I wish I had…
It’s a sad statement that every one of us has said or thought at some point. Most of us could finish that sentence a dozen different ways.
The truth is, we all live with regret. Maybe your regrets are about money, many of mine are. I can think of a dozen things I wish I’d started doing 15 years ago.
To be clear, at 32, I’m still relatively young. I still have time to set up myself and my family financially. This would be a much harder post to write at 55 or 60 years old.
Lately, I’ve been thinking a lot about regret and how it shapes my thoughts. I wonder what I’d do differently if I could have a frank discussion with my 20 year old self. I was pretty uncooperative then, I doubt I would have listened!
Making a habit of debt
Throughout my 20s, I used debt to make almost every major purchase. I bought 3 new vehicles, stereo systems, rims for my car, tools, video games etc. You name the store, I probably had the credit card.
I didn’t know that it was possible to live debt-free. I was just following the example set by my parents and friends. It seemed like everybody was getting new things and if I didn’t use credit, I could not afford to keep up.
When I met my beautiful wife and we started planning our life together, money would come up frequently. We both carried some debt, mostly student loans. The truth is, when you get married, you are taking on each others debt. She was committing to take on my bad decisions as her responsibility and I was doing the same for her.
We dug our way out of debt
In September of 2014 after five years of marriage and countless payments, we finally paid off all of our consumer debt. For the first time in my adult life, I didn’t owe anybody a dime. I will never forget how good that feels.
Unfortunately…it didn’t last long.
A few months after that, we bought a house, and frankly, we were unprepared. There were lawyers and inspections, upgrades and repairs.
We quickly found ourselves back in debt despite having vowed to never use a credit card again!
The old cliche rings true here – ‘If you fail to prepare, you’re preparing to fail’
Two years in, we’re now more settled financially and digging our way out of debt once again, and it’s even harder this time with three children instead of two. If you have kids you know how much extra pressure being a parent can put on your finances.
If I had started developing wise money management habits 10 or 15 years ago, I would be in a much more comfortable place right now.
This post is titled ‘10 Money Habits to Start in Your 20s’, but when it comes to money management, it’s never too early or late to start. If you are a teenager reading this, pay attention! Start now! If you’re in your 30s (like me), 40s, 50s or beyond, there’s still time to put the work in and get your finances in order.
The best time to plant a tree was 20 years ago. The second best time is now. – Chinese Proverb
Now is the time to start building habits that will put you on the path to financial success.
If you want to get ahead of the game financially, read the tips below carefully and consider how you ca implement them in your life.
11 Money Habits to Start in Your 20s
Create And Stick To A Budget
It’s difficult to control your money if you’re not tracking where you spend it. Every dollar that passes through your hands needs a job. For some of them, the job is to buy food or rent, for others, it’s job may be to send you to Hawaii.
I can’t emphasize this enough. If you do not have a budget, you will not reach your financial goals. If you have not done so yet, pour yourself a coffee, find a comfortable chair and make up a simple budget right now.
Learn to Save Automatically
I have always had trouble saving. My parents didn’t encourage me to save when I was young and I never developed the habit. Sound familiar? I’m going to show you how to start saving money today.
For me, the key to saving money has been to automate it. Allocate some money in your budget to savings and set it to automatically transfer to a savings account the day you get paid. That way it’s done and you don’t have to think about it.
Pro tip: open an account at a different bank and set your regular transfer to go there. This makes the money a little more difficult to access and decreases the chance that you’ll spend it.
Build An Emergency Fund
Everybody needs an emergency fund, period. You need a supply of cash for when your hot water tank starts leaking (like mine did this year), or you car breaks down. Ideally, your fund would cover you for a few months if you lost your job or had some other unexpected expense, but $1000 is a great starting point.
Still living at home? Great, set up your emergency fund anyways. It’s great practice and will put you in a better financial position when you’re out on your own.
Live Below Your Means
There is nothing on this list more important than this. It is impossible to build wealth and thrive financially if you spend more than you make. Your budget will show you if you’re spending more than you earn.
If you find that you’re overspending your income, stop immediately. It’s unsustainable and will severely limit your options in the future. Sell a car to offload a payment, downgrade your cell phone or cable, stop eating out. Whatever you do to balance your budget, do it fast.
Save For Retirement
I didn’t start saving for retirement until my 30s. I’m miles behind my peers who started in their 20s, and there’s no way I can catch up to somebody who starts saving in their teens. It seems so far off right? It’s not, life is short. Yesterday I was graduating high school and had all the time in the world. Today I’m married with three kids and a full-time job. The time to develop the habit of saving for retirement is now.
Starting your retirement fund early also holds some other hidden benefits. By 25, you will have a significant pool of money in your retirement savings which you may be able to ‘borrow’ penalty-free to make a down payment on a home.
Not Using Credit
At 18 years old I got my first gas station credit card. I bought my gas at the same place for a year diligently trying to build my credit rating. Like many others, I had been told that having good credit is very important and building it should be a priority.
I’m not going to tell you that a credit score has no value. WIthout good credit, I could not have qualified for my mortgage and bought our family home. In my opinion however, the merits of good credit are generally oversold. What does good credit earn you? More credit, and so the cycle continues.
Set Financial Goals
I wish I’d have started setting financial goals earlier in life. It’s hard to achieve something that you aren’t actively working towards, and money is no exception. Whether your goal is to get through college debt-free, pay cash for a new car or save towards a down payment for a home, the habit of setting and following through with financial goals will serve you well your entire life.
Pay Bills On Time
One of the few things I’ve done properly relating to money is always paying my bills on time. Getting behind on bills is a dangerous game and the farther you fall behind, the harder it is to catch up.
An easy way to avoid this is to set up your bills as an automatic payment from your online banking the day you get paid. That way you never get behind. This also saves you being hassled by creditors.
I recommend that everybody give to a cause that they believe in. There are many reasons to give from supporting your local church to helping the homeless and less fortunate. You might want to support a political candidate, a local initiative, help a friend in need, you get the point. There are hundreds of ways to give and I’m not going to cover this in detail. I recommend you check out this article on giving.
Set Money Aside For Yourself
It’s important to budget discretionary cash. It’s hard to stick to a budget when you feel like it’s holding you back from having fun or treating yourself. I recommend you set aside some money every month that’s just for play. Eating out, movies, whatever. You need some discretionary cash, so make sure to plan for it.
Track your progress
Make sure you’re tracking progress on your financial goals and budgeting. Sit down once per month and do an assessment of your budget. How are your savings going? Are you setting aside enough play money? Should you grow your emergency fund?
A budget isn’t a static thing that you write once and use for the rest of your life. As your circumstances and needs change, your budget should change as well.
Do you have anything to add to this list? What do you wish you had started in your 20s?