1. Figure out your financial flow

“Budgeting” doesn’t have to mean a ton of number crunching and purchase tracking in Excel (unless that’s your thing). Instead, you can use the 50/30/20 rule, a rough guideline to help you direct your money more purposefully toward your goals.

First, you’re going to want to make a list of all your income sources so that you have a good idea of what’s coming in the door. Then you can divvy up your expenses like so:

• 50% of your take-home pay to needs (bills, food, transportation, etc.)

• 30% of your take-home pay to wants (face masks, wine, travel, etc.)

• 20% of your take-home pay to Future You (debt payments above minimums, saving, and investing)

Especially in your 20s — when you have extra getting-started-adulting costs like work wardrobe, maybe a car, and deposits on housing (or ridiculous rent in the city you love), but your salary’s also in getting-started mode — you may need to push past 50% on the “needs” bucket. That’s OK; it’s flexible. If you can, try to borrow the difference from the 30% in the “wants” bucket.

Easier said than done (and flat-out impossible) sometimes … but keeping your eyes on that full 20% to Future You, and pushing for it as hard as you can, will help you get to your goals faster. Start with whatever you can today and try to boost it up a percent or two a couple times a year. Raises, bonuses, and tax refunds are great for this.

Every few months, take a couple minutes to go back through your income and expenses to see if your spending habits are still in line with the buckets you set. Then you can tweak as needed.

2. Get that employer match

Once you have a handle on how your money’s moving, in almost all situations, the first step is to take full advantage of your 401(k) employer contribution match, if one’s available to you. Two words: Free money. (Two more words: FREE. MONEY.)

The most commonly offered 401(k) match in the US is 50 cents on the dollar up to 6%: If you put 6% of your paycheck into your 401(k), your employer puts in 3%. In that case, your employer is effectively giving you a 50% return on your money. Compare that with the 9.5% that the stock market has historically returned. It’s kind of huge.

Quick note: If you’re following the 50/30/20 rule, 20% of your take-home pay goes to Future You. Your personal 401(k) contributions belong in that bucket, even if they technically get deducted from your paycheck before you “take it home.”

3. Start with a mini-emergency fund

Unless you’re incredibly lucky, it’s not really a question of if you’ll find yourself in need of an emergency fund, but when. Sudden expenses like unexpected medical costs, car repairs, or even a lost job are going to cost you, and if you don’t have the cash for it, you’re (let’s be real) screwed.

So prepare for it! But don’t worry — you don’t have to go big right away. In fact, we suggest starting small. Ultimately, you’ll want to save up somewhere between three and six months’ worth of take-home pay. But for now, start with just one month’s worth, to give yourself a stash of cash (in its own FDIC-insured bank account, one you can access whenever you need to) in the event of any unexpected bills once you start in on that credit card debt.

4. Pay off high-interest debt

Americans under 35 carry an average of $67,000 in debt. So when we surveyed 1,000 women on their money habits and goals*, we weren’t really surprised that 74% of women in their 20s told us they have debt, and 41% said their debt has a high interest rate (think credit cards).

At Ellevest, we talk a lot about the need to start investing ASAP, because waiting can cost you. But high interest rates on debt can cost you even more. So after taking advantage of your employer’s 401(k) match, it’s probably time to start paying down your debt. We’re talking credit cards, private student loans — basically anything with an interest rate over 10%.

We typically recommend the “debt avalanche” payoff method, which is intended to save you the most on interest. Here’s how it works: Make a list of all your balances, from the highest interest rate to the lowest. Use whatever wiggle room you can find in your budget to pay extra on the balance with the highest interest rate (while still making the minimum payments on all the rest). Once that one’s paid off, keep working your way down the list.

4. Save for emergencies and tackle medium-interest debt

Time to get back to that safety net. How much you need depends on your situation — specifically, your risk level. Three months’ worth of take home pay is probably a good amount if your income is pretty stable — if you’re on a salary and have a partner whose income you could (at least partially) rely on — and you don’t have dependents or own a home. If there are aspects of your income that make it less stable, like you’re single or you work on commission or do contract work, or if you do have dependents, then six months’ worth might be safer. (If you’re self-employed, nine is probably an even better plan, to float you during those dry months.)

Next (or concurrently, if you want) you can go back and pay off your debts with interest rates between 5% and 10%. What about those balances with interest rates under 5%, like some federal student loans? It’s often OK to pay the minimums on those until they’re paid off. The returns historically provided by investing are likely to outweigh the cost of that interest.

5. Get renters insurance

A study by Liberty Mutual found that less than half of millennials who rent their homes have renters insurance. That’s less than ideal, because renters insurance protects your stuff … and your emergency fund. Super good to have in case a water pipe bursts and floods your entire apartment.

Depending on your policy, renters insurance often also pays for you to stay somewhere else if you can’t live at home while whatever went wrong is being fixed. And it could pay the cost to replace something that got stolen, even if the theft happened somewhere other than your apartment. And it’s not even expensive ($15 a month on average).

Some important notes: If you have roommates, you each need your own renters insurance policy. Some expensive belongings, like jewelry and high-end electronics, might need to be listed specifically on your policy (aka “scheduled”) in order to be covered. And ahem, this is for renters … if you’re a 20something homeowner, you’ll need homeowners insurance instead.

6. Get disability insurance

The Social Security Administration says that 25% of 20-year-olds will become disabled for some period of time before they retire. Yep, you read that right. Your #1 most valuable asset — especially when you’re just starting out in your career, with many more years of life and work ahead of you — is your earning power. If something happens to keep you from working, disability insurance replaces at least part of your income.

There are two types of disability insurance: short-term and long-term. Short-term insurance lasts a few months to a year and usually pays more. Long-term lasts until you’re no longer disabled, a set number of years have passed, or you reach retirement age. It also tends to be the more important type of insurance for most people. That’s because an emergency fund might be able to get you through a short-term disability, but being unable to work for a really long time can thwart even the best-laid financial plans.

You can often purchase disability insurance through your employer; if not, see if any other groups you’re a part of (alumni associations, trade groups, etc.) offer it. And if neither of those is an option, you can look into purchasing a policy on your own.

7. Get started investing

OK, so we just threw a lot of financial priorities at you. But after you’ve finished paying off that high-interest debt and building your emergency fund, that “Future You” part of your budget will be freed up for investing. The sooner you can get to that point the better, because historically speaking, it literally pays to start ASAP. Thanks to the magic of compounding returns — earning money on top of the money you earn — investing now can get you more than investing tomorrow, and investing tomorrow can get you more than investing the day after that. And so on and so forth.

Retirement

If you find that wiggle room in your budget, consider dialing up your retirement contributions. The cold, hard truth of the matter is that women live six to eight years longer than men and retire with two-thirds as much money. So if we wait to get started, we’ll end up even further behind.

If you’re just getting started on investing for retirement, check out our explainers on choosing between a 401(k) and an IRA, the difference between Roth and traditional IRAs and 401(k)s, and SEP IRAs for freelancers and the self-employed. And if you’re a couple jobs into your career and have an old 401(k) or two hanging out, we can help you with that, too — here’s a helpful article on 401(k) rollovers.

Other goals

While retirement is probably going to be your biggest money goal from a dollars-and-cents perspective, some of your other goals may be able to benefit from investing, too. Those goals might include starting a business, buying a house, having kids, splurging on something (30th birthday trip tasting wine in the south of France, anyone?), or just plain building up your wealth. Any goals with a timeline of several years are fair game, and you can get started on them now.

So there you have it: debt, emergency fund, insurance, retirement, and #goals. Put that ish on autopilot and then get out there and make big moves.

Disclosures