When you’re 20 years old, you tend to believe what other people tell you. And that was especially true for me when it came to money. I believed whatever someone told me. Part of that was because I didn’t know much about money. And part of it was because I didn’t care enough about my financial future to do any research myself.
I know, I know. Not the smartest move.
But I generally didn’t care about money.
As long as I could still make my minimum payments on everything and live the lifestyle that I had, I was perfectly fine. I wish I could go back and shake the 20-year-old version of myself and yell “WAKE UP!!!! This is your future! You should care just a little!!!!” But I can’t. Unless you have a time machine hidden in your closet. If that’s the case then please, shoot me an email.
Until then, here are 8 things that I wish I knew about money back in my twenties.
1. Debt is neutral.
One thing I was told when I was younger was that there is “good” debt and “bad” debt. Students loans were smiled upon and affectionally awarded the labeled “good” debt. I’m guessing people figured it was good to have students loans because it meant they were getting a college degree.
But what if I had dropped out of college? Would that still have been “good” debt? At what point did “good” debt suddenly become “bad” debt? And what does it mean about me if my debt was “bad”?
I’ll be honest about one thing – my fear of debt definitely kept me away from credit card debt. And for that, I am thankful. However my fear surrounding debt gave me a warped sense of debt and what it means about me if I have debt.
Does having debt mean that someone is irresponsible?
What if that person used credit cards to pay for their electricity bill because they had lost their job and needed to keep the lights on? Does that make them “bad” with money?
After years of being in a very unhealthy relationship with debt and what it means about me, I’ve settled on one thing for sure: Debt isn’t good and debt isn’t bad.
Debt is neutral.
Isn’t that a relief?
Debt is Simply a Financial Tool
Much like a hammer can be used to build a house or break a window, debt is a tool that can be used for various purposes. It’s not the tool itself but how it’s used that determines its value. A mortgage can help someone secure a home; a business loan can help an entrepreneur grow their company. The intention behind taking on the debt is what’s crucial.
Debt does not tell the full story. It doesn’t disclose why a person took on that debt or the circumstances that led them to that decision. As mentioned earlier, someone may use a credit card to pay for essential utilities during a rough patch. That very same credit card might be used by another person to fund an impulsive shopping spree. The same tool, different scenarios.
It Doesn’t Define Your Worth
Just because you have debt, it doesn’t mean you’re irresponsible or unworthy. Everyone’s financial journey is unique, and setbacks can happen to anyone. It’s not the presence of debt but how you manage and approach it that speaks volumes about your financial maturity.
It’s time to shift our mindset and stop labeling debt as inherently good or bad. Instead, we need to recognize it for what it is – a financial tool. Like all tools, its effectiveness depends on the user. By understanding and respecting its power, we can use debt strategically and minimize its potential pitfalls. Remember, it’s not debt that defines you, but how you handle it.
2. Start saving for retirement now. Yes, now.
In high school, my brother had a friend who worked at a local gardening store. While most of us were eyeing the latest fashion trends, he was proudly funneling a significant portion of his paycheck into his 401K. I remember being baffled, wondering, “Why stash it away for some distant future? Wouldn’t it be better spent on cute clothes?”
But even at the tender age of 16, he had the foresight to prioritize his long-term financial well-being over immediate gratifications.
It wasn’t until I embraced motherhood that the importance of retirement savings dawned on me. Suddenly, with two kids in tow, I found myself thinking, “Wait, I’m an actual adult now! Isn’t this the time adults start saving for the golden years?”
Looking back, I wish the magic of compound interest had caught my attention at 22. But in all honesty, concepts like Roth IRAs were far from my youthful, carefree mindset at the time.
3. Your clothes aren’t the center of attention.
Fresh out of college, I was drawn to the allure of upscale mall stores. I dreamt of a shoe collection with 30 diverse pairs and a wardrobe that felt limitless.
Deep down, I believed that the right attire might earn me admiration or validation from others. It wasn’t just about fashion; it was an attempt to cover up a lot of insecurities.
However, I soon realized that people weren’t as focused on my clothing or fashion choices as I’d imagined. Everyone else was engrossed in their own lives, choices, and anxieties.
Looking back, I wish I could guide my younger self to more budget-friendly stores and advise her to curate a more minimalistic wardrobe. Because, in truth, the abundance of outfits I owned wasn’t necessary; most people weren’t even noticing.
4. The art of saying “no.”
I spent a ton of money when I was in my early 20s. Money that I didn’t need to spend, and money that I sometimes didn’t even have.
