Your twenties can be a time of rapid change and stark contrast. For example, you may start your twenties living in a dorm room, eating whatever you can get your hands on, and finding furniture for your tiny apartment on Craigslist. You can end the decade with a college degree, a well-paying job, a home, and even a family.

Because your twenties can be so tumultuous, it can be hard to get your finances in order, let alone any other part of your life. But with a few smart money moves, you can all but ensure that you’re on the right track. 

1. Create a budget

Most financial experts will tell you that the absolute first thing you should do — whether you’re a teenager, in your twenties, or even in your fifties — is to create a budget. A budget acts as your financial blueprint, and will show you both how much money you’re earning from your job and any other income streams, as well as how you’re spending it.

When you get a sense of how you’re spending your money, you can then find ways to start saving more, and create both long and short-term financial goals, including saving for retirement, a home, car, or your childrens’ education.

2. Build up an emergency savings fund

An emergency fund, or rainy day fund, is perhaps the second-most important financial tool you can arm yourself with, behind a budget. For most people, an emergency fund is little more than a pile of money in a savings account — it’s liquid, easy to access, and acts as a financial backstop when you need to pay for an unexpected expense.

It’s generally recommended that you save up at least a few months’ worth of expenses as your emergency fund, and only use it when needed. That would include a medical emergency, a case in which you need to have your car repaired, or even if you simply overspend your budget — it’s better to dip into your savings than take on credit card debt.

3. Keep an eye on your debt

Getting into debt when you’re young can hobble you for years to come. That’s why it’s critical that you get a handle on your debt as early in your possible, and knock it out as quickly as you can. While some debt may be unavoidable, or even “good,” in a sense — think a mortgage or student debt, which can help you build home equity and increase your earning power — other types of debt can be detrimental to your long-term financial plans.

Specifically, keep a close eye on any credit card debt, auto loans, and personal loans that you take out, and pay down the debt as soon as you can. The sooner you pay those debts off, the more you’ll save in interest charges. And with those savings, you’ll be able to pad your savings and investment accounts, helping you build wealth.

4. Save for retirement

On the topic of building wealth, another smart money move to make while you’re in your twenties (or teens, even) is to start saving for retirement. While it may feel like retirement is a long way off, starting to contribute to a retirement account as soon as possible gives your money more time to compound and grow.

Compounding is the process of earning interest on your principal, and any interest previously accrued. It effectively supercharges your savings, and is what allows a relatively small amount of money to grow into a small fortune over many years.

So, by figuring out what you can afford to contribute each paycheck — which can be set up to be automatically deducted and invested — you can effectively put the process on autopilot.

There are two primary retirement accounts, IRAs and 401(k)s. Anyone can open an IRA at a financial institution, while 401(ks) are employer-sponsored accounts. You can also choose from two types of IRAs and 401(k)s, Roth and traditional, which have different tax advantages. Money contributed to a traditional account is tax-deductible in the current tax year, and for Roth accounts, your withdrawals in retirement can be made tax-free.

You’ll also want to consider your asset allocation for the investment vehicle you choose. you’re choosing the mix of stocks, bonds, and other investment products that you’re purchasing in your portfolio. Your allocation will likely change with time, as your goals and investing timeline change.

5. Consider working with an advisor

It can feel like a leap to call in a professional while you’re still young, but getting good advice, particularly in your early earning years, can help you get your bearings and establish long-term goals. Establishing those goals, taking a look at your budget, and talking through your savings, investing, and allocation plans while you’re in your twenties should put you on a path toward prosperity.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information.

The views and opinions expressed herein are those of the speaker or writer and do not necessarily reflect the views of Alliance Wealth Advisors, LLC. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. Diversification does not guarantee a profit or protect against loss in a declining financial market.