When I was in my early twenties, I was fresh out of school. I had all of the world in front of me and a million opportunities. With this newfound freedom, there were only a few things limiting my options. I didn't have school tying me down, I could ignore any advice my parents gave to me, and I could reject any opportunity that didn't perfectly align with my interests.
Often, you read stories that begin this way and lead to remarkable adventures. These stories hold valuable lessons, but they usually come at some cost. For me, the adventures were fairly limited. My journey as a young adult may not have sent me around the globe, but it did help me build some financial strength.
Rather than dwell on my financial mistakes, there are a number factors that allowed me to become financially competent. I'm certainly not perfect, but I also know I could have done a lot worse. Young adults are going to need to balance their freedoms with financial responsibilities. My experiences have left me wishing I'd done a lot of things differently, but I can't change the past. Fortunately, it's not all bad, and I can show gratitude for the smart decisions and encourage others to do the same.
Buying My Car In Cash
There's one guiding principle of my financial decisions as a young adult: I hate debt. While my friends were driving around the city during their senior year in high school, I was bumming rides and borrowing my parents' cars. I had some money in savings, and I probably could have leased a car if I wanted.
Leasing a car meant one thing: debt.
So I saved for years. I didn't have my first car until I was 20, but when I bought it I paid cash. It was hard to watch all of my savings disappear, but it was possible to rebuild my savings when I didn't need to make monthly payments. Assuming you don't need to replace your car every other year, buying a solid, used car can save you a lot in the long run.
Contributing to Retirement
As soon as I had a job allowing me to contribute to a 401K, my mother convinced me I had to do it. I really didn't want to because I wasn't making a lot of money. How could I think about retiring when the thought of eating at Chili's seemed like a luxury? But I listened to my mother. I wasn't even making $16 an hour, but I managed to make a contribution.
Six years later I am very happy I did this. Compounding interest is a remarkable thing, but it takes years for you to truly see results. After all this time had elapsed, my contribution doubled. $4,000 turned to $8,000 and I did absolutely nothing in the process. Of course, I can't really touch this for another few decades, but the money will continue to grow during this time. Investing is most impactful when you're young, and if you can contribute a few hundred dollars you can sit back as it turns into a few thousand.
Saying No To Going Out
In my early twenties, I didn't want to go out that much. I probably could have rallied my friends and gone out every weekend if I wanted. The thing is, I just didn't want to. So I spent many weekends at home despite the invitations to go to bars or parties. There's no denying the pressures to go out. There's also no denying the fact that nights out can lead to some great adventures. When you don't feel like embracing those adventures, the nights on the town just become cash sucks.
I'd never tell people to stay in all the time, but it's a good habit to become comfortable saying "no" when you'd rather stay home. Many of my friends went out three or four times each week. By the end of the month they'd have a $600 bar tab and little to show for it. While very few adventures start with a night in front of the TV, some bank accounts are built with this strategy.
Using a Credit Card
I've previously mentioned my hate for debt, so it may seem counterintuitive to advocate for the use of credit cards. When done responsibly, they can be quite beneficial. Not only that, you can earn rewards in the process.
Admittedly, I tried to limit my credit card use as a young adult. So, I learned to charge my monthly subscriptions to my card. I knew I would spend about $200 a month on my gym membership, streaming services, and parking pass. Then, I set my bank account to automatically pay the balance each month. In this process, I showed my creditworthiness and automated some of my bills. Years later, I earned cash back with my rewards. It took a long time, but last year I bought a couch and recliner entirely with credit card rewards. That was a pretty great bonus.
Repay Student Loans FAST
After graduation, most students enter the real world with buckets of university debt. There are certainly good memories to be had in school, but those memories can also be quite expensive. If you took out loans, try to repay them as soon as you can.
It can be tempting to avoid repayment because student loans might get forgiven. While there is a chance of forgiveness, there's a guarantee of interest. The longer you wait to repay your loans, the more you will need to repay. So, it's usually best to pay down your loans as quickly as you can. The only time it can be beneficial to avoid repayment is when the loans are deferred and interest is not accruing. Even then, you should save money as if you were paying the loan. That way you can make a huge contribution once payments resume.
People want you to spend money. When you make a purchase, especially a big one, businesses will try to upsell you. Before you swipe the card, take a look at the receipt. If you see some funky insurance policy on there then you ought to question it. Even when you go to the doctor, you can ask if a procedure is covered under insurance. Many services are elective but are presented as mandatory.
This isn't to say everyone is trying to rip you off. However, a lot of people are trying to make processes more complicated than they need to be. For example, when I bought a new iPhone Verizon tried to charge me a $40 activation fee. After a decade with Verizon, I had to wonder what they were activating. Turns out, all I had to do was pop my old sim card into my new phone. No activation needed, but I was going to be charged by default.
Learning Money-Saving Skills
In your twenties, you're often advised to learn marketable skills. Your abilities to code, edit, or create budgets could lead to job promotions and earn you money in the future. I'd never advise people to stop focusing on academics, but I would challenge them to learn some life skills that can save money. My roommate taught me how to poach eggs. Every time I do it I think of the cost at Sunday brunch. Two poached eggs cost under $1 at home but can cost $10 at a restaurant.
Nobody wants to spend their paycheck changing oil, touching up paint, or repairing appliances. If you can learn to do this on your own you can significantly reduce these costs. If you learn to do this young then you will be saving money your whole life.
Knowing What to Spend Money On
For about five years I was an avid Crossfitter. I loved it, even though my membership was 15 times more expensive than Planet Fitness. While it might not have been the most economical, I went to the gym at least four times a week and really enjoyed the workouts. I have no regrets with this spending because I truly valued the experiences and services I received.
Saving money can be tedious, but it can't be the only objective. You ought to spend some on your personal passions and hobbies; you just need to know what's worth your money. When you have your priorities straight, you're not going to waste money. Even if you're not making a budget-friendly decision, it's important to reward yourself sometimes as long as it's not breaking the bank.
Starting to Make a Change
Now that I have hit my thirties, I know I am not in the best financial situation. I also know I could be in a much worse position, and I am grateful for the past decisions I made. While I can try to be proactive in the future, I can never change my past decisions. I didn't handle my finances perfectly, but there are many areas where I show gratitude.
It can be hard to talk about money, especially when you're young and freshly out of school. In this position, you have a lot of options and the most fun ones aren't financially conservative. Up front, saving money looks boring. In the future, it can lead to exciting opportunities.
Even if you aren't fortunate enough to have made smart decisions in your 20's, you can work to make future changes. My financial journey is quite limited compared to others. Things change slowly, and you don't build success over night. When I look at myself a decade ago, I was an entirely different person. It took time to build strong financial habits, but my results have convinced me to never return to my old ways.