Most of the time it was because I had no idea how to use the word “no.” I hated feeling like I was missing out, so I would say YES to every invitation. From traveling to eating out all the time, I was there. Sometimes I’d go places when I didn’t even feel like it, all because I had no idea how to say “no” and not upset people.
Over the years I have learned to put my health, savings goals, and my family first. I have a lot of kind ways to say “no” to spending extra money! Here are a few of my go-to ways to kindly tell someone that you’re not interested in spending that extra money:
- “Thanks, but I have other plans at home tonight. Maybe next time!”
- “You’re so kind for inviting me. Right now I can’t fit that into my schedule, but maybe in the future!”
- “I’d love to, but I’m focusing on a few financial goals that I’ve set for the month.”
- And my favorite way to say no: “Not today, but thanks!”
5. It’s okay to skip the fancy apartment.
After college, I landed in Dallas and immediately had this picture in my head of living in a trendy Uptown apartment, just a short walk from my go-to brunch spot.
But here’s the thing: the rent for those places was over $1,200 a month, and on my teacher’s salary of less than $3,000 a month, the math just didn’t work out. Even though I really wanted to be in that happening area, I had to be practical.
I ended up in a decent apartment in a not-so-trendy neighborhood. Looking back, it was the right move. What I’ve learned is, it’s completely okay not to have the fanciest place right off the bat. The key is making sure wherever you choose is safe. And hey, there’s always time for that dream apartment later on!
6. Meal planning is essential.
Back in the day, I thought meal planning was for families with packed schedules, not for someone single like I was in my twenties. So, I’d hit the grocery store, fill my cart with frozen meals and snacks, and easily drop $150 every week at the grocery store.
And that doesn’t even count all the times I ate out – a lot during the week and pretty much every meal on weekends!
If I had just slashed my food spending, I could’ve been putting a good chunk into retirement savings. It’s funny how I once saw meal planning as something only for busy parents. Now I know that being intentional with your meals, just like with your money, is a game-changer for anyone.
7. Tracking your money isn’t enough.
In college, my mom got me into the habit of tracking my finances, starting with Microsoft Money. These days, I’m more of a Quicken person (if you’re curious how I manage our family’s finances today, check out this link). For a long time, I thought just tracking my spending was enough. I mean, I knew when I was scraping the bottom of my account, with barely $2 left before the next payday rolled around. Yep, I was acutely aware of my paycheck-to-paycheck lifestyle.
But here’s the thing: Just watching your money isn’t enough. Tracking is great and all, but without a budget, you’re basically just watching your cash flow out without any real control.
Think of it this way: tracking is like watching the game, while budgeting is playing in it. You need both to score.
Sure, find a way to monitor your income and expenses that fits your style, whether it’s old-school paper and pencil, a handy app, or software like Quicken. But pair that with a solid budget. Only then can you really start steering towards your financial goals. Remember, you need both a budget and tracking to get a clear financial picture.
8. Don’t let money define you.
In my early 20s, I was convinced my worth was directly linked to my income. As a teacher earning a modest salary, I felt trapped in a financial loop of perpetual struggle. When I married another teacher, I thought, “Well, financial success isn’t in the cards for us.”
But a mindset shift changed everything. We realized that if we kept telling ourselves that money was an insurmountable obstacle, then that’d be our reality. Instead, we chose to believe that we could change our financial trajectory, even with our combined teacher incomes. We refused to let our earnings set our limitations. So, we set out with determination to design the financial future we desired.
Now, here’s a twist: while I wish I knew all this wisdom in my early 20s, I genuinely believe I wouldn’t be in my current position without those earlier financial stumbles. Those challenges pushed me to a tipping point, igniting my passion for budgeting.
That very passion led to the birth of Inspired Budget. It’s the result of years grappling with financial misunderstandings, followed by a profound urge to turn things around.
The Bottom Line
Reflecting on my younger years, it’s clear that the lessons I learned about money have been transformative. Money management is not just about dollars and cents, but more so about mindset, discipline, and understanding the true value of financial independence.
These 8 lessons have not just shaped my relationship with money, but have guided my life’s journey, turning obstacles into stepping stones, and helping me create Inspired Budget from personal experiences.
For anyone navigating their financial path, remember this: it’s never too late to re-evaluate your relationship with money. Your past doesn’t dictate your financial future; your actions today do.
Embrace the lessons, seek guidance, and always remain passionate about creating a secure, prosperous life for yourself and those you love. After all, the true wealth in life isn’t just in our bank accounts, but in the wisdom we accumulate and the difference we make.