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I want to share the top 10 things I wish I could tell my 18-year-old self about money. These are lessons that I have learned over the past four years, and I believe they are crucial for anyone in their twenties to know.
I took my net worth from -$15k to over $100k in my twenties after becoming financially literate, and I want to help you all do the same! TIME is so valuable when it comes to money, so your early twenties are the absolute best time to become financially literate and learn about money. Being good with your money in your twenties will truly set you up for financial success.
If I had known these things when I was 18, I would be much further ahead financially. So, let's dive in and discover what these 10 things are.
1. Don't Wait Until You Feel Like You "Know Everything" to Start Making Money Moves in Your Twenties
One of the biggest mistakes you can make is waiting until you know everything before taking action with your money. The truth is, you will never feel like you know everything. So, instead of waiting, it's essential to start making money moves now. Even if you only know a little, taking that first step matters. I started investing at the age of 20, and while I didn't know much then, it was still a valuable decision. Starting early allowed me to grow my net worth to over $100,000 by 24. So, don't let the fear of not knowing enough hold you back. Take action and learn as you go.
2. Read a Money Book Sooner Rather Than Later To Master Your Money in Your Twenties
Reading books about money is one of the best ways to educate yourself and gain financial knowledge. I have read around 10 to 15 money books in my lifetime, and about 90% of what I know today has come from books and podcasts. These resources are often free or low-cost and provide valuable information on personal finance. One book I highly recommend is "I Will Teach You to Be Rich," which breaks down the financial fundamentals you need to know in your 20s.
3. Being Good With Money In Your Twenties Is 10% Skill And Knowledge And 90% About Discipline
Contrary to popular belief, being good with money is not about having a natural talent or being born into it. It's about discipline. While learning personal finance concepts is essential, the discipline to save, invest, and make smart financial decisions truly matters. I studied finance and economics in college but learned nothing about personal finance. I sought my financial education to learn about important financial concepts. So don't let your lack of formal education in finance hold you back. Focus on developing discipline and continue to be proactive with your money.
4. Learn To Manage Your Money Before Focusing On Increasing Your Income
Many people make the mistake of thinking they need to make more money before they can start managing it effectively. However, the best time to learn about money is when you have less. Whether you're a college student or just starting your first job, don't wait to learn how to save, invest, budget, and track your spending. Your mistakes now will be relative to your age and income, and it's better to learn from them early on. By managing your current income level, you'll develop strong money habits that will benefit you in the long run. Waiting until you have a higher salary may lead to bigger financial mistakes. So, start learning how to manage your money now, regardless of your income level.
5. Track Your Spending To Know Where Your Money Is Going
To effectively manage your money, you must know where it's going. Many people underestimate how easy it is to spend money without realizing it. I was guilty of this in college, where I had a decent income but didn't track a single dollar of it. As a result, I was terrible at saving money. Budgeting apps can be helpful, but I find using a spreadsheet to track expenses more impactful manually. I even have this spreadsheet available for download to help you get started.
6. Prioritize Your Spending Based On What You Value
When it comes to budgeting and saving, it's essential to focus on cutting expenses and spending money on things that bring you joy. You work hard to earn money, so spending it on things you value is okay. However, you can't afford to spend your money on everything. Figure out what you like to splurge on and what you can save on. For example, I prioritize living alone without roommates, so I'm willing to spend more on rent. But I don't value spending money on home decor, concert tickets, etc. Knowing your spending values will help you make better financial decisions.
7. Choose Your Friends And Partner Wisely
The people you surround yourself with can significantly impact your financial habits. If your friends have different money goals and influence you to make bad choices, it will be challenging to get ahead financially. While you don't have to cut these friends out of your life, finding friends who share similar money goals is crucial. Additionally, choosing a partner wisely is crucial. Your partner can have a significant impact on your finances as you get older. It may not seem like it now, but as you start living together and sharing expenses, your partner's financial habits will become more apparent. Choose a partner who aligns with your financial values and goals. Be cautious about dating and finances, as your partner can make or break your financial situation as an adult.
8. Get A Good Return On Investment (ROI) From College
If you're planning on going to college, it's essential to consider the return on investment (ROI) of the money you're spending. Graduating with a significant amount of student loan debt can make it challenging to achieve a good ROI. While certain professions, like being a doctor, may justify the high cost of education, choosing a major that aligns with your career goals and has a good ROI is essential. Additionally, take advantage of internships, scholarships, and networking opportunities to maximize your college experience and increase your chances of getting a good job after graduation.
9. Learn A High-Value Skill And Start Earning Money
Today's world offers abundant opportunities to make money outside of a traditional nine-to-five job. Even if you plan on attending college and getting a degree, take advantage of your free time to learn a high-value skill and start freelancing or earning money. College provides a unique opportunity to leverage your free time and develop skills that can generate income. Don't wait until after graduation to start making money. Start now and take advantage of the gig economy and freelancing opportunities.
10. Believe In Your Ability To Make Money
Your mindset plays a crucial role in your financial success. It's essential to believe that you can make a lot of money. Don't let your background or lack of wealth hold you back from pursuing financial success. I didn't come from a wealthy family, but I could quit my full-time job and start my own business, earning more than my corporate salary through freelancing. If I can do it, so can you. Believe in your abilities and work towards your financial goals with confidence.
Takeaway
In conclusion, managing your money in your 20s is crucial for setting yourself up for financial success in the future. Start investing early, educate yourself through books and podcasts, develop discipline, and learn to manage your money regardless of income level. Track your spending, prioritize your expenses based on your values, and choose your friends and partner wisely. Consider the ROI of your college education, learn high-value skills, and believe in your ability to make money. By implementing these 10 tips, you can take control of your finances and build a solid foundation for a prosperous future.
Remember, it's never too early to start taking action and learning about personal finance. So, start today and watch your financial situation improve over time. If you found this article helpful, like and subscribe for more tips on managing your money in your 20s. Let me know in the comments if you have any other questions about personal finance!
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