Currently, I’m still in my early, mid-twenties and I work actively everyday to ensure that I am taking steps towards financial wealth and empowerment.
Growing up, I was always conscious of my money situation and thus felt that I was more aware of where I was placing my money. Even when I spent money on traveling, it was always after working extra shifts and putting time to making more money to afford those trips.
Sure, others may have had it easier, with no worries in the world about their money situation. But, I looked at my situation as a blessing. Having a chip on my shoulder allowed me to develop more quickly in multiple areas of my life, other than just my personal finances.
Always remember, if you haven’t been shot at and you have all the resources you need to survive on a day-to-day basis, you already part of the most privileged and wealthy population of the world. Don’t take this for granted. Keep this in mind and realize you have the time and resources at hand to improve your life quality even further. The choice is entirely in your hands.
Here are 5 steps I believe would improve the future financial health of anyone moving forward, especially if you implement them in your 20s.
Establish a Budget, and Stick With It
This is priority number one.
How else would you plan on tracking your income vs. your expenses on a monthly basis. A strong number of 20-something year olds are dealing with debt and/or living in high cost-of-living areas in America. It’s important to get started and really get granular about tracking your expenses.
I always encourage my friends to categorize their spending. I break down what I spend into different categories- food, gas, transportation, utilities, rent, entertainment- as this allows me to see month over month my average spend rate for everything. You can see where you spent too much money on entertainment and can focus on bringing that number back down the next month.
There really is no excuse for not creating one.
If you hate being too much into the detail, the 80/20 rule is a good place to start before you dive more into the specifics of your expenses. With the 80/20 rule, you make a hard 20 percent savings of your post-tax income into separate savings and investment vehicles.
Learn How to Cook
I must admit this is a bane of mine. I absolutely love dining out with friends, as I believe spending quality time with friends really helps me live a more fulfilled life. But, to counteract that in my budget, I go out of my way to cook and meal prep more throughout the week.
I definitely have more room to grow here myself as I typically meal prep a certain amount during the week, and eat out more when I finish. Instead, I should be focusing on cooking more throughout the week and not making any excuses for it.
Dining out and eating fast food more consistency leads to poor financial health and poor physical health in the long run. You’ll also be saving money in the long-term by circumventing any potential health problems that may come about because of a poor diet.
Ditch that extra night or two out during the weekdays and hit the grocery store. You don’t know how creative you can be in the kitchen until you put on the chef hat yourself. I admit; I’m a pretty subpar chef myself, but I always feel proud about what I make! And, this skill will come in handy on future date nights, as well. Woo!
Invest and Save Aggressively For Retirement And/Or Financial Freedom
This goes back to creating a budget for yourself. Outline how much you can afford to save and push that even further.
While I’m still not entirely convinced a 401k is the best investment vehicle, automatically sending part of your paycheck to one is still better than not saving at all. You will, however, want to check for any hidden fees that may be associated with your 401k. Look up the company and do some research on the various reviews out there. You have the resources.
I would advise that if your company gave a decent match, that you should definitely invest in one. That essentially is an immediate return on your money and may offset any potential hidden fees taken by the investment company for handling your investments.
I also strongly recommend having a minimum of 3-6 months of living expenses saved up in a more liquid, accessible savings account. This will hedge and protect you against any future emergencies that may put you in debt, which is not a great place to be, as we all very well know.
I’m pushing myself even further to save up a year’s worth of living expenses. While it’s going to take me longer to get there, I like the piece of mind that comes with knowing that I have provided myself a strong safety net to protect against and handle any emergencies down the line.
It will also be sweeter once I complete that savings goal and can turn my attention completely towards my investments.
Keep in mind, the higher you prioritize your financial freedom now, the sooner you can achieve it. It will be a sweet feeling for all of us indeed.
Keep Developing New Skills and Improving
My father told me that if he grew up in America and had the resources I have nowadays, he would probably be an engineer. We are in a Golden Age of technology and information. Even two decades ago, you could not just pull out a phone and look up any information you desire.
Try explaining Google to someone in the 1960s.
Be humbled and excited by the sheer amount of resources available to us today.
Keep developing and expanding upon your skill set. This, in turn, will allow you to grow your career more fully and aggressively, which hopefully grows the size of your paycheck. If not, well again, you have all the resources available to you to hunt and find another company who will value your time more so. And, show it in the money.
Live Like You’re Broke
You’re in your 20s.
Got a new bonus? Got a big raise at work?
Don’t buy that new car or upgrade your apartment. That’s not an investment and it should not be viewed as such. Instead, keep your living and overhead expenses low and grow your savings and investment margins even wider.
Sacrifice now and reap the rewards down the line.
I promise you that life will carry on after you are no longer in your 20s. There is plenty of life to be lived for you yet. And, if you’re older and reading this post, kudos to you! It is never too late to start managing your finances and finally take control of your life!
If you’re in your 20s, now is the time to live like you’re broke. I have been living a rollout floor mattress for months now. Can I afford a better living situation and a new platform? Yes. But, I actually enjoy the romantic endeavor and feeling of growing my life! Your 20s are the best time to live like a bum while doubling down on growing your finances aggressively.
I get more fulfillment out of what I do spend money on and I don’t need the extra amenities that come with a bigger apartment or a fancier car. I am more than happy to wait on getting those later on in life. Your net worth should be a bigger priority than what you own, because what you own ultimately ends up owning you.