How Living Below Your Means in Your 20s Can Set You Up for Financial Success

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According to the February 2022 LendingClub, nearly 70% of millennials and more than 65% of Gen Z live paycheck to paycheck. Paycheck to Paycheck Report.

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Looking to escape the paycheck to paycheck trap? Experts say one of the most important keys is to live below your means. Read on to discover the lasting benefits of living frugally in your twenties, as shared by financial experts.

You can establish an emergency fund

“Creating an emergency fund to cover unexpected expenses, such as medical bills or car repairs, is one of the smartest things you can do in your 20s,” Levon Galstyan, CPA, told Oak View Legal Group. “You can avoid taking out a loan by using money from your emergency fund, which can help you avoid paying interest.”

Consider putting your emergency reserve in a high-yield savings account. Experts generally advise saving three to six months of living expenses. But if that seems too difficult, Galstyan recommends keeping whatever is left over after necessary expenses.

“Even saving $20 a week – about $3 a day – over a year yields $1,000, which is a great starting point,” he said.

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It can help you pay off your debts faster

Living below your means gives you the freedom to put extra money into paying off your debts. If you have credit card debt, student loans, or auto loans, paying them off early could save you hundreds or even thousands of dollars in interest.

“Additionally, owing money to a lender can lower your credit score by increasing your utilization rate and the proportion of available credit you’re using,” Galstyan said. “If you have a lot of debt, lenders may consider you a high-risk borrower, making it harder for you to get approved for other financial products.”

No debts yet? Living frugally can help keep it that way, said Taylor Westergard, financial coach and founder of Money in evolution.

“If you start saving, you open the door to a lot of opportunities,” she said. “But if you allow yourself to go into debt in your twenties, you are borrowing from your future.”

You can save more money for the future

Are you planning to buy a house one day? What about getting married or retiring? Most major life events are expensive, so the sooner you can start saving for them, the better.

“The sooner you start saving for retirement, the more your money can grow due to compound interest, which is interest earned on both your initial savings and the earnings of reinvested savings,” said said Galstyan.

However, savings aren’t just for big life events. They also give you the freedom to change careers, travel, and buy expensive items or experiences — all things you typically can’t do while living paycheck to paycheck.

“Living below your means in your 20s can help you secure your financial freedom and stay out of trouble later in life,” said Nathan Liao, Chartered Management Accountant and Founder of CMA Exam Academy. “It also saves you money for exciting purchases you may be looking forward to, like a dream vacation or a new laptop you’ve always wanted.”

You can start building your net worth now

Liao says living below your means is the best way to gradually build your net worth. (Your net worth is the sum of all your assets, including money, savings, and possessions, minus your debts.)

An effective way to increase your net worth is to buy a home early on. Living below your means gives you more leeway to save for a down payment, which can help you avoid private mortgage insurance and get lower interest rates, which will mean with a lower overall mortgage payment.

“Buying property in your twenties can give you financial stability in the future and help you accumulate wealth,” Galstyan said. “When you’re young, you can start paying off your mortgage and building up equity – the part of your property that you own – which helps you accumulate wealth.”

You learn successful financial habits early on

By adopting good money management habits now, you will reap even greater dividends later, especially as your income increases. Experts recommend practicing habits such as:

  • Ask yourself if you really need something before you buy it
  • Make a monthly budget
  • Track all your expenses
  • Automation of your day-to-day savings and your retirement savings

“More revenue isn’t always the answer,” Westergard said. “As a financial coach, I work with individuals and couples making six-figure plus who are still living paycheck to paycheck. Budgeting and prioritizing savings should happen in some degree, regardless of your income level.”

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About the Author

Jenny Rose Spaudo is a content strategist and writer specializing in personal and business finance, investing, real estate, and PropTech. His clients include Edward Jones, Flyhomes, PropStream and Real Estate Accounting Co. As a journalist, his work has appeared in Business Intern, GOBankingTariffs, Movieguide®, and various small publications. She has also written a book and hundreds of articles for CEOs and thought leaders. Before going freelance, Jenny Rose was director of online news for Charisma Media, where she oversaw three online magazines, hosted a daily news podcast and managed editorial content for the company’s robust podcast network. In 2014, she graduated summa cum laude from Stetson University with a bachelor’s degree in communication and media studies and Spanish. During her academic career, she won two awards for her research and was named “Top Senior” in both of her majors. Find it on and connect with her on LinkedIn.

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