Saving

19 Money Lessons I've Learned in My 20s

Erin Lowry

As a personal finance blogger, speaker and author, money has dominated most of my thoughts for years. Even more so while I was working on my book: “Broke Millennial: Stop Scraping By and Get Your Financial Life Together.”

Here are 19 of the most important lessons I’ve learned along the way.

1. We need to talk about money.

Money is still way too taboo. And the only way we break down this wall is to open up dialogues with friends, partners, parents—anyone who’ll listen, really. Having honest conversations about salaries and negotiation techniques with friends and co-workers is what helped me learn how to advocate for myself.

2. We will mess up—probably more than once.

Whether it’s a small misstep, like an overdraft, or a big one, like defaulting on your student loans, we will trip up. But it’s never too late to turn things around.

In many cases, getting back on the right track—and successfully managing our money over the long term—is as simple as committing to periodic financial check-ins. A friend once had a $25 medical bill end up in collections because the doctor’s office never contacted him to ask him to pay it. Fortunately, he found out about it during a routine credit check, and was able to immediately pay it off and repair his score before much damage was done.

3. A weekly budget meeting can help, too.

Every Sunday, I sit down for 20 minutes to crunch numbers from my bank accounts and credit cards. This gives me a chance to course-correct if I’m overspending, and ensures I’m on track with my short, medium and long-term financial goals.

4. Short-, medium- and long-term savings goals are equally important.

We often get too fixated on big goals—like putting away money for retirement—and don’t give enough attention to smaller targets, like saving for a trip to Italy or for a home down payment. But I’ve learned to make a conscious effort to have a healthy mix of goals, especially after realizing that accomplishing bite-size goals keeps me motivated to stay the course and hit bigger ones.

5. Tracking your net worth keeps the big picture in focus.

In addition to that weekly budget meeting, I also run my net worth update once a month. Seeing the consistent march upward also keeps me inspired to continue aggressively saving.

6. Compound interest is the eighth wonder of the world.

Not everyone feels weak in the knees about the glories of compound interest like I do. But come on, it’s what enables you to grow wealth with pretty minimal effort and consistent contributions. Contributing to a 401(k) is a simple way to get started. I also invest in a mix of low-cost funds.

7. So long as you’re on the right side of it.

While compound interest can do wonders for your investments, it can also sink your finances if you’re on the wrong end of it. If you tussle with credit card debt or loans, compounding interest is the reason it feels like you’re in a black hole of bills—regardless of how much you pay.

8. Time is money.

DIYing everything may save some pennies, but is it always worth the time and potential aggravation? I’ve calculated my hourly rate—including living expenses, health insurance, taxes and my business operating costs—and use that to decide when it pays to outsource. I’ve learned that the hours I can add back to my schedule each weekend is well worth the cost of drop-off laundry service.

9. You are your best investment.

Whether it’s updating your skill set with professional courses, purchasing professional clothes for a big interview or taking the leap into entrepreneurship, it’s important to invest in yourself. I’ve spent the last three years building a steady stable of freelance clients, which eventually helped me leave my full-time job this year. (Bonus: Building my brand over the years also earned me a book deal.)

10. Emergency fund, rainy day fund, freedom fund—pick a name and start saving.

A cash cushion is one of the important pieces when building the foundation of your financial house. I have an emergency fund for myself and one for my dog. (I know—don’t laugh.) While I’ve been without incident, my dog recently got diagnosed with early stage heart failure and racked up about $500 in vet bills within a two-month period. So those savings came in handy.

11. Other people will spend your money if you let them.

There will be times in your life when you’ll feel other people are essentially spending your money for you (*cough* weddings *cough*). After two years of getting blitzed with wedding invitations, I learned how to tactfully say no to some. Sending a present helps ease the blow.

But I’ve also opened a savings account that specifically focuses on preparing for other people’s weddings, which allows me to say yes more often. It sometimes doubles as my travel fund if I actually get to take a vacation instead of just attend someone else’s event.

12. Once it’s serious, you have to get “financially naked” with your partner.

Did you just realize the person you swiped right on two years ago might be your soulmate? Then you better make sure you’re financially compatible by having an honest and non-judgmental money conversation. “Getting financially naked,” as I like to call it, with my fiancé is how I learned how much he had in student loan debt, and when we began foundational conversations about how we’d handle money if we got married.

13. You might be your parents’ retirement fund.

It’s also important to do a financial check-in with your parents and other family members to find out if they expect your support in their later years. I’m grateful that my parents are transparent about their financial situation and are set for their retirement, but that isn’t true for everyone I know. Plenty of parents raided retirement funds to send millennials to college, which could mean those people will need to financially support their parents later on. It’s best to know now.

14. Your budgeting style will probably evolve.

You don’t need to stick with one budgeting style forever. Much like fashion, your spending and budgeting styles can change over time. That’s okay.

I used to be a big believer in the envelope system, but I gradually outgrew it to focus on the less rigid style of paying my bills and saving first, then allowing myself to feel comfortable spending the remainder without designated buckets. Since my income has risen drastically over the years and my lifestyle has mostly stayed the same, it’s never been a problem to give myself more flexibility.

15. Busyness is a huge threat to your budget.

While we’re talking budgets, be careful about falling into the busy trap. It’s easy to constantly eat out and mindlessly shop online for more than you need when you’re overworked and overwhelmed. Bulk-cooking on the weekend has become one of the ways I avoid ordering out when I’m busy—better for the budget and the waistline.

16. Estate planning isn’t just for the elderly.

Like most 20-somethings, I anticipate being around for many more decades. But unfortunately that isn’t always the case. Be proactive by having a will drafted, so your family doesn’t isn’t left guessing about your wishes in the midst of their grief. I got a quick and easy will done for less than $75 on LegalZoom.com.

17. It’s a good time to set up your beneficiaries, too.

Beneficiaries are the designated recipients of your money after you’ve passed away. You can set them up for your investments, retirement funds and even checking and saving accounts. It takes all of three minutes, and it means your money won’t be left forever unclaimed in the cloud (or wherever our digital currency lives).

18. Loaning money to loved ones is rarely a good idea.

This doesn’t mean you should avoid lending a helping hand. I have before, and I don’t regret it. But if I’m going to be forking over money, I mentally mark it as a gift, not a loan, in order to protect the relationship.

19. Personal finance is PERSONAL.

Ultimately, the biggest money lesson from my twenties is that personal finance is nothing if not personal. There is no single road map for navigating how to handle money, so it’s important we respect the journeys of our friends, coworkers and loved ones alike. I make it a policy to only offer in-person advice when asked. (And you asked, right?)

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