What financial tips would you give to your 20 year old self?
Like a lot of young people, I made several financial mistakes. I did not understand the value of money. I put off saving and investing. I did not bother to learn about personal finance. I never thought about seeking professional advice. These are the things I wish I started sooner. Here are some quick financial tips and tricks that I would give my 20 year old self.
If you see yourself making these financial mistakes, it may make sense to work with a financial advisor.
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Top financial tips I would Give My 20-year Old Self:
1. Long term financial goal rather than short term financial goal
One of the best financial tips I would give my 20-year old self is to save and invest my money with a focus on long term goals rather than short term goals.
2. Save money: one of the best financial tips.
Put a little bit away every month. When I was 20 years old, I was in college. I had a student part-time job. All my money was spent on beers. Back then, I was more interested in partying and drinking more than anything else.
Just imagine how much money I would have right now if I started to save $100 dollars every month for 13 years. With no compounding interest alone, I would have had $15,600.
If you’re looking for ways to save up some money, why not getting a side hustle. From starting a blog to make money to Uber driving to completing online surveys, there are plenty of ways to make extra cash. And if you really want to stash extra cash away, why not putting it into a high interest savings account so you can get a little bang for your buck.
3. Save for travel.
One of the best financial tips I would give my 20 year old self is that I would save for travel, rather than use my credit cards to pay for traveling expenses. In college, I took a long trip to Europe where I practically visited 10 countries there. All of the expenses (the flight tickets, the bus tickets, hotel, food, etc) came from credit cards. I had a great time, but I found myself owning several thousand dollars.
I would have saved for my traveling expenses. I would still use a credit card, but before doing so, I would make sure that I have cash to cover the balance as soon as it is due.
4. Don’t open too many credit cards because you can’t afford them.
I would tell my stupid 20 year old self, “do not open too many credit cards, because really you can afford them.” Now I know that there are good debts and there are bad debts.
Now that I know that credit card debts are bad debts.
If you have a lot of debt and wants to tackle them, the first thing is to get a free credit report, where you can see all of your debts in one place.
Now that I know that if you don’t pay your balance on time, you’re going to incur late fees. Now that I know if you don’t pay more than the minimum, it will take years to pay off the balance. Now that I know a credit card interest rate can range from 18% to 21%.
And if you don’t make any payments at all, well you’re going to be in debt for a while, and goodbye to your credit score.
At 20 years old, I knew no such thing. At one point, I had 4 credit cards and $11,000 credit card debts. For a 20 year old with no real job, that’s a lot of debt. I was just not responsible enough to have any credit cards. It took me a while to get out of debt.
5. Don’t sign anything (especially contracts) you don’t understand
My biggest regret up to this day was signing a gym membership contract (Bally’s – now LA fitnesse), when I had no idea what I was signing. That single act put me in a big financial hurdle. I attended college in Massachusetts and would go home in New York City during the summer time.
One summer, I applied and signed a contract for a gym membership at Bally’s. I would pay a monthly fee but the commitment would be for a year, something I found out later.
I spent the first 3 summer months working out and when I returned back to school, I no longer needed it so I stopped paying the monthly fees. 2 years later, I owed $3500. I had to pay that half of that with cold cash.
6. Learn about personal finance.
I would take at least one class in personal finance or economics in college to learn about personal finance. In college, I took a bunch of liberal arts courses one after another. Not even one in business or finance.
Not that the courses I took were not good ones, they just did not teach me any thing about money or that they had nothing to do with money. So taking a class in personal finance is one of the top financial tips I’d give my 20 year old self so that I could learn how to manage money.
7. Have a budget.
I would have a budget. In college, I always had some money. Not a lot, but enough to live a comfortable college life. But that money was always wasted on alcohol, unnecessary clothes, and partying. With a budget, I would accurately track where my money goes and cut back on unnecessary stuff. For my budget, I’d use a free app called Personal Capital.
For more financial tips on how to create a budget, see Create a Budget and Stick to it
8. Invest your money: one of the best financial tips.
Lastly but not least, I would invest my money. If saving $100 a month in a regular savings account, would give me $15,600 in 13 years, imagine how much I would have if that same amount was invested in a low risk index fund.
Imagine again if I took more risk and invest in stocks such as Apple. In 2004, right when I started college, a share of Apple was worth $1.60. Now a share is worth $155. Just imagine.
In sum, If I were 20 years old, I would do all of the above things: investing, saving, creating a budget, learning about personal finance, and keeping the number of credit cards low, or not having one at all.
I made these mistakes above and will never repeat the, again. So should you.
Do you agree or disagree? Why and why not? What are the most important financial tips you would give your 20 year old self? Share your thoughts in the comments below.
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