7 Personal Finances Lessons I Learned in My Twenties
I turn 30 next week [gulps audibly]. Now that I’m an old man, I thought this would be a good time for me to share some of the financial things I did right, plus a few of the things I did very wrong during my twenties. [Note: I wrote this with my 5 day old daughter sleeping on my lap. It would have been 10 things, but I could only think of 7 before she needed a diaper change.]
- I started saving for retirement early. You’ve heard it a million times, but I’m telling you, start saving for retirement NOW. I got my first post-collegiate job at 22, and I promptly set up my 401(k). Every time I check the balance these days, I can’t help but smile.
- I spent too much money on cars. I’ve mentioned before that the biggest financial mistake I ever made involved a car. As I’ve gotten older, I’ve learned that they’re just tools for getting you from point A to B. I should have known that new car bliss only lasts for about a month, but the payments last for years. Thankfully, I learned from my personal tendencies, and do what’s best for me in the long run.
- I kept investing even when things looked bad. A lot of people decided to sell their investments when the market bottomed out. I decided to keep buying, and I doubled that money when things came back around. Remember, buy low and sell high.
- I stayed at a job I hated for way too long. The money was good, and I couldn’t walk away despite the fact that my health and relationships were suffering. The term “golden handcuffs” is a real thing, and I’ll never fall victim to it again. It’s just not worth it in the big scheme of things. On the bright side, the things I learned at that job helped me with this site.
- I automated everything. I can’t tell you how much money I’ve saved by having my bill payments and monthly savings automated. I socked away more cash than I would’ve if I had been moving it manually, and I avoided late fees from missed payments.
- I splurged every now and then. Spending more than you should is good for you now and then. However, there is a smart way to do it. Spend your money on experiences, or things that can be sold later to recoup some or all of the cost.
- I started this blog. I wanted to share some of the things I had been taught with the world, but I ended up learning more than I ever imagined. Over 178,000 people follow this site these days, so I feel more of a responsibility than ever to give sound advice. As I dig for content for this site, it has led me to awesome advice that I never would have come across otherwise. If you want to take your expertise in something to the next level, just start teaching what you know to others.
66 Websites That Will Save You Money
- Frugal Lifestyle - Cheap recipes, great links, and quality products.
- GetRichSlowly.org - Personal finance that makes cents.
- IWillTeachYouToBeRich.com - Learn to automate your money and make more.
- MoneySavingMom.com - Helping you be a better home economist.
- TheSimpleDollar.com - Financial talk for the rest of us.
- WiseBread.com - Living large on a small budget.
Budgeting and Personal Finance Tools
- AnnualCreditReport.com - Get your free credit score.
- BankRate.com - Compare mortgage rates, credit cards, and more.
- BillShrink.com - Find the best bank accounts, credit cards, and more for you.
- Bullishness - Compare stock brokers.
- Dinkytown.net - Financial calculators.
- Google Advisor - Another site for comparing credit cards and bank accounts.
- Mint.com - The best free way to manage your money.
- Motley Fool - Compare brokers.
- NerdWallet.com - Compare credit cards.
- Undebt.it - Snowball debt management.
I'm going to be an adult for a moment and talk to you guys about An Important Thing
Namely, your finances.
OH GOD SO BORING I KNOW I’M SORRY.
But the thing is, I’m like, old. I’m 37. And I made a lot of mistakes when I was younger and I really wish someone had explained some stuff to me back then so maybe I can write a thing and help some of you guys out.
Okay so hopefully you know about stuff like having a job, getting money for said job, and you have at least a checking account. If you don’t know about these things you can ask questions. Seriously. I am not like an all knowing person but I have probably done some things you may have questions about and I can relay what I know.
Anyway, what I wanted to recommend are are two really important things I’ve found that are EASY and HUGE HELPS.
1) Please buy and read this book. UGHGH BOOKS AND IT MIGHT BE BORING I know. Really. But someone recommended this book to me a few months ago and I bought and read it and it was so extremely helpful. It was written for EVERYDAY PEOPLE of low (like, even down to minimum wage) to middle income ranges so quite likely, it is relevant to you.
