We have made a lot of progress in the past few years with disciplined savings and aggressive investing. Within a span of five years, we are projected to have gone from a net worth of about 200k in our early thirties to close to 1M by our mid-thirties.
I believe the twenties is a decade when many people are still riddled with debt and working towards setting themselves up financially. And I can relate to this, we did use our twenties to become debt free and once we achieved this (except for mortgages), we were able to build wealth quickly just in the past few years.
However, there are some things I could have done differently in my twenties that wouldn't have taken a lot to change which could have set us up for more success even before we began our thirties.
I "may" or may not have heard some of this advice in my twenties, but being stubborn, I likely did not listen. I wouldn't be where I am without making all the mistakes and learning from my experiences but if I can tell my younger self six financial tips, it would be this.
Save and Invest at least 25% of Net Income
As mentioned earlier, it is common for the twenties to have credit card debt, car loans, student loans, etc. And after your rent and bills, it does not seem like there is a lot left over each month.
That was certainly me when I graduated from college; I did not make a lot of money so I did not think about saving money let alone investing. But if I prioritized my own well-being, I could have invested just a small dollar amount like a few hundred bucks each month. Setting aside part of the income towards investing and saving would have built a smart habit, and it would have accumulated to something significant before I even turned thirty.
Buying a Small Studio
When you graduate from college, renting is often a practical solution. You don't know where you'll end up living, nor do you know what type of home might be right for you.
However, having lived in the same city and rented for all of my twenties, I could have purchased a small studio for $150,000 and built a significant amount of equity with the amount I've paid in rent. By the time I turned thirty, this could have brought us an additional $1000 in passive income.
*I will say that owning a home is a costly option with closing costs, interest expenses, and homeowners association fees that the amount of equity you truly build each month is minimal. Renting is not always a bad thing and it can be a good decision until you feel settled and sure that you'll want to live there for many years.
Paying off Student Loan and Consumer Debt Earlier
When I graduated from college, I paid the minimum balance of my student loan as I did not feel like I had any additional income to do more.
Instead of saving, I spent any extra money I had leftover on going out with friends and traveling. However, once I saw the accumulated interest I have accrued by not paying more than the minimum balance, I needed to take this seriously. I changed my lifestyle temporarily and was able to pay down the debt in a few years. The same thing applied to my credit card debt and I was sick looking at the amount of interest I was paying on this debt and so I worked hard to pay this off as well.
Earn an Extra Income
To be a little sympathetic, the twenties can be a tough decade. You are just starting to build your career so finances are tight, all while you're dealing with a lot of emotional hardships. Mine stemmed from not only relationships but also a struggle with myself on personal doubts and stacking against others' accomplishments. But when looking back, simply working hard at my own path and building my career, and cultivating social relationships alone was enough.
Had I known what I know now, I could have worked even harder to take on a side hustle to earn more money. As mentioned in another blog, working part-time at some of these places can earn you significant savings on the things that you would have already spent money on, like coffee or retail products (read: Discount on Employer Products).
You Don't always Have to Spend Money to Have Fun
Not creating a budget in my twenties, I did not know how much I was spending going out to eat and buying all the things I wanted to buy.
Looking back I didn't always have to go out to have fun and enjoy friends' company. There were many things we could have done that didn't always require spending money like staying in or joining sports leagues (read: Free Things We Like to Do in Chicago).
Holding off on Buying a Car
Fortunately, I lived in the city and I did not have this predicament. But I know that purchasing a new car with your recent grown-up salary seems justifiable.
New cars are in my opinion simply unnecessary and a bad decision for your personal finance. The money you spend on maintaining a car will make you think twice about owning it. From the repairs and maintenance, city stickers, gas, insurance, parking tickets, and redlight tickets, it's endless.
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