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How to manage your debt in your early 20s

Your 20s are the perfect time to start managing your finances and debt. It is the right time to decide on your career path. It is the time when you should begin making big financial decisions that will be helpful to you for a lifetime. No matter what your money goals are, StepChange number can provide you with quality money advice and various reliable debt management solutions, if necessary.

In this guide, you can find several practical financial management and debt management solutions that would enable you to build healthy money habits and budgeting practices. The money decisions you make in your 20s will significantly influence your finances and debt in the long run.

To enjoy a debt-free life in your later years, you have to start preparing for it in your early 20s. Start focusing on building a solid career path. Secure your financial future by saving money and making profitable investments. How you manage your debts and finances in your early 20s will make a big difference when your retirement age nears.

The financial situation in your early 20s

When you complete your graduation and are a fresh college graduate, you will, at this point, feel the need to become financially independent. You will get paid internships or land your first job. The first time when you receive your first-ever income, the feeling is overwhelming. You can start planning to manage your finances and your debts like student loans by this time.

People in their 20s often say that student loans are hard to write off. If you have a student loan under your name, you should quickly find a suitable debt management solution to manage that debt. If you cannot pay off your student loans for a long time with your fresh salary, you might want to consider calling the StepChange number.

Nevertheless, when you get your first job and salary, you suddenly feel an excess of money at hand. The first stimulus would be to spend that money on entertainment and leisure. However, at that point, you better not spend money unnecessarily if you want to have healthy financial and debt freedom.

The time in your early 20s is the most accurate phase in your life to acquire money management skills and how to become debt-free quickly. If you want to enjoy your golden years, lay the foundation for money management and debt-free. StepChange number can provide you with the necessary money and debt advice to build a quality financial future.

Even though starting money management early is nerve-racking, you have to take responsibility! Therefore, follow the guides below to take advantage of your early financial management skills and avoid unnecessary debt in the future. If you still end up with problem debt, StepChange UK can help you find the right debt management solution.

Ways to manage debt and finances in your early 20s

When you are a fresh college graduate, you will not have many debts on your account besides essential student loans or credit cards debt. But, it is not a bad idea to start thinking about debt management at an early age. You can build up your credit score. When you end up with multiple debts, you can then seek debt help from the StepChange number. But as of now, being able to manage your finances will significantly support you in staying debt-free in the future. So, let’s get started.

Plan a budget and commit to it.

The first step to planning for your finances is to prepare a realistic budget. If you cannot draft a plan yourself, the StepChange number can help you set up a practical budget plan as per your financial flow. Tracking your finances from your early 20s helps lay the foundation for a great financial future.

Practising healthy and effective financial habits at an early age stays with you for a lifetime. If you start spending your money on partying and buying cars without caring about your future finances, you will face difficulty in the later years. As it becomes a habit, you will likely end up with ends and would require a debt management solution to write off the debt. That is why when you are at the right age, take advantage of it and commit to a solid budget plan.

Be sensible when you draft a budget. Learn how to divide your earnings into your usual expenses and savings plus investments. StepChange money advice can help give your budgeting tips as well. Do not exclude any type of probable spending from the budget list. Common things that you must add up to the budget list include:

  • Sufficient money to cover essential living costs.
  • Keep money aside to write off debt like student loans.
  • Put aside some emergency funds.
  • Invest for future financial security and credibility.
  • Since you are at that age, spend the excess money on things you love.

A budget enables you to keep track of your financial flow accurately. But you must ensure that you follow through with the budget. Do not just create a budget and forget about it.

Control your expenses or cut down costs

When you create a budget, you are aware that you should now minimise your usual spending. To commit to your budget, you have to cut down on your standard living costs. But mind that this approach should not hamper your way of living. As much as planning for future financial security in your early 20s is essential, you also have the right to live your life at that point.

Cutting down on your living costs does not mean you should minimise your food intake. You should just be aware of how and where you spend the money. Making a controlled decision about spending money is what you must commit to. Controlling your spending enables responsible and healthy money decisions. Having a budget makes spending more controlled. You can learn a better perspective of money management and how to stay out of debt accordingly in the future.

