The Easy Guide To Save Money in Your Early 20s

Congratulations! If you reached your early 20s, you’re about to embrace one of the most important steps to becoming an adult. Which is the ability to save yourself some money so you have enough leftover to buy those concert tickets.

When I started saving money, I was lucky to be given some useful tips that I carry to this day. Sure, I may a few mistakes along the way but that’s how you learn the best. I may not be an expert on finances, but I do have a list of useful tips that helped me along with a few other people.

Imagine saving and making money the same way as receiving a new car. You love this car and drive it everywhere you can possibly imagine. You drive your friends, find dates, and drive towards the sunset every evening.

But wait, you suddenly realized you’re close to running out of gas and your car is about to stop running. Once that happens, you can simply start taking the bus and trolley again since you did so in the past. But that doesn’t make sense. You have a brand new car! Thus, you’re going to have to find some gas.

After filling your car with gas, you suddenly realize that it’s a simple, but necessary maintenance that has to be kept up. No problem.

However, one day as you’re driving your car, you suddenly come across a flat tire. Again, you’re freaking out because you’re not aware of what you should do. This was unexpected and filling your car with gas isn’t going to fix the problem. But after calming your nerves, you realize that all you have to do is replace the flat tire. Now your car is back to running condition.

You enjoy your car and despite what comes your way, although it might be frightening and strange at first, you know you’ll find a way to push past it. You know maintenance is inevitable for your car because you have to put air in your tires, fill it with gas, and get oil changes. But you don’t let those burdens turn you back to buses and trolleys as you leave your brand new car in the garage.

Did you enjoy that analogy? Good. Let me break it down for you to let it make sense:

1. The Car represents your cash inflow 2. The gas represents mandatory expenses 3. The flat tire represents unexpected expenses

Whenever you begin receiving a cash inflow, it’s exciting at first because it’s more than you’ve probably received in your entire life. I was really excited to see my first paycheck was worth more than $20 and didn’t know what to spend it on.

But as you continue receiving paychecks and buying fun toys and gadgets, you suddenly get slapped in the face by the real world. You realize you actually have to pay someone to run the electricity in your home, your cell phone bill, and the place you stay. These mandatory expenses are strange initially, but overtime you grow use to them as being the norm.

Just as you get used to spending the usual amount of money for bills and pleasure, you assume life is good. However, one day a random brat throws a baseball through your window and now you have to replace it. You never planned on buying a new window, but it happened anyway because someone decided to be a jerk. Or perhaps a family member is in need for money and you decide to lend it to them.

Point is, one of the first lessons anyone in their 20s learn about money is that they need to set a certain amount of cash aside for mandatory expenses and for emergencies. Their plan may not work most of the time as they get themselves into debt, but they at least try to aim to be financially secure because they know it’s the right thing to do.

Let’s not forget the common thought people tend to have. I’m sure you’re familiar with it. It’s the, “If I had $1 million, I’ll be set for life.” In fact, it’s one of the myths I’d like to shatter first:

Size Don’t Matter. It’s How You Use It

The amount of money you make won’t be the cure for all your problems. Being suddenly rich one day doesn’t give you a happily ever after setting. (If anything, it makes things really complicated.) Think about it.

M.C. Hammer was a multi millionaire, earning more than $30 million in the early ’90s. But after being irresponsible with his money by purchasing things he couldn’t maintain, he eventually had to file for bankruptcy.

Football players aren’t any better at keeping their finances together after retirement. For instance, Mark Brunell, who was a Quarterback for the Jacksonville Jaguars making $50 million, filed bankruptcy after he claimed $25 million in debt.

Let’s not forget Basketball players either. These people manage to somehow lose millions of dollars upon child support and carelessly handing their cash away like air. Eddy Curry is a prime example of that. He lost $60 million due to his irresponsible financial decisions because he wasn’t watchful on his funds.

