It would have been great to receive guidance right after graduation. When I finished college, I had a manageable student loan balance, but no credit card debt. I thought I was financially savvy without any credit card balances, yet I had no idea about compound interest and retirement savings. My understanding of saving was limited to immediate needs, not big-picture goals.

Now that my friends and I are older, we've realized we could have benefitted from some crucial advice. Here are the top nine things we wish we'd known in our twenties.

Enroll in your employer's 401(k) right away

Once you land a job with a 401(k) or similar retirement plan, set up automatic contributions from your paycheck. Make sure you contribute enough to receive any company match offered. You'll hardly notice the deduction, and it's never easier to save than when you're unencumbered by family expenses. Aim for 10% of your gross income. Think of it as paying yourself first.

Establish a Roth IRA

If your job lacks a retirement option, don't skip the chance to save. Start a Roth IRA to jumpstart your compound interest journey while you're young. You can contribute up to $6,000 each year from your after-tax modified adjusted gross income (MAGI). Even part-time work offers an opportunity to save; just ensure you don't contribute more than your earnings.

Imagine you're 23, starting a Roth IRA with $500 and planning to contribute $3,000 annually until you're 65. Assuming a 7% growth rate, your $126,000 in contributions could grow to $748,902. If you contribute $5,000 annually, it could reach $1,242,455. That's the magic of compound interest! Even if you pause your contributions, your early investments keep growing. Test out this calculator for insights.

Master budgeting

Many of us are unaware of our spending habits. Random purchases accumulate quickly. By crafting a budget, you can direct funds toward what truly matters, like long-term savings or paying off loans, while still leaving room for enjoyment. View budgeting as a tool for empowerment. Apps like YouNeedABudget (YNAB) or a basic spreadsheet can help.

Create an emergency fund

Having emergency savings is vital, especially for those who are single or lack family support. The typical recommendation is to save 3-6 months worth of living expenses, but many struggle to reach this goal. We suggest aiming for six weeks' worth of expenses, or a target of $2,000. Start small if needed; you could adjust your retirement contributions to 7% and allocate 3% to build your fund.

Pay off credit card balances monthly

This is crucial. I figured this out early on, while many friends learned the hard way. Avoid paying 20% interest or whatever your card's annual percentage rate is. It's akin to tipping 20% on a purchase you didn't intend to make! You don't need to carry a balance to improve your credit score.

Understand the benefits of a strong credit score

On the other hand, credit cards can be an excellent way to build a solid credit score, which can lead to lower insurance rates, the ability to rent an apartment without a co-signer, and more. It took me years to realize how a good credit score could reduce costs and open opportunities. Treat credit cards as tools for regular expenses, not free money.

Avoid lifestyle inflation

It's tempting to abandon frugal habits when your paychecks start rolling in. From experience, I can tell you that living within your means pays off. Rent may be high, making these small habits even more crucial. Opt for groceries over takeout, visit the library instead of subscribing to audiobooks, use public transport, buy second-hand, and consider sharing living spaces. Join a local Buy Nothing group or borrow items from neighbors. These choices save money and benefit the planet.

Balance debt repayment with savings

I wish I had understood interest rates better in my youth. I aggressively paid off my low-interest student loans, thinking all debt was bad, but I missed out on saving in high-interest accounts. You can do both! Once your retirement savings are automated with a 7% return, see if you have extra funds for student loans (which usually have interest rates ranging from 3 to 5%). Let your savings grow while you manage debt. However, if you're facing 23% interest on credit card debt, prioritize that repayment before putting extra funds toward student loans.

Don't overlook health insurance!

If you're on your parents' insurance until age 26, that's great, but what if their plan isn't sufficient? If your job doesn't provide health insurance or you're in between jobs, skipping coverage is tempting. Resist that urge. Check if you qualify for subsidies through your state's marketplace or even for expanded Medicaid. Young adults can face unexpected health issues. Having access to quality healthcare is crucial. Your parents will want you to have it too.