaliman says.

What may help:You may want to live with your parents longer than you anticipated, get a roommate, choose a smaller apartment or move to a cheaper city.

5. You Might Not Have a Lot of Financial Experience

Stanley Longhofer, a professor of real estate and finance at Wichita State University’s Barton School of Business, explains the difficulty of being in your 20s and managing money.

“The challenges for those in their early 20s are fundamentally the same as they have always been — they are new to adulting. They don’t know what they don’t know about their personal finances, and they have a hard time thinking long-term about finances. These have been challenges for every generation when starting out,” he says.

That said, if you sense that you’re having a tougher time financially than your parents or grandparents, you may be right, Longhofer adds.

“What makes it more difficult today is that the financial world is so much more complicated today than it was in the past, as well as the fact that there are so many more ways to bleed money without being aware of it,” he says.

Your parents may have had a cable bill, but they weren’t paying for streaming services. There are subscription services to help you manage your money, provide security for your home and to help you shop better, such as Amazon and Walmart+. Your parents didn’t contend with that, or much of that.

You may be paying for grocery delivery or restaurant delivery, or you may have a subscription to a bulk warehouse, expenses your grandparents probably didn’t incur. Obviously, you don’t necessarily need to pay for all of the services that have become part of the mainstream consumer culture, but many of these services make life more convenient, which may make it hard to cut them out.

What may help: Longhofer recommends finding a financial mentor, “someone at least 10 years older than you who seems to be responsible with their finances and is willing to talk with you openly about their struggles and mistakes.”

He says that might be a family member, or maybe the parent of a friend or an older co-worker. Above all, Longhofer says, your financial mentor needs to be someone with whom you can be completely honest.

Davis, the Golden Gate University professor, warns of misinformation. . She says a lot of people end up getting financial advice from corners of social media, like FinTok, a personal finance wing on TikTok, and that the “finfluencers” (financial influencers) offering the advice may or may not be actual experts.

But maybe the most important thing to remember, Davis says, is to have a plan for your money. Any plan is probably better than just winging it.

“We often have a financial goal, like buying a car or taking a vacation, without a plan,” Davis says. “Just like any other part of life, planning can make the difference between achieving the goal or missing the target.”

More from U.S. News

U.S. News Editors Share How to Avoid Credit Score Drops in the New Year

Hate Budgeting? Here’s How to Reframe It

How to Create a Saving Strategy

These Are the Biggest Financial Hurdles for 20-Somethings – Here’s How to Navigate Them originally appeared on usnews.com

Update 01/14/25: This story was published at an earlier date and has been updated with new information.

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