Currently in my 30's and I recently went down memory lane with some old photos. We sometimes wonder how life would be different if you went back in time and gave yourself some much needed advice, and in todays post I want to go over some of the financial advice I would tell myself in my 20's.
Save for Retirement
Retirement at that age seemed like a sci-fi distant future and so I didn't force myself to save for retirement when I was younger. Little did I know that the power of compounding interest makes your savings grow exponentially faster than I could have imagined. There are employers who will match your contribution and that's like getting free money on top of your savings as well so there was little excuse not to start saving at that age. If you don't start saving when you're younger you may find yourself playing catch up later in life and it's a lot more expensive to reach the same goal thanks to the time value of money!
Set up an Emergency Fund
As a struggling college student trying to make ends meat, an unexpected expense like a flat tire, broken finger, or broken glasses (Yes, all of these things happened to me, but it can happen to anyone!) can really catch your budget by surprise. The importance of an emergency fund was essential to escape the reality behind depending on debt or credit cards to pay these expenses. When you have to rely on debt to meet unexpected expenses you start to ride a slippery slope and may find yourself struggling to escape especially if interest rates are high. It was important to establish some form of an emergency fund even as little as $200 can get you past some of life's unexpected expenses. Murphy's law is a real thing and it can quickly add up!
Educate Yourself in Personal Finance
We're not taught how a checking account works, or what a high yields savings account is in high school curriculum and it's very unfortunate for many. I would read up on personal finance and what strategies you can use to expand your wealth when it comes to savings and ultimately investing. High yields savings accounts are currently averaging 3.5% per year but when you save with big traditional banks you are only earning .03% per year. That is a 3.47% difference that your money could be earning you that you wouldn't have known otherwise if you hadn't done your research. When people say knowledge is wealth, in certain cases, that quite literally means wealth as in money. I would read up on some of the most influential finance books like The Intelligent Investor that I reviewed here, The Richest Man in Babylon, The Psychology of Money, I Will Teach You to Be Rich and the list goes on.
Learn Good Money Habits
Just living within your means and not overspending can help keep you out of trouble. To this day I still struggle with a few financial habits that are hard to establish but with mindful spending, automatic savings and investments it's not entirely impossible to create great finance habits. If you start when you're younger, it becomes a natural habit when you grow into your full adult career and that's one of the most important aspects of personal finance. As I've said in the past post, personal finance is partially driven by behavioral tendencies and psychology. It only makes sense as you develop good personal finance habits, you start to see your goals met and motivation for the next!
Learn to Value Delayed Gratification
There were many times that I wanted to buy something but didn't quite have all the funds to cover the splurge. This in turn caused me to lean towards credit cards or other ways to cover the expenses, and in the end it wasn't really something I absolutely needed at the time. One rule of thumb was to exercise patience and control when it comes to your finances, so if you wait to save money for things you want you'll ultimately come out on top. Following simple delayed gratification rules like the rule of 30 or asking yourself if this is a need or a want at the current moment can help you reach your longterm goals. More often than not, delayed gratification is a greater reward than instant gratification because it means much more to save and achieve than to borrow and regret when it comes to personal finance.
With that, I hope this post has helped you gain some insight into some personal finance tips and advice I would have given to my 20 year old self. If you enjoyed this post please leave a like and comment on what you'd like to see next. As always, I will see you all next time. Thank you!
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