Despite how much money anyone makes, it still won’t save them from being poor or filing for bankruptcy. What happens is when someone is given a bunch of cash they aren’t used to receiving, they immediately begin to change mindsets. They make the assumption that their money is unlimited and they’ll never be broke again.

But no one’s safe from the negative impact of being financially careless. Whether you’re in the top 1% or in the 99% category, nobody’s safe from meeting that fate.

When I began making money at a job I had with a few buddies, they made the mistake of assuming since they had a paycheck, it was okay to buy whatever they wanted since it was their hard earned money. And they were right. Who was I to dictate how they spent their cash?

But by the time they finished partying like rock stars and had to pay their bills, they had no funds leftover for that. They were then forced to take out loans even though they initially had the money to pay for all of their bills plus some.

Save Money. But Be Wise About It

Imagine saving money the same way as earning it. Every penny you save is a penny you don’t have to work to obtain. It gives you a chance to have an emergency fund when someone breaks your window or something unexpected happens. It may sucks to think that way, but it’s worth having a backup plan.

However, some people tend to use this rule the wrong way. Save money, but don’t bother saving too much money. Sounds strange? You want your first goal to be finding a way to save more money so you won’t have to worry about spreading your dollar. And that means consciously being aware of your needs and wants.

People who try to shave a few cents off their groceries usually make the mistake of overpaying for useless clothing they’d forget later. People may like the idea of immediately saving their money with the use of coupons, but forget the importance of spending their money wisely when investing in a car or house they can’t afford.

Thus, be honest with yourself. Before you settle for buying anything, ask yourself if you really need it and is it worth your investment. Ask yourself why you want to buy those shoes, that cute purse, or that new Ferrari.

Understand the difference between your needs and wants, and if you’re too anxious to buy something, separate yourself from it for 24 hours. That should give you enough time to clearly determine if you should buy it. The more an item cost, the more you should give yourself time to think about buying it.

Aim to save your money, but also be aware of where you’re spending your cash at. You may spend frugally when purchasing items you need such as food and clothing, but overpay for useless wants such as new flat screen televisions and car rims. This may not make you the richest person in your neighborhood, but it doubles your bank account in a short time.

View the Long Road Ahead

No matter what your “logic” might be telling you, don’t inherit the “rational” belief your parents, teachers, grandparents, or strangers passed down to you. Although college will help those who thrive to be Doctors or Lawyers or pretty much any career that actually needs a lot of studying, it’s no longer the era where you can rely heavily on it.

Sounds crazy right? After all, don’t college students make more than non-graduates? Makes sense considering a college education does outshine a high school diploma. But let’s look at it from a bigger picture.

Most students who apply for college don’t even know what they want to major in. Some settle for easy degrees as others settle for degrees they’re half interested in. By the time they finish college, the average students spends around $70,500. Most are buried in debt as others struggle to find jobs with the degree they invested so much money into. They may not be a master of their job, but they do alright and they believe that’s all they need to find a good job.

However, unlike 20 years ago, most companies are searching for graduate students who already have years of experience or can prove themselves a prodigy of their field. This isn’t happening because Employers are setting unrealistic expectations towards graduate students. They’re doing it because they’re facing a recession and have to spend their money the best way they can. That means hiring less people, but ensuring those people can manage the workload of five.

A harsh truth is that employers value credentials over education. John may have an education in programming, but Jim has the credentials of selling a popular app he programmed on his free time. Brad may be good at programming and just need a few years of real life experience at a company, but the company is going to hire Jason since he had programming and adobe experience for just 1 year at Microsoft.

Is it fair? Heck no. But it still happens, which brings up the bigger question you should ask yourself before investing in a college degree:

“Is what I’m investing my money into worth the lifestyle I want?”

If you’re not sure what you want to do with your life, and you’re about to guess which major you want to get into simply because Bob said it was “cool,” perhaps investing your money in a college degree isn’t worth it. Because let’s say you decide to major in humanities and liberal arts, social sciences, or computer science.