For me, there were 3 parts to that book. Some of it didn’t apply to me right now but might in the future. Some parts were REALLY RELEVANT TO ME RIGHT NOW and basically revolutionized how I’m taking care of my money. And some of it was “Ugh I learned THAT the hard way and I realllllly wish I would have read this book 15 years ago” (long before it existed.) But if you’re like, 0 - 20 years younger than me there’s a lot of really good stuff in there that could really save you a lot of pains in the future.
Note that that link isn’t an affiliate link or anything. I just am recommending it because I think it’s extremely good and helpful and sincerely think a lot of people should read it.
It’s going to teach you how to divide your income to help you spend the rights amount of money on the things you need, the things you want, and how to save money, as long as you’re actually getting income. Even if your credit is terrible and you’re already in a heap of trouble financially it’ll help you get out of those problems and even talks about how to deal with creditors and the best ways to deal with your debt. If you’re barely scraping by, it’ll help you get on your feet and get some money put away. Or if you’re just starting out, it’ll help you stay out of trouble. Or if you’re like me and doing pretty well but don’t feel like you have a really solid plan and need to know WTF to do now that you’re stable and want to make sure you’re going in the right direction, it helped. The point is, seriously you guys, spend $10.20 on that book and it could really help with your financial future.
And life is really so much better when you have a plan. Even if you’re not where you want to be, even if you’re deep in trouble, having a plan to get out of trouble and/or to get where you want to be feels 100% better than ignoring it and hoping you win the lottery or it’ll all work out on its own eventually (you won’t and it won’t.)
2) Mint.com. Mint is a free site that basically organizes your financial life for you. You let it look at your accounts and you can very easily see how you’re doing financially with it. (It’s read-only, you can’t move money around with it, they use 128-bit encryption etc. It’s about as secure as it can be. If you’re worried about security, read here.) You can do budgeting, you can set goals for yourself, you can get alerts when you have major transactions happen or you get low on money in an account, all sorts of stuff. It’s kind of hard to explain everything Mint does, but it has a good explanation page here. Personally I have 5 accounts at 2 different banks for various savings and checking accounts, I always know where all my money is, and I can always easily tell what I’m spending too much money on with it.
If you don’t use Mint, then find another way to keep track of what you spend and how much you spend on it. Figure out what you spend way too much money on and how you can start getting yourself to save some. I can’t really tell you how to do this because I’ve been using Mint for many years and it works very well for me.
I could talk for a long time about all the dumb mistakes I made when I was younger. How I ruined my credit, how I paid over $4000 for a $1700 bedroom suite (and by “suite” I mean a bed frame, headboard and a dresser), how I ran up credit cards, how my parents had to bail me out, how my mom had to co-sign when I bought my house, and a lot of other really, incredibly stupid things I did. But I won’t, unless you really want me to. Don’t be dumb like I was. I know thinking about your finances is some how both boring AND scary but taking even just a few hours out learn, put some serious thought into stuff and start doing SMART things now can save you a world of hurt in the future.
Becoming an adult is really scary, and if you guys have questions or want advice about being an adult stuff, you can ask me. If this is at all helpful to you, and you want me to make more posts like this, mash like or something to let me know.
Create a budget with these simple steps
Financial advisors will be the first to tell you: if you want to buy a house, get out of debt, save for retirement, or achieve any other financial goal, you have to make a budget.
There are many online tools to help you with budgeting, including mobile apps. But you don’t have to have access to technology to create one. All you need is a pencil and some paper. These tips will help you get started.Track Your Spending
For your budget to be effective, it´s important to know exactly where you’re spending your money each month.
- Write down all fixed monthly expenses or use your favorite online tools or mobile apps to track where the money goes.
- Make sure to include your cash expenses since they can easily go unreported, especially if you’re using computer software.
- Add seasonal or annual expenses such as car registration, tax preparation fees, vacations, or expenses related to the holiday season.
