A while ago, I wrote a piece about a conversation I was having with a colleague and the money tips I gave to a person in their 20s. In reality the money tips should be helpful no matter what age you are.
This post is inspired by the many readers from the sports cards community who are just getting to understand their finances or need some reminders to make sure that their finances are in order.
I am not a financial advisor so the money advice I share is meant to be simple. I hope this post serves as a light bulb moment and reminders to make sure we all become financially smarter.
11 Money Habits and Tips I Wish I Knew In My 20s That Still Applies Today
1. Get in the habit of budgeting aka knowing where your money is going
You are an adult so no one will tell you not to spend money on those Ferragamo shoes (my weakness) or whatever luxury/non critical item you had your eyes on. However, it will become very apparent that you might have your priorities upside down. In my 20s I tried to budget using excel because mobile apps did not exist. I lasted a solid 3 days of excel budgeting before quitting. This happened multiple times… I lasted maximum 3 days each time. Nowadays with the mobile apps available, there is no excuse not to start budgeting to at least give you a sense of where your money is going. I used to spend a couple minutes per month budgeting because I would simply estimate how much my expenses would be and move on. This helped me get out of my massive student loan debt. Nowadays I do not budget because I have gotten into such a good rhythm that I now have the discipline to know where my money is going every month.
2. Sacrificing now will pay exponential dividends later
One of my favorite sayings that I have heard multiple times on podcasts and various blogs was about how the sign of being mature is being able to delay gratification. In my 20s rather than delay gratification, I indulged myself with luxury goods that although I still have today 15+ years later, I would have been countless times financially better off not buying those luxury goods and instead either contributing to my retirement account or saving money to pay off my student loan debt. Because I could not delay gratification, it cost me my entire 20s of financial freedom. There are certain things I will not sacrifice financially such as family and experiences.
3. Try not to compare yourself with others or get envious
I do not know about anyone else who reads this, but perhaps it is the area I grew up in SoCal that had this idea of comparing with others and keeping up. When my credit score was already terrible, knee deep in student loan debt approaching 6 figures, and living paycheck to paycheck all the while not saving or contributing to my retirement account, I had to look good. During the absolute worst time possible to lease a car, I leased a car. I paid a sky high interest rate (or in equivalent lease terms, money factor) to drive an Infiniti coupe. This was about the dumbest financial decision a person in their 20s, who was a money moron, could make. At least I looked good, right….right. It will be very tough when you are younger to ignore that badge whether it is clothing or cars, but I can tell you from experience, keep your eye on the ball. Do not let others’ perception of you ever sway you to get the badge. Make sure you are in a solid financial state when perhaps you can indulge yourself with a reward.
4. Be bold at work
When I was starting out in my career, I rarely negotiated my salary and I rarely took risks at work. Let’s start with the salary. I think I was so concerned about not getting the job that I was just thankful to get an offer. As you grow in your career, you will quickly realize that employees and employers are replaceable. You might feel a sense of loyalty, but in reality, everyone is replaceable. You might as well take risks and see if you can reasonably negotiate. Now with Glassdoor and similar sites that estimate salary, you are armed with more information than ever before.
Even more important than just negotiating is being bold at work. When you are starting out in your career, you tend to be a robot, you do as you say and occasionally taking on stretch projects. I was one of those who would spend extra time to make sure that I did a great job. What was missing is that I was not bold enough to search for projects or opportunities and pitch ideas. Typically when you join a company, most of the employees are competent, but assuming you are ambitious, you want to stand out and be ahead of the competency curve. Taking that next step that is not on your list of responsibilities will take you further in your career than you could possibly imagine.
5. Start saving now and contribute to your retirement account
It is never too late to start saving or contributing to your retirement account. Always set aside an amount to build up your emergency fund, contribute to your retirement account, or to build up to reinvest in your side hustle. For example, I know many in the sports cards community are doing sports cards full time. The issue I see with many here is that there is rarely conversations about setting up benefits including retirement contributions. Unless many of you entrepreneurs intend to work forever, it is important to consider how you will take care of yourself financially post retirement. There are many options to consider to contribute to your retirement account as outlined by NerdWallet.
6. Truly understand how credit cards work
As someone who has been in the credit card industry for way too long, I can tell you that it took me a while to understand the pros and cons of using a credit card. You need to understand how responsible you are with money. If you have no idea, then a credit card is not for you.
Credit cards require a discipline and rigor so that you are taking full advantage of using credit cards. Otherwise, you are exactly the type of consumer a bank absolutely loves because the bank charges interest, which is profit for the banks. One recommendation is to charge what you can to a credit card to earn your points or miles, but always, always pay off your statement balance in full every month. The statement balance and current balance are different. The statement balance is what you will be charged interest so typically your current balance will be higher than your statement balance. If any amount from your statement balance gets rolled over to the next month, then you will be charged the sky high credit card interest. What does this really mean? It means that if you cannot pay the item in full, then you cannot afford the item. It is that simple and straightforward. Paying off your statement balance in full every month is the type of customer the banks do not like because they cannot charge you late fees or charge you interest, both of which are two key ways a bank profits.
7. Balance paying off debts and saving
Personally I think having any kind of debt is a drag on your road to financial freedom. It does not matter what kind of interest rate you are getting whether it is 2% or 20%. That said I would never sacrifice saving or contributing to my retirement account just to pay off debt. There are financial “gurus” that will recommend paying off debt at all costs including sacrificing retirement account contributions. I tried it all ways. The best balance and comfort I found was prioritizing paying off my debts (credit cards, student loans) while also saving a small percentage including contributing to a retirement account.
8. Celebrate key financial milestones
If you set goals however minor they might be, take time to celebrate those wins. It will keep you motivated. What will eventually happen is you will eventually reach your big goal and once you reach it, life just moves on and your sense of purpose goes down a notch. By celebrating even minor financial accomplishments, you will enjoy the journey even more. This is something I learned on my journey to becoming debt free. In order to pay off this massive $77,000 student loan debt, it took a lot of dedication to pay it off quickly, but it required celebrating small goals along the way such as hitting a specific number within a specific number of months.
9. Keep track of your net worth
I recommend keeping track of your net worth. Personally I keep track about once a quarter using a quick and easy assets and liabilities excel document. I used to keep track every month and realized that either it was discouraging to see the drop in net worth month over month or there was not much of a movement. By keeping track of your net worth, this will serve as a motivational point to make sure you are allocated and diversified according to your financial goals. In one of my net worth exercises, I realized because of the increasing values in sports cards resulted in increasing alternative investments as a proportion to my net worth. Although I am fine with the increased allocation to my net worth, it has made me rethink what I have in my collection.
10. Start a side hustle or three and keep at it consistently
I have always had the entrepreneurial spirit ever since I was in high school selling CD’s, but one mistake I made in my 20’s was not continuing one of my side hustles that I worked so hard to build. I had periods of on and off with some of my side hustles and momentum can be so very powerful. I would recommend keep at least one side hustle going as long as it makes sense time wise and financially.
11. Forget those posts about money milestones or net worth by a certain age
If you are reading this, chances are you have come across a post or podcast episode explaining how much you should have saved or what your net worth should be at a certain age. Forget all of that. Focus on you and improving your situation. These type of articles can be very demotivating and is equivalent of comparing yourself to others, which can be toxic. Whether you want to use these as a milestone is up to you, but you want to track how much you have improved over the months and years and motivate yourself by seeing your own positive progress. There is no point in seeing where you should be when all that matters is where you are currently and understanding whether you are improving.
Now back to the community….what are other money tips you wish you knew or ones you have recently learned?