6 Things About Money I Wish I Could Tell My 20-Year-Old Self
Written by
Dawn Allcot
Edited by
Susan Kim
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As finance expert Jaspreet Singh recently pointed out in a video on his YouTube channel, Minority Mindset, people in their 20s have a unique opportunity to build financial freedom and generational wealth. “But,” he said in the video, “that means you’re going to have to start using your money a little bit differently today.”
If you’re in your 30s, 40s, 50s or later, you might look back at your early years with some regrets. I know I do — especially financial regrets over the way I used my money. And it turns out I’m not the only one. Even financial pros were not always smart with money.
Lifegoalsmag.com blogger Tess Brigham, for instance, pointed out in this post that her parents were generous with money and, as a result, she didn’t have to learn how to spend money wisely.
While I had a different upbringing from Tess, which has caused me to spend more wisely as I got older, there are things I wish I had known about money in my 20s that would make building wealth easier today.
Tess has an older sister, Brooke, who is an attorney and now working toward a certificate in Personal Financial Planning. She offered Tess some money tips that both Tess and I wish we had known sooner. You’d better believe I’m passing these lessons on to my own kids.
Start Thinking About Money Today — and Learn All You Can
When I was younger, I read “Rich Dad, Poor Dad” by Robert Kiyosaki, and a handful of other personal finance books. But I failed to apply the lessons, thinking I had plenty of time to build wealth. I thought my 20s should be for having fun.
Plus, living in an expensive area of the country (Long Island, New York) it wasn’t like I had a lot left over once my rent, car insurance and other bills were paid. Little did I realize how easy it would have been to use that money I was spending on bagels and coffee at the deli and, instead, invest in my future.
Sign Up for That 401(k)
Regardless of how little disposable income I had, I wish I could tell my 22-year-old self to sign up for that 401(k) when the company owner at my first job offered it. I didn’t understand how “matching contributions” equals “free money.”
Likewise, Brooke told her sister, “Start saving for retirement as soon as you start working, even if you have debt, try to save $100 a month in an IRA or your employer’s plan.”
No matter how little you have available to save, make it a point to pay yourself first and save for retirement.
Understand that Time Is On Your Side — and Time Is Money
It’s okay to start small with retirement savings when you’re in your 20s, because every bit you invest will grow for decades.
“The power of compound interest is astounding. If you did nothing more than save $100 a month from age 20 to 65, assuming an average return of 8%, you will have $536,000 at age 65,” Brooke said at LifeGoalsMag.com.
Avoid Credit Cards
Compounding interest works on your side when you are collecting it over decades. But when you have to pay it to lenders, compound interest can destroy your dreams of wealth.
It’s good to have a high credit score when you ultimately want to take out a car loan or buy a house. Building up revolving lines of credit — and paying them off on time — is one way to increase your credit score.
But unless you are disciplined enough to pay your credit card bills in full at the end of every, avoid credit cards until you’re mature enough to handle them. If it’s too late to avoid credit card debt, make it a priority to pay it off.
“If you have debt you need to make a written plan to get out as soon as possible,” Brooke said. “This is hard. It requires making a budget every month and actually sticking to it, but your future self will thank you.”
Don’t Ignore Your Student Debt
You might think that student loan debt is “good debt.” After all, it’s an investment in your future. But it can also be an albatross holding you back from your goal of financial freedom.
“You should treat this debt the same way you treat paying off a credit card,” Brooke said. “You do not want to have this debt hanging over your head for the next 25 years.”
Build Up Your Emergency Savings
Once your high-interest debt is paid off, start building short-term financial security with an emergency savings account. With interest rates as high as 5% from online banks, it’s easy to see your money grow.
Finance expert Jaspreet Singh recommended putting at least 10% of your income into an emergency savings account, while another 15% should go toward investments to help you build wealth.
Following the advice of pros like Singh and savvy big sisters like Brooke takes knowledge and discipline. But it’s not impossible and can put you on track to enjoy a financially secure lifestyle as you get older.
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