First job, first car, first apartment: The smartest things to do with your money in your 20s

Libby Kane

In your 20s, it's up to you to decide where to go — and what to spend.Marco Saroldi / Shutterstock.com

Once you're out of school, it's all up to you.

"Everything and everyone around you is fighting for your money, and you have to be the one who makes the decision of whether you're going to give them the money or keep it for yourself," Kathleen Hastings, CFP and portfolio manager at FBB Capital Partners in Bethesda, Maryland, told Business Insider. "It's all you."

While you're figuring out that balance, your 20s are full of exciting — and expensive — milestones, from renting your first place to starting your first full-time job.

How do you juggle those costs with planning for your future? Everyone's situation and needs are different, but read on to find out the first, smartest thing to do with your money in five common situations you might face in your 20s.

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If you're starting your first job, figure out what it costs you to live every month and what you can save.

"The first thing you really need to do is get a good idea of what's coming in and going out," Hastings said. "Take note of how much you're making and how much you have to live on." To find that information, Hastings recommends making a three-column spreadsheet: Column 1: Denote the amount of your net paycheck — that is, the amount that hits your bank account after any pre-tax deductions like health insurance or 401(k). Column 2: Assemble your fixed expenses — the monthly costs you have to pay no matter what, like rent, utilities, and student loans. Column 3: List your discretionary expenses — the money you choose to spend, like money spent on eating out, concert tickets, or new clothes. Then, once you have an idea of what it costs you to live, follow the advice Christopher Horan, CFP and associate wealth adviser at Strategic Wealth Partners in Independence, Ohio, gave Business Insider: Start assembling your emergency fund . "It's important to build up that cushion," said Horan. "The general rule of thumb is three to six months of expenses. As a young 20-something, storing that money in a savings account is adequate. That way it's liquid, accessible, and you don't have trouble cashing it should it be needed." While Horan emphasizes the importance of beginning to save for retirement early in life, he says the emergency fund should come first, so you don't end up operating in the red should something go wrong. "That first year will be critical to establishing those emergency savings," he said.
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If you're renting your first apartment, make sure you can afford it.

Both Hastings and Horan agree that signing on for an apartment you can't actually afford is a disaster waiting to happen. The general rule of thumb for "affordable" is less than 30% of your gross (pre-tax) income. But remember: Your rent isn't the only housing cost you'll incur. There's also your maintenance costs, your utilities, and your renter's insurance, to name a few bills that will inflate your monthly cost. "A lot of times younger people want to live in a place that has a lot going on, and there are costs associated with that," said Horan. "They want to live in middle of a city, downtown, and rent is going to be higher there. Plus, they want to go out and have fun with friends and do stuff, but when you have higher rent, I've seen people make mistake of living life off credit cards in order to do the things they still want to do."
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If you're buying your first car, don't expect to buy a brand-new luxury car right off the bat.

It's not unlike getting your first apartment: If you sign up for something too expensive, you're going to make things difficult for yourself. "Emotion gets very involved," Hastings said. "People generally want to buy a new car — 'Oh it smells good and it's nice!' — but you drive it off the lot and it's not worth as much. Five years later you need a new car and you're still making payments on the first one." She pointed out that it isn't just 20-somethings who fall prey to the siren song of new leather seats. "We see it all the time: It's e motional buying versus practical buying, and we all succumb to that ... not just the 20-somethings." This doesn't mean you never get to have a new car — just that it might be smart to wait. "Keep the new car for when you can afford it," Hastings said. "Go for a car with minimal expenses and minimal gas. You're better off looking for something reasonably priced, lower on gas mileage — something that's practical until you're further down the road with your expenses and income."
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If you're starting to pay student loans, figure out how much you owe, and to whom.

It sounds obvious, but a lot of borrowers don't actually know where their loans are held, or for how much. "That goes hand in hand with knowing the options on the repayments," said Horan. "A lot of students out of college might have trouble securing a job, so especially with federal loans, they need to know their grace period, when they need to start paying back, and whether they're eligible for income-based repayment." However, he said, "be wary of extending your repayment period, because although monthly payments might be lower, you will end up paying a lot more over time." And if you're moving cities or houses for a job, make sure you update your service provider with your new address, so they can get in touch and you can stay on top of your loans.
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If you're getting married, talk about money

It's important to have the money conversation prior to marriage, said Horan. To start, he recommends asking the following questions: • What are your goals as as couple? • How much are each of you spending? • How much debt do each of you have? • How much savings do each of you have? If you need some help broaching the conversation, performance coach Tony Robbins has some tips on how to bring up the subject , and Money Under 30 issued a couples' money worksheet (financial expert Farnoosh Torabi also has tips to stop fighting about money ). Plus, said Hastings, give some serious thought to how much you want to spend on a wedding, if you're paying for your own. "It's easy to get emotionally involved in planning the party, and next thing you know, you're $30,000 in debt," she said. "If you don't have a big spread between what you're earning and what you're paying, you're immediately starting your life off with big debt. That's really hard to overcome."