The 11 smartest things to do with your money in your 20s

Entering the “real world” in your 20s is thrilling, but far from simple.

On top of navigating the job search process and learning the ins and outs of renting an apartment, you have to figure out what to do with your first paychecks.

To help, we’ve rounded up the smartest things 20-somethings who are just starting out their careers can do with their money:

1. Pay off student debt.

In 2013, a full 70% of college students graduated with debt, averaging $30,000 in student loans each.

Student loan debt in particular is often blamed for preventing young people from buying homes and growing their wealth, so the sooner you can start living debt-free, the better.

If you have debt, it's usually in your best interest to pay more than your minimum payment, thereby reducing the length of your loan and the amount you pay in interest. If you aren't sure where to start, consider the advice from 13 real people who paid off thousands.

2. Enroll in your company's 401(k) plan.

'Pay yourself first,' says Jonathan Meaney, a certified financial planner and wealth manager at Carter Financial. 'It's one of the smartest pieces of advice you can get.' This means, first and foremost, contribute to your 401(k) if your employer offers one, and take full advantage of your company's 401(k) match program -- which is essentially free money -- if it has one.

Paying yourself first is no revolutionary or glamorous concept, but it's critical to accumulating wealth over time.

Many experts recommend putting aside at least 10% of your income. If you're not comfortable making a 10% contribution, it's better to start small than not start at all. In fact, self-made millionaire David Bach started by setting aside a mere 1%. Over time, he gradually increased his percentage -- from 3% to 10% to 15% -- until he reached 20%.

Once you've decided on a percentage to contribute, make it automatic. This way, you'll never even see the money and you'll learn to live without it.

3. Increase your 401(k) contributions.

Enrolling in your company's 401(k) plan is step one. Next, you'll want to get in the habit of upping your contribution on a consistent basis, either every six months, at the end of each year, or whenever you get a pay raise. Thanks to compound interest, even a mere 1% increase can go a long way over time.

Check online to see if your plan offers auto-increase. If it does, choose a percentage you want to increase your contributions by and how frequently you want it to increase. If you don't have this option, or are contributing towards different retirement plans without auto-increase, make a reminder note in your calendar every six months or year to up your savings rate.

4. Establish savings goals and start setting aside money.

That 10% (or more) you're setting aside feels a lot more pressing if you're saving for 'two years of business school' instead of 'the future.' Setting savings goals for major expenses that you hope will be in your future, like a home, car, laptop, or vacation, is an important part of staying motivated to save.

Determine what big purchases are in your future, and calculate how much you need to save for them and for how long. You don't have to set aside a massive chunk of money each week. Start small -- a little bit of savings each day or week can go a long way over time. For instance, taking a $1,000 vacation to Palm Springs a year from today means you need to set aside a little under $3 a day until then. Tweak your budget to accommodate that $90-ish a month by spending a little less, and you'll be well on your way to the desert.

'You can never save enough,' Meaney says. 'There will always be something to apply that towards. The key is that you set goals and prioritise the things that you want and might want down the road.'

It may be helpful to set up multiple savings accounts in order to save for specific purchases. Check the online interface of your bank and see if it will allow you to create sub-savings accounts.

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5. Contribute to a Roth IRA.

Another retirement account worth investing in is a Roth IRA, which is particularly suitable for young people. Contributions to this type of fund are taxed when they're made, so you can withdraw the contributions and earnings tax-free once you reach age 59 1/2.

One of the reasons Roth IRAs are well-suited to millennials is because younger workers may be earning less today than they will be later on, keeping them in a lower tax bracket and paying less in taxes than they may in the future.

Note that there is an income cap if you want to contribute to a Roth IRA: $116,000 a year or less for individuals and $183,000 or less for married couples filing jointly.

6. Monitor your cash flow and track your spending.

Cash flow is one of the most important things to be aware of, particularly in your 20s, when you have the freedom of spending your own paychecks. 'You've got to know where your money is going and you've got to make sure that more money is not going out than is coming in,' Meaney emphasises.

Everyday purchases and unexpected expenses have a way of adding up, and trying to keep track of them in your head oftentimes won't cut it. Particularly if you're prone to overspending or making impulse purchases, try actively recording and analysing your spending habits. You'll most likely find something that either you didn't know you were spending your money on, or you felt was unnecessary.

If you don't want to keep a spreadsheet on your computer or write your purchases in a notebook, consider one of the many free budgeting apps out there that help you categorise and monitor your spending.

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7. Get the insurance you need.

As tempting as it may be to save a bit of money each year by foregoing insurance, that's one of the worst money mistakes you can make.

'If you are a renter, definitely get renter's insurance,' says Meaney. In addition to covering break-ins or damage from a fire or severe weather, renter's insurance will cover you if your car is ever broken into. 'Anything that is not part of your vehicle that is stolen from your car -- golf clubs in your trunk, for example -- is not covered by auto insurance,' he explains. 'Your renter's insurance on the other hand, will cover those items.'

Auto, health, and disability insurance are three other must-haves, Meaney emphasises. Check out this young adult's guide to affordable health insurance to get started.

9. Make quality purchases.

Invest in things that have value. While it may be hard to part with your cash, some things are worth spending money on, such as a nice interview suit or new experiences. Check out more smart purchases to make in your 20s.

Quality purchases don't necessarily mean big-ticket items; there are several everyday items to invest in that can pay for themselves in a short amount of time, such as a commuter bike or coffee maker.

10. Take advantage of work benefits.

If you're not taking full advantage of your employee benefits, you're leaving money on the table. We talked about contributing to your employer's 401(k) retirement account if it's available, but there are some other overlooked -- yet incredibly advantageous -- benefits to consider:

Healthcare flexible-spending account: This type of account is a pretax benefit account you can use to cover a variety of healthcare products and services, from acupuncture and physical therapy to vaccines and over-the-counter medicine (note that OTC medicines are only eligible when prescribed by a physician). You can put up to $2,550 of tax-free money into this account in 2015, and save about 30% on healthcare expenses with the tax break, WageWorks reports.

Commuter benefits: These are often overlooked, but they can save you over $600 each year, WageWorks tells The Wall Street Journal. The concept is simple: Employees can use pretax money from their paychecks to cover mass-transit passes -- including the train, subway, bus, ferry, and parking.

Fitness reimbursement program: Depending on your employer, you could receive reimbursements for many common health related expenses, such as gym membership fees, fitness classes, or sports league teams. While you're looking into fitness reimbursements, check out other expenses your company may reimburse, such as cell phone plans, moving costs, or professional development classes.

Talk to your human resources department to understand the scope of what's available to you.

11. Invest in yourself.

Self-educate by enrolling in a course, attending a work-related conference, or reading smart books. The wealthiest, most successful people are constantly exercising their brains and looking for ways to continue learning long after college or any formal education is over.

On a similar note, invest in your health -- consider using your bonus for a gym membership, yoga classes, juicer, fitness magazine subscription, or anything else that will better your health and strengthen your mind.

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