Track at least two months to get a sense of your average of expenses and avoid high or low months.Track Your Income
The second part is identifying your monthly income. It is important to be accurate since you will be making financial decisions based on what you make. To make an accurate assessment:
- Write down all net income from each job or income source for one month. This may include regular salary, temporary jobs, unemployment compensation, and public assistance. If the amount varies, average it out to the last 12 months.
- Include income that occurs less frequently like annual bonuses, dividends and interests, tax refunds, etc.
- Create a document with two columns: one with your monthly income and another with your monthly expenses. FDIC.gov has an example of a budget worksheet (at the end of the page).
- In the expenses section, separate them by fixed and flexible. That way you can prioritize your monthly expenditures.
- If monthly expenses exceed income, then you have to look for ways to reduce expenses or make more money. It’s usually more feasible to reduce flexible expenses such as mobile phones bills, water and electricity.
It is ideal to have a monthly budget where income is greater than expenses, and where the budget includes a monthly savings amount. This can help you balance your family budget. Because things can change month to month, experts recommend that you remain as flexible as possible and adjust when needed.
How to Choose a Credit Counseling Agency
It’s easy to get into debt. It’s much harder to get out of it.
Fortunately, there are credit counseling agencies that can help you get your finances in order. They can help you figure out a budget and stick to it while managing your debt and avoiding future financial pitfalls.
However, not all credit counseling agencies are the same. Some offer free or low-cost services while others charge high fees or might not be trustworthy. The following tips will help you choose the right credit counseling agency.Look for Agencies with a Good Reputation
Most reputable credit counseling agencies are nonprofits that offer free or low-cost services. However, the fact that an agency is a nonprofit does not guarantee that it is affordable or that it has a good reputation. Here are some tips for selecting a credit agency you can trust:
- Ask family members and friends if they can recommend an agency. It’s best to pick one that has been around for several years and has a well-established reputation.
- Use credit agencies or credit counseling services referred by credit unions, banks, universities or military bases.
- Choose a credit agency that’s been approved by the Federal Government.
You can also check out state and local consumer agencies to find out if a credit agency has complaints.Compare Services and Costs
Once you have a list of agencies you can trust, the next step is to take a closer look at the services and costs they offer so that you can choose the one that best serves your needs. Be careful with credit agencies that charge high fees for services that you can get for free somewhere else.
Some of the most common services offered by credit agencies include:
- Professional, person-to-person assistance with managing your money and debt.
- Help putting together a family budget and sticking to it.
- Free workshops and educational material.
Before finally choosing a credit agency, it’s worth writing down a list of questions you might have so that you can avoid surprises such as hidden fees or limited services. Here are some questions to help you pick the right credit agency.
- Are there different fees for different services? Some agencies might charge for initial consultations or a monthly fee. Be careful with agencies that pay their employees more depending on the services you sign up for.
- Will you be signing a contract before getting counseling? If so, be sure to read the contract before signing it.
- Does the agency have the right certifications to provide credit counseling? It’s best to use agencies that have been certified by independent organizations.
“Make a will. Pay off your credit cards. Get term life insurance if you have a family to support. Fund your 401(k) to the maximum. Fund your IRA to the maximum. Buy a house if you want to live in a house and you can afford it. Put six months’ expenses in a money market fund. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.”—
Everything you need to know about money by Scott Adams, the creator of Dilbert.
87 words of pure and simple gyaan. Too often we complicate how we go about securing our futures. Too often we neglect them because we think its too complicated
This is as simple as it gets,
Many people who follow me on Tumblr are in their teens or 20s and this piece of advice is for them in particular. I didn’t start saving and building a portfolio until I was 30. Don’t make the same mistakes as me.
“6. ADJUST YOUR MENTAL BUDGET Appalled that a romantic weekend getaway for two will cost you $1,000? Don’t worry; it won’t. For some reason, people always assume that the alternative to travel is to stay home and spend nothing. Instead, you should be subtracting what you save by not being home. Surely you would have gone out for dinner and a movie one night, at least, so knock off $100. Add in gas, groceries, electricity, etc., and you’ve got at least another $50. Your weekend now cost $850.”—
Thank you, NYT, for validating the method I use to justify just about all of my luxury expenses over and above the usual.