The following blog is by Brittney Castro originally published in Brittney Castro’s Blog – Financially Wise Women.

A lot of people in their 20s are dealing with large amounts of student loan and credit card debt and living paycheck to paycheck, dreaming of days when they can begin to use their money to reach their financial goals. While most will think financial planning at this stage in their lives is pointless, the truth is there are some basic strategies you can implement, regardless of how much debt you have or how much income you’re earning. Learning these strategies will help set up the financial foundation you need to move through this challenging time in your life and set the stage for a strong financial future.

Create a budget:

Even as a young adult who may not be making that much money yet, budgeting is critical, as it allows you to see how much money is coming in and going out every month. Although most 20-year-olds understand they should budget, the reality is most just don’t do it. Get a budgeting system as early in place as possible and review how you are spending your money so you can make adjustments, if necessary, to ensure you are living within your means and able to save for your financial goals.

The basic budget formula for after-tax income is:

• 50% for fixed expenses, such as housing (28% or less for housing expenses), basic food, insurance premiums, etc.
• 20% for financial goals. This would include extra debt payments, your cash cushion, retirement, etc.
• 30% for variable expenses, such as dining out, entertainment, travel, etc.

Set up weekly money dates:

Set up weekly money dates to review your budget and manage and plan out your finances. During your money date you should pay your bills (although most should be set up as auto-pay), update and review your budget and take care of any other financial concerns. By calling this allocated time with your money a “date,” you can begin to bring a fun, exciting element into your financial life to help you stay committed for the long haul.

Open up a savings account and set up automatic contributions:

Most people don’t save because they make it way too difficult for themselves. Instead, review your budget and aim to start saving toward your financial goals by following the “pay yourself first” strategy. Under this method, you set up your savings to be automated every month and you save before you spend money on variable expenses. The goal is to save 20% of your net income–but don’t let that amount scare you. Even if you can only start with $10 a month, that’s better than nothing. Every year, review and see if you can increase your savings amount.

Build up a cash cushion:

The goal of a cash cushion is to have three to nine months of your fixed expenses in a savings account to pay for life’s unexpected incidents. Life always throws curveballs–your car breaks down, your computer crashes or you receive an unexpected medical bill–and having money in the bank to cover those expenses will help you maintain your financial peace of mind. If your fixed expenses are $3,000 per month, you should aim to build a cash cushion of anywhere between $9,000-$18,000, depending on your comfort level, job security, etc. That sounds like a lot, I know. But remember, just start with what you can to build you cash cushion over a few years. Again, even if it’s $10 a week, that’s still one step in the right direction.

Keep an eye on your credit score:

Our credit score affects nearly everything in our financial lives. It affects the interest rate on the car loan we apply for, the mortgage loan, the credit cards–and even employers and landlords can reference your credit score when reviewing your application. By monitoring your credit score, you can see where you stand and what you can do to improve it if necessary. Use websites likewww.creditkarma.com to view your credit score (not your actual FICO) regularly for free and then pay to see your actualy credit score at least annually using www.annualcreditreport.com.

Create a debt reduction plan:

The first step is to make a list of all your debts. Get clear about how much you owe, the interest rate of each debt, and the minimum payment due. Then review your budget to determine how much you can realistically add toward extra debt payments and start with the debt with the highest interest rate while paying the minimums on the rest. This will allow you to save the most in interest payments. Once the debt with the highest interest rate is paid off, move on to the second highest, and so on.

Start saving for long-term goals:

If you have the ability to start investing into your retirement accounts after you’ve allocated some monthly funds toward building your cash cushion and paying off your debts, then set up an automatic contribution into your retirement account. By starting early, you can allow compounding interest to work in your favor on your investment accounts. If you are new to investing, make sure you do your homework and read investment books so you are clear about what to expect when investing for your future.

Focus on building your earning potential:

Income is one of the biggest factors in wealth creation over time. After all, if you don’t make money–or don’t make enough money–it is very difficult to save for your financial future. So if you can’t save as much as you would like to due to your income level, focus on ways to increase your earning potential for the long run. There are a lot of free courses you can take online, and even watching YouTube videos to sharpen your skills is something anyone can do. Also, there are so many ways you can earn extra money on the side. Ramit Sethi teaches this to his community at “I Will Teach You To Be Rich.” Think outside the box, and continue to focus on increasing your earning potential every year.

About the author: Brittney Castro, CERTIFIED FINANCIAL PLANNER™ is the Founder and CEO of Financially Wise Women, a Los Angeles based financial planning firm for women. She specializes in working with busy professional and entrepreneurial women who are passionate about life and want to gain clarity around their money. Brittney’s mission is to help women plan and create the life of their dreams, free from anxiety about money. She is known for her non-judgmental, compassionate approach to financial planning. She has been featured in the Wall Street Journal, New York Times, Financial Planning Magazine, Investment News, and Registered Rep Magazine. Away from the office, you can find Brittney working out, drinking green juice, reading, playing at the park with her dog Arya and of course dancing. Visit her at http://www.financiallywisewomen.com and request a FREE 30-minute Discovery Session to discuss how financial planning can help you use your money to live a life you love. Financially Wise Women is a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.