Handling money in your twenties is a learning process. Your twenties is when you're finding your way in the world on all fronts, not just money. There's no guide for money that gives you the steps, so many people end up figuring it out by trial and error. While trial and error is a valuable teacher, learning from others can also be effective.
If you are lucky, you'll be able to find a family member of friend that want's to share some tips with you, but if you are like many people, you're just guessing and trying the best you can to figure it out.
When I was in my early twenties, I didn't have my money all figured out, but I did do a few things right. Now that I'm almost 30, I can confidently look back and reflect on what I wish I would have known in my early twenties and also share with you what I did that worked. Hopefully, these tips can give you some help if you need direction.
I've had some great experiences with mentors, and I've had some terrible experiences with mentors. Early in my career I valued finding people that I could surround myself with that were successful. I wanted to learn the tricks, the shortcuts, and the experiences that I could benefit from. Overall, it's proven to be worth my time but not necessarily easy.
Not all mentors know how to be mentors. You may be thinking... "how do I find a mentor." My best advice to find a mentor is to look at who you already trust in your life, not someone entirely new.
If your Aunt Sally is a successful real estate investor with multiple rental properties, ask her to go to coffee and ask as many questions as you can. I bet you'll find out that personal finance is a strength of her's too and she'd be happy to share with you what she knows.
Don't over think this. Find someone you trust that has a competency that you respect and ask them to talk more about it.
After all, not all mentors are good trainers. I found a couple of bad mentors. A few people that didn't have the right motives and that wanted to take advantage of me for some of what I was willing to offer as a "mentee." Nothing terrible happened, but people should know that you are ready to say, "this isn't working out anymore" and move on.
Just because someone is your mentor does not mean they are always right and it doesn't mean you aren't smart. Use them for what their expertise is and take all other things with a grain of salt.
Keep your integrity and follow your intuition with people. Trust is important. Make sure you can trust your mentor about the topic they're teaching you.Mentorship is not an excuse for having poor boundaries with people. It's a simple agreement to make each other better.
So if a relationship begins to turn toxic, take a step back and reevaluate how much influence you allow this person to have in your life.
Understanding your relationship with money can be a game changer. Hopefully, a mentor can help you down this path by contrasting what you think about money with their practices and thoughts about money.
We all have different views of money. We typically get our perspective of money from our parents. A good indicator of your habits with money can be seen in how your parents spend money. I know, it's not what you want to hear.
Do you want to be better than your parents? If you do, you need to understand what your natural tendencies are so you can be aware of them.
Financial awareness is everything.
This is important because if you grew up in a family that didn't have much money, it's safe to say your view of money will be different than someone who got a brand new BMW for their 16th birthday. Neither way is right or wrong; it's just different.
Regardless of how you view money, it's good to take a hard look at your spending habits to see what may surface. You may discover that you spend more on a particular area of life that you didn't realize. Your tendencies can be a powerful predictor of your future success.
Most people get stuck in the trap of "this is how I was raised" mentality
If you want to take your money more seriously, track your spending for a couple of months to identify any trends that may surface. If you're spending more than $200 or $300 a month on an item, highlight it in red or orange.
If you're spending $75 - $200 on something, you also need to take note. The idea is to see what those things are and ask yourself it's reasonable that you're spending that much on this stuff.
I remember early in my twenties after I finished up college, I got my first real job at a bank. I'll just be honest and say, it was terrible. My first day I was excited because I wore a tie and dressed up real fancy but after that, I hated it.
Life lesson: I learned I didn't want to wear a tie every day, so I quit to go work at a coffee shop until I could find a better job.
All that to say, during this time I began striving to save at least $1,000 in my personal savings account. It was a goal I wanted to reach early so that I could have that safety net.
I think about it now, and $1,000 doesn't seem like much, but when you don't make much as a young professional, it can take some time.
It was helpful for me to set that goal, write it down, and contribute to reaching it each pay period, no matter how little I added. There were times that I only put $15 or $20 towards that goal, but I gained satisfaction that I was doing what I could.
Eventually, I reached my goal.
The point is that you need to set goals for yourself. YOU NEED TO SET GOALS. Without goals, you have no plan, and without a plan, you will not make progress.
Ask the millions of Americans that are still filing bankruptcy and make hundreds of thousands of dollars a year.
1. Save $1,000 in an emergency fund
2. Make higher payments towards student loans or car payment each month to get ahead of payments and pay it off loan early
3. Save three months of living expenses in a high-interest savings account
4. Open a retirement account or begin contributing to a 401k
These are general goals you can shoot for. Some you may already be doing; some maybe not. Even if you think these goals are "basic," it's important to write them down and commit to taking some step each month towards reaching that goal, even if it's $20 a month.
This is by far the biggest advice I have for young 20-somethings getting started out. You need to do your thing.
Do the best you can with what you have
I had friends right out of college making nearly 6 figure salaries. Did I? Heck no! My first job out of college working at the bank was $23,000 a year.... Yes, $23k!....
I ate tuna every day for lunch. Side note: I no longer eat tuna because it reminds me of how broke I used to be.
My point is, regardless of how much you are making or how much your friends are making, you can still work towards improving your situation.
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The crazy thing is, I have friends that have always made more than I do but they are worse off financially than I am today.
Why? I've set goals, stuck to them, and understood my finances. Why do they make six figures and screw over their finances? I don't know. I don't ask them.
I can tell you that they don't understand their spending. They buy brand new cars they can afford. They buy houses too soon. They buy stuff they don't need. It's what they know. It's what their parents did. It's what "they do."
They have not take the time look at their habits. This is the single biggest trap that 20-somethings get caught up in. It's the same mantra that we have all heard, "keeping up with the Joneses." It's not worth it.
If you want to get ahead in your 20's with money, look for a mentor, try to understand your habits, set clear goals, and forget "where everyone else" is at on their journey.
If you do these things, you're surely going to be ahead of the pack when you get to your 30's.
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Zack is one of the co-founders of FreeUp and is in charge of setting the strategy for the blog and managing the day-to-day operations. When he isn't plotting new ways to create awesome blog content, he likes to geek out about global affairs, ride motorcycles and can probably be found hiking somewhere during his days off.