What I Wish I Knew About Money in my 20s
After the interest in Gus & Kadri’s podcast about overspending in their 20’s, we decided to put their advice into words. Kadri shares his story of overspending, followed by Gus’ advice for how to control your spending habits in your 20s.
Kadri’s Story: I turned 20 years old in December of 2007. I had just finished my first year of college and although I wasn’t sure what I wanted to study or do as a career yet, I was excited about the opportunities available to me. About half a year later, I found myself part of a generation of young 20-somethings in college, graduating or searching for jobs/internships in the midst of the 2008 economic crisis.
More than 10 years later, here we are again. I’m older now and remember the pain and struggle that I (and friends and family) experienced surrounding 2008. The most important thing I could have done then, was come up with a financial plan for myself. A plan that focused on funding an emergency fund, paying down debt, and really determining what mattered to me most in life. The second biggest thing I wish I had then, was someone to tell me what to do and the patience and perspective to do it. I am now fortunate to be this very person for my clients that I wish I had 10 years ago.
I think one of the hardest things for anyone in their 20s to understand, is that life isn’t short; it’s long, and to ensure a fruitful life, you need to start early with the right habits and mindset. It’s only when we look back and say we should’ve, would’ve, and could’ve that we realize how quickly time passes.
Just like it takes 4 years to earn a degree, it takes time to save money. It also takes time to get out of debt. When you’re in your 20s you don’t have personal history or experience to know what to do. Instead you’re trying to have experiences and live your best life, which is so important too! It’s all about finding a balance between the two, and having a financial buddy can be really helpful in achieving that balance we all strive for.
For those of you now in your 20s--take it from me--it’s never too early to get started with a financial plan. Figure out what you really like to spend money on, and what you really don’t like to spend money on. This can help guide your goal-setting and spending for one of the best decades of your life!
After reading Kadri’s story, you might be thinking, how can I get started? I am in my 20s and haven’t been financially planning, but I am motivated to get started.
Gus’ Advice: Budgeting in your 20’s? This might be an unheard of concept, but in our opinion it is never too soon to start. Financial literacy is not talked about in school (except for that one time in 7th grade home ec. class), but it is possibly the most important subject of all! We all need to learn how to budget, how to save money, and how to pay taxes, but our education on these topics is so limited.
Spend less than you earn.
Getting that first adult paycheck is an amazing feeling and the urge to go out and spend it all is really tempting, but it is important to instill good saving habits from the beginning. Aim to put 20% of this away into an emergency fund. Now, we know that 20% might not be possible right away but you can work your way up there. Start with 5% and over time you will get there. Keep in mind that you are building your credit during this time. If you choose to open a credit card, pay it off in full every month on time. These habits will pay off in the long run!
Save! Pay yourself first.
Not saving in your 20’s is one of the biggest disservices you can do to yourself. Start saving young and we promise you will be happy to have this fund later in life when you might really need it.
Dip your toes in investing.
If you are lucky enough to have a little bit of extra discretionary income, try investing small amounts. This can be as little as putting $5 a month into an investment account each month. You will slowly see the returns over time and as your income grows, you’ll be able to increase these contributions.
Don’t compare yourself to others.
Everyone is on a unique journey. We all are working towards different goals, whether that be what we want out of life or what we are striving for career wise. Your journey is not the same as anyone else’s and there is no sense in comparing your journey to those of your friends.
Contribute to a retirement plan.
If your company offers a 401k, 403b, or other retirement plan, it is important to take advantage of this benefit, especially if they offer matching. You should always take advantage of matching benefits otherwise you are leaving free money on the streets!
Know your worth.
This can be one of the hardest things on the list. As a young professional, keep in mind the value you bring to the table. You bring a fresh perspective to your workplace and that can be just as valuable as experience. It is important to continuously research your salary and advocate for yourself. Remember this as you gain your experience and navigate your 20’s.
In sum, think of your future self and what you are going to be working for. Are you helping that future version of you right now? Are your spending habits in line with that person that you are growing to become? It’s quite okay if you don’t know the answer to this question. Most 20-somethings would have trouble answering-- but what’s important is that you are thinking about that answer and always working to be the best version of yourself-- no matter your age!
Ready to take your finances to the next level?
To get started schedule a free 20 minute consultation call to speak to a member of our team. We will ask you a few basic questions to get to know you more, walk you through our financial training program steps, and of course answer any questions you may have. No pressure to join!