How To Start Saving & Investing Like A Pro At 20

Im in my 30s now, and even though I started investing in my early 20s, I made my fair share of mistakes and wish I had someone or some resource to properly guide me. Yes there’s the internet, but I guess at the time I just wasn’t “ready” to take in the personal finance wisdom. I was just trying to earn a decent income.

The best way to start saving and investing like a pro in your 20s is to have income coming in, live well below your means, and save/invest at least 20% of your income.

This sounds super simple right? It is. Wish I knew this back then.

To be honest, I don’t think it matters if you make $25k a year in your early 20s or $60k, its that your systematically earning money and putting at least 20% of it away.

If you do that in your 20s, your 30s will be golden, and so will your retirement.

One of my favorite personal finance words ever is “compounding“, it’s beautiful.

See, there’s 2 things you need to build wealth.

Money, and time.

It’s your job in your 20s to save as much as you can, but it’s equally as important that you start ASAP and keep doing it.

Every year that you save and invest money, that money earns interest. If you don’t take it out, then the next year it earns interest on that interest.

You get gains on your gains, and it that avalanche effect just gets bigger and bigger over the years.

Biggest mistake some of my friends are making in their early 30s is playing too much with their money. Moving it around, getting hit with penalties, missing out on opportunities, all because they couldn’t be patient.

In your 20s, you’re saving and investing your money right?

The saving portion is to build up your emergency fund, and maybe to save up for a future car or house.

The investing portion is meant to truly build your wealth. You put money here in smart investments, with the intention that you’re piling it up and not touching it until you’re much older.

Don’t make extremely risky investment choices, if you don’t know much about the stock market, buy index funds.

If you don’t know anything about bitcoin (like me), then maybe just buy a little bit with some extra cash, to see if it could become something in the future. Just don’t go crazy and put in your 3-month emergency fund here.

Let’s create a scenario right now, and run with it for the rest of my post.

You’re 22, recent college graduate, got a good starter job with a company that pays $32k/year, and you have no kids. You’re renting an apartment, have some minor student loan debt, and have car payments.

Aside from the rent and car payments, all your other bills (phone, utilities, food, gas, etc..) total up to $700/month.

To keep it clean, let’s say all your expenses total equal $1,600 a month.

To keep your income clean, after tax you take home $2,600 a month.

So you have $1,000 leftover every single month to play with (let’s make this a game).

It’s always important to get your safety money going before you invest, so first we..

1. Start funding your emergency fund

Learn to save for emergencies before you start investing

Don’t even do anything else until you have at least 1-2 months of emergency fund saved up, that means investing.

From our past example, your monthly expenses are $1,600.

So if you take 2 months of your saving/investing money, you’re at $2,000 and you now have a decent buffer built up in your emergency fund.

Pro tip: If you’re playing the long game, you want to have at least 1 year of emergency fund saved up. For this example, thats $19,200. That seems high, but at that number, you have very little money worries.

So after you have 1-2 month worth of emergency money saved up, the door to investing now opens up.

Instead of putting 100% of your money towards saving like you did for the first 2 months, you can now do something like 20% saving and 80% investing.

The ratio is up to you.

2. Start a ROTH IRA right away

Investing in your ROTH IRA is important after you have some savings

When it comes to the investing game, my recommendation is to start a ROTH IRA right away, or fund your 401k.

With the 401k part, maybe you’re already starting that at your new job. If so, keep doing it, taking part of your salary to invest in the 401k.

My tip is that you also start a ROTH IRA so that you can fund money there (up to $6,000 a year) that can grow tax free for your retirement.

Quick thing about 401k and ROTH IRA.

  • When you put money into a 401k, it reduces your taxes now, but you pay taxes on all the money later.
  • When you put money into a ROTH IRA, you pay taxes now, but it grows tax free, and 100% of the money you see in the account is yours.

This isn’t 100% set in stone, it’s just my recommendation.

If your company offers an awesome 401k plan, go with that.

If not, get a ROTH IRA and start setting yourself up for retirement.

3. List out your debt, and make plans to kill them all

Figure out all the debt that you have

Following the previous example, you’ve saved up 2 months of emergency funding.

You then started saving 20% of your income, and investing 80% of it.

Let’s say you’re 2-3 months further down, awesome!

The next thing you want to do that’s really imporant, like really, is to kill any debt. Get, it, out, of, your, lifeee.

Debt is like a 500lb person pushing you back while you’re trying to run forward with all your might.

There’s good debt and bad debt, but in general you want to get it out of your life. An example of good debt might be a mortgage, whereas bad debt is high interest credit card debt.

In my opinion, a mortgage is something that should also be reduced as much as possible.

I won’t rant here about that, but if you do plan on buying a $200,000 house with a 30-year 4% loan, please do yourself a favor and always try to pay a bit extra every month to reduce the loan.

Debt sets you back from financial freedom, so if it’s a small debt like $2,000 then set plans to reduce and remove it out of your life ASAP.

4. Live below your means

Living frugal

I already covered this earlier but this is one of the essentials to be able to save and invest during your 20s, like a pro.

If you party all the time and use your salary to buy a car you don’t need and spend lavishly, then you’ll go nowhere fast.

You’re 20, this is the best time in your life to live below your means, especially if you’re not married and don’t have kids.

Pack your own lunches and do whatever it takes to minimize your expenses, imagine all the other money going into investments.

Remember that $1 invested today could be $20 in the far future. Are you really going to get that new $1,400 iPhone when your current one is fine?

Investing that $1,400 for 15 years could turn it into $15,000.

Bonus: Get the best credit cards

You always have to spend on something every month.

You still need your phone, car insurance, and groceries, might as well get a good return out of the spend.

Check out my post on the best cash back credit card to see which one might be best for you. Please only have 1-3 credit cards max, no one needs more than that.


Everyones situation is different, but one thing that’s for sure is that if you start saving and investing money in your early 20s, you will set yourself up for a much better financial life.

And let’s face it, money can cause alot of problems, but if you start piling it up early on, it can mean stress free years in the future.

What did you takeaway from this post? Do you want to run through your unique goals? Post a comment below and let’s talk 🙂

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