I’ve been earning money since I was 16 years old, and I’ve learned a lot about personal finance along the way. One of the biggest things I have learned is that most people my age spend what they get straight away. It’s important to save money from a young age. It doesn’t have to be a lot, but it needs to be consistent. Often, people start thinking about saving seriously when they want to buy a house.
Many young people think their twenties are the time to live it up, saving for later. I never wanted to be scraping for change in my thirties. Through careful study and practical application, I’ve learned valuable lessons about money that I want to share. These lessons can help you avoid financial pitfalls and set you on the path to financial security. Let’s dive into 20 crucial money lessons I’ve learned in my twenties.
#1 Have an Emergency Fund
An emergency fund is crucial for financial stability. This is money saved up to cover unexpected expenses, and should ideally last for 6–12 months. Only use it in genuine emergencies such as job loss or medical bills. I find that having an emergency fund gives me a safety net, reducing stress and preventing debt accumulation during tough times.
Setting up an emergency fund might seem daunting, but it’s achievable with consistent saving. Start by setting a monthly savings goal and automating your contributions. Over time, you’ll build a substantial fund that provides peace of mind. For example, if your monthly expenses are $2,000, aim to save $12,000 to $24,000 in your emergency fund.
#2 Don’t Waste Money on Materialistic Items
Materialistic spending is a common trap for young adults. Most young adults’ money often goes toward buying the latest gadgets, designer clothes, and other trendy items. Experiences are generally better than items. These items often give no lasting value, and no one truly cares if you have an expensive brand name on your shirt.
Instead of chasing fleeting trends, focus on experiences and investments that provide long-term value. Travel, education, and skill development are far more rewarding than accumulating possessions. You can find good clothes at a low price.
#3 It’s Fine to Say No to Your Friends If You Can’t Afford It
It’s perfectly acceptable to decline social invitations if you can’t afford them. I know that some of you might feel embarrassed to say this. But don’t be. If you can’t afford something, don’t try to afford it. Your financial well-being should always come first.
Being honest about your financial limitations is a sign of maturity and self-respect. True friends will understand and respect your decision. Suggest alternative, budget-friendly activities, such as a potluck dinner or a free event in your city. For example, instead of going to an expensive restaurant, suggest a picnic in the park.
#4 Never Be in Debt (Except for Some Cases)
Avoid debt whenever possible, except in strategic situations like mortgages or business investments. Don’t borrow money from your friends, not even your family unless you absolutely have to. It’s generally fine to borrow money for a house. And in some cases, it’s fine to borrow for business purposes, but only if you know what you’re doing.
Unnecessary debt can quickly spiral out of control and hinder your financial progress. Focus on living within your means and saving for major purchases. If you do need to borrow, ensure you have a clear repayment plan and understand the terms of the loan. For instance, before taking out a loan for a business, create a detailed business plan and assess your ability to repay the debt.
#5 Stop Comparing Yourself to Others
Comparison is the thief of joy and financial stability. Comparison will drown you. Focus on your own finances and how you can always improve. This will always be the right choice.
Everyone’s financial journey is unique, and comparing yourself to others can lead to unnecessary spending and dissatisfaction. Instead, focus on your personal goals and progress. Celebrate your achievements and learn from your setbacks. For example, rather than envying a friend’s new car, focus on saving for your own financial goals, such as a down payment on a house.
#6 Prioritize Spending Money on Your Health and Learning
Investing in your health and education is always a wise decision. You can never go wrong with this. Your education and health are invaluable assets, and prioritizing them will pay dividends in the long run. It will be great for your mind.
Whether it’s a gym membership, healthy food, or a professional development course, prioritize investments that enhance your well-being and skills. These investments not only improve your quality of life but also increase your earning potential. For example, taking an online course in a high-demand skill can lead to better job opportunities and higher income.
These 20 lessons have been instrumental in shaping my financial habits as a 20-year-old. I’ve learned that money is a tool, not a source of power. It’s crucial to have a constant cash flow and adopt a minimalist lifestyle when you’re young. Preparing for retirement early and using credit cards wisely are also key. Spending less than you earn, living with a budget, and avoiding peer pressure are fundamental practices.
Remember, financial literacy is a lifelong journey. I hope these lessons provide a solid foundation for your financial future. Stay disciplined, stay informed, and always prioritize your financial well-being. I’ll give you another one when I’m 30. How different will my thoughts be? Do not let other people control your financial decisions.
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