Your twenties are an important time for learning a lot of life lessons. It’s a time for making mistakes, it’s a time for taking risks and it’s a time to really learn who you are.
There were a lot of money lessons I learned throughout my twenties that I wished I had known about a decade sooner. Lessons that every twenty something should definitely know.
Unfortunately, I had to learn the ‘hard’ way. But I’m sharing these lessons with you today so maybe you’ll pick up a few things I missed, or you can share them with your kids/grandkids, siblings or friends who may be going through some tough financial times too.
This isn’t a big lecture on working your butt off to buy a house and ‘set yourself up’ in your twenties. If that’s what you want to do, by all means do it. But I know that’s not for everyone and it wasn’t for me either.
This is all about being savvy in your twenties so you can enjoy your financial freedom and not be paying for your twenties when you’re in your thirties!
Note – As I live in Australia things like retirement funds, health insurance and student loans have been omitted from this list as these vary greatly from country to country.
1 – Budget Is Not A Dirty Word
I have no idea when this mindset was formed, but for so long I thought a budget was just for ‘poor people’ and those who couldn’t manage their money. Little did I know that money management is a skill, and it wasn’t one I possessed at 20 years old.
A budget not only helps you keep track of your money, but it helps you understand your spending habits. I know I spend far more on food than I think I do because I will just grab something here and there or pop out to the grocery store for a few items and $50 later I’m home.
Create a budget now. It doesn’t matter how lean your budget is, just be sure to include everything (spending and entertainment money included) and keep track. It makes the world of difference.
2 – You Do Not Need A Credit Card
Again, I’m not sure when this money mindset was created but I always thought that when you turned 18 you should get a credit card. I do wonder if it’s a societal thing because we always ‘see’ people using their credit cards to pay for everything.
How many times have you heard ‘oh just put it on the credit card’. All of these little triggers add up to creating a mindset of credit.
But you absolutely do not need one. If you can’t pay for it in cash, you don’t need it.
3 – You DO Need An Emergency Fund
One of the arguments I hear (and probably used myself) was that a credit card was just for emergency purposes. But a credit card that is maxed out is no good in an emergency situation. Instead, you need an emergency fund with a minimum of $1000 in it.
Why $1000? Because that’s enough to get you out of most difficult situations. It will get you a plane ticket on short notice, a car service or a tow truck if needed or will cover an unexpected huge bill to avoid it going to a creditor.
The next step from here is to create a ‘savings’ account with a few months of expenses coverage. I understand this isn’t a priority in your twenties, I know it wasn’t for me.
But having it there will reduce so much financial stress in other areas and will allow you to be a little more risky in areas you may not have been otherwise – which is what your twenties is all about!
4 – Do Not Get A Loan To Buy A Car
Nope, nope, nope. Although the thought of getting a shiny new car is exciting and you want something a little fancier, you absolutely do not need to go into debt for a car! Cars depreciate in value rapidly, especially if you buy brand new!
Save and buy what you can afford. When you can afford to upgrade by paying in cash, then do so, but if you go into debt for a car you start a downward credit spiral that can be so difficult to get out of.
5 – Live Within Your Means
While I’ve covered this off with credit cards and buying a new car, this applies to rental homes out of your budget and buying a house too. This doesn’t mean trusting what the banks will loan you for a home either.
When I was 22 I had a $400k home loan that I could barely afford. I was scraping by each week and depleted all of my savings getting the house.
I ended up having to sell the home 12 months later and the sale price only just covered the loan. I lost all of my savings in the house and had to start all over again.
It’s also so easy to overspend when you shop online now too. With offers of ‘buy now and pay later’ you can easily rack up a massive shopping list without realising how much your payments will be or if you can realistically afford them.
6 – Have A ‘Spending’ Budget
If you budget properly and allow adequate spending in your budget then you’ll have no issues with overspending. Budgeting isn’t about who can save the most, it’s about be aware of all of your costs.
You can set your spending amount to be whatever you want (as long as everything else is covered).
Like going out on the weekends and eating at higher end restaurants, buying high quality clothes and going away to 5 star hotels? You can absolutely do it – as long as you can afford it and budget for it!
Having a spending budget means you know exactly how much you can spend and you won’t get any ‘surprise’ bills for your online shopping binge.
7 – Work Hard, Relax Often
If I had my twenties again, I would have worked at least two jobs and worked hard. But I also would have worked to pay for my time off and worked to take holidays. Yes, your twenties is a fun time, so make the most of it in whatever way looks best for you.
For some that may be head down working hard and saving hard for months, then taking a few months off for travel. Or maybe it’s about buying your house and renovating it. Or maybe you work a day job and build your entrepreneurial empire at night.
You will never have as much flexibility in your life as you do in your twenties. Make the most of it.
8 – It’s Okay To Take A Career Risk
Find your dream job but it doesn’t pay as much as you’d like?
Or maybe you want to take a risk, work part-time and start your own business. Or maybe you just want to take time off ‘work’ and go all in on that incredible idea you had. Perhaps you want to travel the world and work in a different country.
Take the risk now. Take the risky job, take the scary leap and make the move.
Before you have a mortgage, before you have kids and a family to support, take the risk to make your dreams come true. You never know where it could lead you.
9 – Invest In Yourself
The greatest investment you will ever make is in yourself. Invest in your education, whether it’s traditional education (like university or college), or a course you’ve wanted to take, or a book you wanted to buy.
Educate yourself on finances, self confidence, world issues and life management. All the things they don’t teach in school but you need in real life. There is so much to learn – be a sponge! Go to the conference, watch the documentary and talk to the experts.
Invest in your health. Understand what healthy means, take the yoga class, take the cooking class and experiment with food. Learn what makes you feel good, what makes you feel strong and use it to your advantage.
The world is yours.
What money lessons do you wish you knew in your early twenties? And even better – what did you do well? Leave your comments below, we’d love to hear from you.
Saturday 8th of September 2018
Wow,amazing post thanks
Dyana - A Debt Free Journey
Thursday 1st of February 2018
I definitely wish I knew about emergency funds in my early 20's (although I'm still in my 20's)! When an unexpected expense popped up I wound up having to swipe my credit card which put me in more credit card debt.
I do wish I had applied myself a little bit more, but one thing I can pat myself on the back for is sticking it out in college and earning my degree!
Thursday 15th of June 2017
Loved the post! Great advice ☺
It's so hard to afford living in Sydney, my hubby and I have moved into my in-laws laundry/basement. We've been here for over 3 yrs now! My in-laws are SUPER generous, but we're keen to have our own space. We are now building a garden studio/granny flat in their backyard.
Unfortunately I wasn't able to spend my 20's working & saving, as I've been chronically ill since I was in yr 8, now I'm 28! Perhaps my 30s will be all the excitement?!
One thing that we struggle with is trying to have a budget with an irregular income, and figuring out how to do our taxes properly. It would be great to read some advice about those!
Saturday 17th of June 2017
I cannot even fathom the cost of living in Sydney, it just blows my mind. My brother lives there and I just can't imagine how stressful it could be. It's so good that you have wonderful in-laws. :-)
I totally understand budgeting with irregular income too - my husband and I have been Paramedics for years and I don't think we've ever had two pays that are the same! Will definitely add more personal finance to the list for this site. Thanks so much for the feedback!