Balance your account every month

Committing to a budget and controlling your expenses require you to balance your account accurately. Regularly checking the account enables us to keep track of the balance. Doing so will stop you from overdrawing money from the account. Hence, you won’t have any overdrafts on your account. You won’t have overdraft to write off debts then. Balancing your account is not difficult if you seek help from the StepChange live chat.

Set up a safety net (emergency fund)

One of the many ways to secure your financial future is to set up a deposit account or emergency funds. Starting an emergency fund from your early 20s is of great help in the later years when you have some high unexpected expenses to take care of. In your last years, let’s say that you got some high debts to repay. While making payments for them via a suitable debt management solution, you are left with minimum funds. Now, if you have to pay for emergency medical bills or pay car maintenance, the emergency funds will come to the rescue.

If you put more than enough money as an emergency fund, you can stay debt-free. Creating a safety net for your financial needs does not have to be set up daily. You can start in your early 20s by keeping aside small attainable savings as and when you can.

Start investment at an early age of 20s

At the early age of 20s, you might think that saving for your retirement is not necessary at that point. But, as time passes, you will have less money at hand for savings purposes as your standard of living will increase. Starting early with investments is a great option to save for the future and your family afterward.

Invest early and take advantage of the profit in compound interest. Call the StepChange number for money advice if you do not know about investment. There are various investment schemes and options with different risk profiles. If you are eligible, you can invest in the following options.

Investment options at an early age of 20s include:

  • Post Office savings scheme
  • Liquid funds
  • Recurring deposits
  • Systematic investment plan (SIP)
  • Life insurance
  • Debt funds
  • Public provident funds

These are the standard investment options where you can substantially benefit in the long run.

Set up money goals

Having attainable money goals is an excellent approach to determining your career path and financial management measures. A vital money goal can keep you afloat to achieve it.

Financial security is validated when you have short-term, mid-term, or long-term money goals. You cannot work your way up to become a billionaire by following a single approach and one money goal. You gotta work hard to achieve that long-term money goal step by step. For that, you have first to fulfil the small financial achievements.

When you set a strict money goal early, you can plan accordingly to visualise that financial goal. Call the StepChange number for impartial financial advice if you are overwhelmed in the process. They will guide you to make some significant money-related life decisions.

Build a healthy credit score

As you reach your early 20s, various financial products are accessible and available. Assuming that you have become financially independent, the benefits might entice you to obtain such economic opportunities. But if you carelessly accept overdrafts or credit cards, you will have unwanted debts. And along the way, your credit score will get affected. Even if you don’t have credits under your name, your credit score can get poor. Establishing plans to build your credit score from an early age helps a long way.

Do not get into any financial agreements without prior consultation from StepChange financial advisors. It is unprecedented how it might affect you. As a rational person, you should be responsible and successfully manage your credits without needing to apply any debt management solutions.

There is a paradox in this situation. Without obtaining any credits or loans and repaying them on time, you cannot build a healthy credit score. You cannot receive outstanding credits or financial products without a credit history. Since obtaining a credit card in your 20s is not unattainable at this point, you can get one by becoming an authorised user of your family’s credit card. The credit reference agencies would record this condition on your credit history. By doing so, you can potentially find ways to build up your credit score gradually.

If you obtain any loans along the way to improve your credit score, you must accurately make timely payments to write off debts.

Pay off debts

If you got a student loan during your academics, you should first find ways to write off that debt after you start earning enough. Make that debt a priority when making payments. Not paying the debt for long can lower your credit ratings. Not writing off debts will increase the debt utilisation rate, resulting in a low credit score. As a result, you might lose accessibility to different financial products. At a certain point, there might arise a situation where you have to look for a suitable debt management solution to write off debts.

Therefore prioritising debts payments at an early age of 20s will make your debt stress less. The consequences of having debts depend on how you utilise their presence on your credit profile. If you regularly make payments to write off debts, your credit score will improve. If you do not make debt repayments, it will severely harm your credit score. Regardless, becoming debt-free should be one static money goal on your list.

Wrap up

As many 20s are the perfect age to enjoy your life to the fullest, it is also the phase where you should plan to achieve financial stability. Having feasible financial goals will enable you to accelerate your career and economic development. All-round management of your finances and debts goes hand in hand.

If you struggle to manage your debts and finances, you have many sources to take financial support.


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