The first decade of adulthood is one of the most important periods of your life. The course your life takes when you are younger can and will determine your future. Making smart decisions can make your life easier later down the road, or dumb decisions can make your life so much more difficult.
I’m now several years removed from my 20s, and aside from the uncomfortable realization that time seems to accelerate every year, there are a few small pieces of wisdom I’d like to pass on to my younger peers. I definitely didn’t do everything right financially as a young adult, and there are some big regrets I’m going to share with you. At the same time, I made enough good decisions to be where I’m at today, and I’ll share those as well. Here’s how you can win with money in your 20s and set yourself up for the rest of your life.
1. Live cheaply
This is one thing I did right financially in my 20s, but mostly because I didn’t have the means to live any other way. Unlike some of my peers who lived above their means using credit cards and student loans to finance their lifestyle, I lived at my means (I wasn’t saving much but had a very modest emergency fund). As a young adult, you can live extremely cheaply and nobody will bat an eye.
Live in an inexpensive apartment. You’ll probably have a couple roommates, maybe even some of the six-legged or eight-legged variety, but you’ll survive. Once you are living in a nicer place, it is really difficult to go backwards. Housing will probably be your biggest expense, and choosing affordable living quarters can give you margin to save more while you are young.
Drive an affordable, reliable vehicle that is easy to maintain. For me, that car was a 2007 Toyota Corolla. I bought it in cash for $3,800 with almost 200,000 miles. It was worth every penny. That car required nothing more than the occasional oil change, sometimes very occasional, but it never complained. If it weren’t for a driver running a red light and damaging it beyond what it was worth, I’d still be driving my Corolla today. The other driver’s insurance company reimbursed me the fair market value of the car at the time of the accident, which was $3,716.16. That means apart from the cost of gas and oil changes, most of which were done by my dad, that car cost me just $83.84 and lasted nearly seven years. Buying that car was one of the best financial decisions I’ve made.
Groceries and food were probably my second biggest expense in my 20s, and while I didn’t eat as cheaply as possible, I was a frugal spender when it came to food. I frequently shopped at Aldi and Kroger for groceries, and while I dined out with regularity, cost was always a priority. On Mondays, Johnny’s Pizza served dollar slices. On Tuesdays, Papa John’s had a deal where you could get one large one-topping pie for $4.99 (they later raised it to $5.99, which prompted a swift boycott of Papa John’s). Needless to say, I consumed a lot of pizza in my 20s.
2. Start investing as soon as possible
I didn’t start investing for retirement until I got my first “real” job out of college. I will always regret not starting earlier, even if I only could have invested a modest $20 a month. Still, I’m glad I started when I did, in my mid-20s, and had an employer that generously contributed to our 401(k). While starting to invest a small amount in your 20s may seem insignificant, the positive habits you build will far outweigh the money you save. Start saving as early as possible, it doesn’t matter how much; not only does a little go a long way when you are younger, but if you can put money away for retirement when you are making very little, you’ll find it easy to invest more when you are making significantly more money.
3. Don’t fall into the student debt trap
I will always regret taking out more student loan debt than I should have in college. I went to a public university, and received some financial aid, including tuition assistance from my employer (shoutout to Publix) but stayed in school several extra years to earn a second degree. I don’t regret my decision to stay in school to earn another degree, because I wouldn’t be where I am today without it, but I do wish I would have finished school sooner and worked harder to maintain the GPA required for the HOPE scholarship.
My student loan debt exceeded my first year salary, our Money Guy rule, but was/is manageable. Still, it’s hard not to imagine how my student loan payment could be put to better use: I could save more for retirement, take more vacations, or save for big homeowner goals like replacing our porch.
4. Don’t ignore your health
I took poor care of my health in my 20s. I didn’t visit a dentist once the entire decade, and only visited a doctor a handful of times. My diet was very unhealthy, consisting mainly of pizza (see above), and I really didn’t significantly improve my diet until the last few years.
I feel like I got off easy. When I visited the dentist again for the first time in about 15 years, I had a few cavities and needed a crown but got to keep all of my teeth. My poor diet caused no major health issues, which I think is probably due to exercising regularly. Even with a lack of consequences, I wish I would have taken better care of my health in my 20s. We are fortunate that our bodies can handle a great deal of mistreatment when we are younger, but as you get older, that is no longer the case.
Your 20s are perhaps the most pivotal decade in your life. You can completely derail your finances and set yourself up for a painful future, or you can make smart money decisions now and your future self will thank you. I know when you’re young getting older seems far away, and it can be difficult to imagine how much the decisions you make today will impact you in the future. The future arrives much more quickly than you would think, and the earlier you can start building a solid financial foundation, the easier your life will be.
