Here’s What a Realistic Budget Looks Like for Someone in Their 20s

CNBC’s Emmie Martin recently shared an article detailing the ins and outs of a very affluent 25-year-old’s budget. The 25-year-old profiled in the article was extremely lucky, earning a six-figure income, excellent credit and little debt. The article did a great job of breaking down his financial situation. However, it received plenty of backlash on Twitter from users who pointed out some unrealistic aspects of this budget.

Here’s what the finances of people in their 20s actually look like, on average

According to a 2019 CNBC income survey, the average 20- to 24-year-old makes $30,628 annually, while the average 25- to 34-year-old makes $43,524 annually. Averaging the two gives $37,076, a healthy starting point. That equates to about $3,000 in gross income a month before taxes.

Roughly $6,000 of that total income will be devoured by income taxes, FICA taxes, state taxes and local taxes. Thus, the net monthly income for a typical person in their 20s is about $2,500 per month.

Roughly half of young adults attended college, and of those, approximately 70% accumulated some debt, which averages out to roughly $400 in student loan payments.

The average monthly rent in the United States is just shy of $1,500 while monthly utilities come out around $400. The average person on a moderate budget spends about $290 on food per month. If you plan to be incredibly thrifty with food shopping, it’s about $183.

Want a cell phone? Those average around $60 per month per person.

According to AAA, the average monthly ownership cost of a vehicle is $774 per month. That does include the payments as well as the fuel, maintenance, insurance, registration and occasional repairs needed when driving 15,000 miles per year.

What’s a realistic budget for young adults?

Let’s assume that your average 25-year-old attended college and has one roommate while renting an apartment (where they split rent and utilities), and use everything else according to the national average. That person’s budget would look like this:

Total income after taxes$2,500
Rent– $750
Utilities– $200
Student loans– $400
Food (average of thrift and moderate plans)– $236
Cell phone– $60
Car– $775
Total remaining$79

That $79 remaining has to cover things such as medical expenses, toiletries, household supplies, emergency fund savings, gifts and more. All other expenses have to come out of that $79 per month. If we were to follow the budget outlined in CNBC’s article, then some of that would also go toward charity, donations and a house cleaner.

The average young adult has a very fragile budget

The problem with this budget is that even the slightest unexpected event can blow over this house of cards. What if your rent goes up? A family member suddenly passes away and you have to fly home for the funeral? Your car’s starter fails a week after you get the brakes fixed? The power goes out for a week and you lose all your refrigerated food? What if you lose your job?

[Read: Best Money-Saving Apps]

What if you’re in anything other than the average situation? Do you live in an area where rent is above average? Perhaps you’re making slightly below average income, or perhaps you have some sort of ongoing medical expense.

In any of those situations, the only solution for many people is to borrow. They’re left in a situation where their only reliable option is to use a credit card or seek out a personal loan to fix the problem in the short term, which of course leads to additional debt payments in the long term.

Not only that, but many life choices are also simply closed to the average young adult. The average budget offers no direct path to homeownership, at least not for a while. There is no direct path to starting a family and having kids, as there isn’t sufficient funds for that. That budget doesn’t provide enough room in that extra $175 a month to pay for baby expenses and child care.

How to save money and get ahead in your 20s

Live with your parents or roommates

One of the biggest advantages a 20-something can leverage is reducing the cost of rent and utilities by living with other people. If rent and utilities average $2,000 in total, every single roommate you add to that equation reduces that amount substantially. A single roommate drops that bill to $1,000. Three roommates turns it into $500 a month.

If you’re able to move in with your parents for a time, you may be able to reduce those expenses down to a trivial amount. This is the key reason that so many 20-somethings today move in with their parents. The realities of a young adult’s budget make it such a powerful financial move.

[More: 7 Efficient Budgeting Strategies During Coronavirus]

In addition, living with people opens up savings on food, too. It’s much easier to buy food in bulk and spread out the chore of making group meals if you live with several people. For example, if you have three roommates, you can take turns making meals every fourth night and make meals large enough so that everyone has leftovers the next day. This drastically cuts one’s food costs.

Avoid owning a car, if possible

Try to seek employment that’s easily available via mass transit while also living near mass transit options, then buy an all-access pass so that you can use buses and trains for your commute as well as errands and other things around the city. If you have this, you can forego the expense of owning a car. You can always rent or borrow a car if you have a need to go outside the city.

If your area doesn’t have mass transit, aim to live close enough to your job that you can walk or bicycle to work as well as to places to get food. A well-equipped bicycle with pannier bags can easily transport groceries and other items, and again you can rent or borrow a car when needed.

Prioritize an emergency fund

The average budget of someone in their 20s has very little wiggle room, and if you have a budget with very little wiggle room, even a small emergency can cause things to collapse, resulting in debt and many other problems. The most effective tool against this is to simply have a cash emergency fund, mostly held in a savings account at a bank.

[Related: Best Emergency Loans of 2020]

It can be tricky to find funds for an emergency fund when you’re on a very tight budget, but even contributing $20 per week results in $1,000 in emergency funds within a year. That money can be tapped for any emergency. It provides protection against things as different as a car problem, an unexpected loss of a roommate, an emergency that requires travel, or anything else that comes up.

The most effective way to build an emergency fund is to set up an automatic transfer from your checking account to your savings account, moving over a small amount each week automatically. $20 is a great starting point, but even $10 can add up to a huge difference maker after a while.

Cultivate social relationships and activities that don’t rely on spending

Your core social circle should not be encouraging you to spend money. The activities that your social circle chooses should not require spending money, either. The activities you choose to engage in on your own should require minimal expense as well.

If any of those things aren’t true, change them. Suggest low-cost or free things to do with your friends. For example, rather than going out to a bar, choose to split the cost of drinks at someone’s house. Rather than spending the day shopping, spend the day going on a hike together. Seek out and emphasize other social relationships that don’t inherently require spending money. If your friends are constantly focused on doing things that require spending money, intentionally choose to spend more time with other friends who don’t require it.

Too long, didn’t read?

The portrayals of the finances of young adults in the media are often not realistic. They focus on a very affluent slice of twenty-something life, and that results in financial advice that’s not useful to the vast majority of fresh graduates struggling to get by. Don’t buy into those media reports. Focus on solving the real problems that your budget presents rather than the budgetary concerns of people making three times your income.

We welcome your feedback on this article. Contact us at with comments or questions.

Updated August 27, 2020 – A recent version of this article attributed the CNBC article to Emma Martin. It has been updated to Emmie Martin.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

Reviewed by

  • Courtney Mihocik
    Courtney Mihocik
    Loans Editor

    Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.