When you’re just starting a professional career, it’s easy to fall into one of two camps: You might be feeling stressed about how to save for the future on an entry-level income, or you might feel the opposite, putting off savings and other financial goal-setting because you think you’ve got all the time in the world to catch up.
For most young adults, the reality is somewhere in-between. Though saving early can have a huge impact on your financial situation later in life, many young professionals are limited in the amount of savings they can build every month.
But regardless of your income level, there are ways you can start saving money and building toward the future—as well as developing habits that will benefit you later in life. Here are some tips for 20-somethings eager to start saving, even in small amounts.
Set a Basic Budget
No matter how much you make, everyone faces the same challenge of limiting their spending to less than what they earn as income. The sooner you can learn how to set and stick to a budget, the better.
One simple budgeting method is to use the 50/30/20 rule, which allocates 50 percent of your take-home pay for necessary expenses, 30 percent for non-essential spending, and 20 percent for savings.
Looking for help creating a budget for the first time? Check out our online budget calculator to add up your expenses and figure out how you might be able to start saving.
Make Automatic Savings Contributions
Once you’ve set a budget and identified how much you can save every month, you can hold yourself accountable by making automatic contributions to a savings account, retirement fund, or other savings vehicle.
Before you start saving money on your own, check with your employer to see what kind of retirement savings vehicles they offer. Many employers offer 401(k) matching programs through which your company will match a certain percentage of your income with contributions to an account. This could equal hundreds or even thousands of dollars in free money every year, so make sure you’re taking advantage of this opportunity to maximize your savings.
As you start saving from the ground up, you’ll probably want to put money toward a few different savings objectives. In addition to 401(k) contributions through your employer, you should build up an emergency fund to cover unexpected expenses that are likely to crop up in the future, such as medical bills or even a job loss.
You may also have short-term savings goals you want to pursue, such as the costs to cover a wedding, buy a new car, or even make a down payment on a home.
Consider a Side Hustle
Limited entry-level incomes can create financial stress, especially when you’re young and trying to build financial opportunities for yourself. If this describes your situation, you might consider picking up a side hustle to bring in some extra income—including money that could jump-start your savings.
There are many options out there that can help you earn some extra money, such as driving for a rideshare company, walking dogs, or delivering groceries. You can use one of these flexible part-time jobs to cover living expenses if your current job isn’t enough, or you can dedicate some or all of that money to your savings efforts.
As Income Increases, Keep Spending the Same
As time goes on, your income level is going to increase: You’ll land a new, higher-paying job or receive a promotion and/or pay raise where you currently work.
If you feel the temptation to start spending more, do yourself a favor and try to keep your spending low. Instead of spending your extra income, consider putting that increased take-home pay toward your savings efforts.
Over time, as your income starts to increase, you can still enjoy the lifestyle benefits that come with increasing your earnings. But by putting savings first, you’ll develop good habits and build up a strong nest egg of savings before you turn 30.
Saving money is often a daunting challenge for young professionals working on a limited income. Nevertheless, it is important to save whatever you can, even in small amounts. It may feel like nothing now, but as time and interest accrue, you’ll be glad you got started on saving early.