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6 Tips to mastering your finances in your 20s
It’s no secret that your finances are a personal journey. There are many ways to become debt free, save money, invest, and make more money. In the end, the point is that there are various ways of achieving your personal financial goals. In this episode, we will discuss six personal finance tips or more decisions I have made to help me in the journey to becoming debt-free, creating generational wealth for my kids, and having plenty of money for retirement. And I believe these are tips that can help you achieve your personal financial goals!
Ok! So I know it is not sexy to chat about retirement, especially at our age, I am still in my 20s and I am sure you are in your 20s or early 30s if you are listening to this show. But the reality is that if most of us will be blessed to be around for retirement time we better hope to have had a plan ahead because retirement is the biggest expense of our life.
Oh boy! I am going to get vulnerable here, but I wanted to bring this topic up because although there is a HUGE tabu in my family and society in general it is so important to talk about money and what a tool it is for you to have opportunities and options. And of course, you can’t talk about a career without talking about money because, in the end, you have a job or a career to sustain yourself so that you can retire.
So what a disservice would it be for me not to talk about this when I am teaching you how to land six-figure jobs?
The reality is that I don’t know much about investing because money was just something dirty to talk about, it was a secret to talk about making too little or too much.
When I first started working at 16 I SPENT every penny I earned, I never saved a dime. I used to have a scarcity mindset about money because I never had it. We grew up very modest and frugal, although we were frugal because we had no other option.
And so when I had the money I just wanted to buy all the things, although they were needs, they were just filling a void of emptiness, I had detachment from it because “money is made to be spent”
And yes, while I agree that you should not be in the biz of hoarding money you should also know ways you can put it to work.
I mean if I knew then what I know now I would probably be a millionaire ten times over.
But we are not living in the past and I am trying to be better at not dwelling over what could have been.
Anyways is not until I landed this role at a tech company that I realized I needed to start taking my finances seriously, I have a mortgage, two kids, and two immigrant parents who although are not counting to be dependent on me or my two brothers, the harsh reality is that we might have to take care of them once they are retirement age.
And so spending money on unnecessary things is no longer cute.
And it is not like I was shopping and getting red bottoms. I am just one of those people who would always go “where has my money gone” because I refused to look at my statements, I went months without checking my debt account because I was afraid and ashamed to look.
But that is no longer an excuse. Because I came to realize that this is the youngest I’ll ever be, this is the most energy I would ever have and I am the healthiest I will ever be, I needed to stop taking those blessings for granted and started to call myself out on self-pity and the what ifs. So when I said enough of ignoring, and started to accept my situation and remove the shame from it here are some things that came to crashing as harsh realities but necessary:
- Now is better than never
- You did not know any better but now you have the education and resources to do better
- Now you have the opportunity to teach your children the things you wish you knew
- You can teach others in the community and take them along in the journey of your self-discovery
- If I don’t take control no one will and in 30 years I will be sorry that I have become a burden to my loved ones because I did not want to face reality
And some of that might sound harsh but it is the reality check I needed to wake up and I am here to tell you that you do not need to feel shame, it is ok to be on the journey you are on. I know that you are not alone and you being here today listening is the first step towards freedom.
So before I began with the tips here are the main reasons why I decided to take my finances seriously:
- I want to have enough to retire and enjoy the fruits of my labor and the long hours I put into my career
- I have a debt to pay off $81.099.48 to be exact and that is composed of student loans and one personal loan I took out during covid
- I want my children to have better opportunities and more options (generational wealth)
- I don’t want to be a burden
So here are the tips I started to implement to better my finance and how you can too:
1- Start with a cash flow statement (simply means how much is coming in and how much is coming out)
- Where is your money going? Does it align with your future money goals?
- Are you living paycheck to paycheck (breaking even and not having any money left after getting paid and taking care of your bills?)
- Take note of how you react or how you feel when the topic of money comes up
PRO TIP: the way I did it was by printing out my bank statements from the last three months because I truly have no idea where to start. Doing this helped put perspective on how much money I spent on non-essential items.
2- Create a money plan
- You can start by creating a budget and you can check out this post all about budgeting and come back once you have an idea of how to create your budget
- Find ways to invest in your future self. SAVE, and then save some more whenever you can
- Separate your savings and spending accounts, I recommend a checking account for your paycheck and monthly fixed expenses, high yield savings account for savings like an emergency fund, and a credit card (if you trust yourself to use it responsibly) for variable expenses
- Make a plan to pay off your debt; this is something I ignored for far too long, although most of my debt was recently acquired, I never really had a plan for paying that debt off, and for a while, I didn’t even know the balances on them *I know bad* decide if you want to take the avalanche or snowball method to pay your debt off based on balances and interest rates.
3- Pay yourself first (401K savings)
- Make sure that no matter how much money you owe you should always be thinking of your future self.
- Saving, investing, debt pay off, in that order.
- At first, it was a strange concept for me because I am always trying to take care of my bills and external people, but then I realized that that never left much room for me to save, so every month I first say “OK did I put money in my savings and brokerage?” if the answer is yes, then I go ahead and throw the extra cash towards my debt.
4- Build out an emergency fund
- This is huge because having a solid emergency fund can keep you from going into debt or going into further debt, trust me I made the mistake of not having a complete emergency fund and that is why I had to take out a loan during covid.
- An emergency fund consists of having 3-6 months’ worth of monthly expenses, the actual essentials, not the Netflix or Hulu subscription, but your groceries, rent, transportation, etc.
- When you are starting your journey, in my humble opinion this should be your number one priority.
5- Automate, automate!!!!!!!!!
- Making things easier for you and your lifestyle will set you up for success. Once you get a handle on your accounts, the amount of money flowing and your financial goals are best to automate all you can with your banking so that you can set it and forget it
- It is super simple to set up an automatic transfer to your savings and brokerage account as well as setting up automatic payments to your creditors to avoid having to pay late fees for payments you accidentally forgot to pay on time
6- BONUS!!!!!! Take care of yourself first because doing it for others!
- Ok, so this one is significant. Especially for my fellow first gen and immigrants, I know how important our parents are and how much we owe them for all the sacrifices they have made to give us a chance at a better life. However, you can’t help them retire if you are still paying thousands a month in debt
- Make sure you have the priorities set in stone and have the plan to help your parents or family out but once your own financial goals are met
- Trust me my biggest dream is to be able to buy my parents an apartment they can call their own, but I can’t do that when I am barely able to make my mortgage payment because a lot of my monthly income goes towards payments of debt
The last tip I need to get off my chest is that you need to understand that debt payoff can be exhausting and you might even reach the point where you want to give up, but remember it took months, if not years to get to this point, so give yourself the time you need to get used to this new normal.
As always I hope this one serves you well, remember that you are not alone and we are here to support each other during this difficult time. Debt Free sounds so sexy, let’s put in the work now and enjoy the fruits later.
Until the next post, I will see you back here at the same place, same time, and don’t forget to drop your questions and suggestions below by typing a comment or simply head over to the contact tab and shoot me a message directly into my inbox.
DISCLAIMER: I AM NOT A FINANCIAL ADVISOR. INFORMATION FOUND ON THIS SITE IS AN OPINION BASED ON MY PERSONAL EXPERIENCE AND SHOULD ONLY SERVE AS EDUCATION, AND NOT PRESCRIPTIVE ADVICE. PLEASE CONSULT A FINANCIAL ADVISOR.