By the time you finish school, although you will have a degree in something, you possibly won’t find yourself in the career of your dreams. You’ll either work at a job you’re overqualified for or at a job you’re miserable in.

And this isn’t meant to discourage anyone from majoring in any degrees. We need people with college degrees if they want to be Doctors, Dentists, Scientists, or anything that requires a lot of studying with trained professionals.

But when you merely invest in a college education because someone said you should, it sets your priorities on the wrong field. You’re investing a huge chuck of cash towards a career your Employer will eventually compare you to people who actually have a passion for it. If you major in computer engineering but you’re not totally enthuse about it, you’re going to have a rough time facing off against those who work all day happily on computers and programming.

Sure, it’s awesome to have a master’s degree and earn more than the average person once you land that high position in a company. But think of your sanity because of the amount of time you’re going to have to dedicate towards that career. Unless you love it with a passion, think over the value of your college education.

In the end, if you want to make money, you need a following set of skills you can’t learn in school. You need to know how to be creative and have the ability to come up with ideas. Whether it’s a new recipe, an invention, or a business proposal, you need to have an active imagination.

You need to understand how to communicate with other people so it’s a win-win battle versus a win-lose. Learning the arts of communication is crucial because human relationships mean a lot and will get you far if you understand human behavior.

You need to be organized, productive and know how to keep your priorities in check. It won’t matter how intelligent or gifted you are if you can’t determine what’s important to work on.

And most of all, you need to know how to constantly read and apply the knowledge you learn.

These are the traits that determine how far you can reach.

Remember, investing in a college education depends on the person and their personal drive for that career. A college education does not mean that it will result with a better salary. The best advantage the average student gets from college is the credentials of claiming that was where they studied at.

Quite a few people I know with degrees ended up working in totally different fields because there were no open spots available for them. Other people I know couldn’t afford to go to college and jumped into a profession where they rose up in ranks throughout the years. By the time they reached their early 30s, they bought a home, had money set aside for them, and lived a comfortable life.

Thanks to thousands of resources online, you can learn how to speak another language for free. You can learn programming for free. You can learn how to make websites for free.

Whether it’s on YouTube, Codeacademy, or Khanacademy, the world is open for anyone to learn a skill they’re truthfully interested in. And rather than investing $80,000 on a degree you barely care about, invest it in a business you want to open, workshops to enhance your skills, or investments.

Be Smart About Your Credit Cards

You don’t want to put something on your credit card if you can’t pay it off either immediately or in a short timeframe. It’s easy to get into the mindset of buying something with the idea you can pay it off later, but it hurts when you suddenly realize you can’t make those commitments. The next thing you know is that you’re hiding from debt collectors and avoiding those mysterious calls.

It’s a painful experience knowing you’re forced to pay back with a 15 – 20% interest rate. If you have a problem with abusing your credit card, cut it up or keep it at home when you go shopping.

But hey, let’s go over a quick lesson on how to use your credit card wisely because let’s face it; you’re going to have to use it eventually. You know building a good credit score is pretty important whenever you want to buy a car, house, or boat. The best method that has helped me was to:

1. Don’t chew more than you can swallow: You have to prove yourself to your lenders that you’re a responsible person who can pay them back on time. That means don’t get a $5,000 loan when you only make $500 a month. You’ll drown yourself in debt faster than a hippo in quicksand.

2. Take care of the big fishes first: The best strategy to take if you’re already in debt is to pay off the ones with the highest interest rate. That being said, if you’re paying off a car loan with a 20% interest rate and a bank loan with a 7% interest rate, it’ll be wise to put more money into the car loan until that gets paid off. Or else, you’re looking at spending more money in the long run.

3. Be on time: Don’t be that person who’s always behind on their bills. Lenders like to see their customers always paying on time. It shows you’re responsible and it reflects well on your credit report. If you have a bad habit of forgetting to pay the bills, technology makes it easy for us. You can set payments to automatically pay your bills without you worrying about a thing. You can also have email alerts to tell you when a payment is due or even text message alerts.

4. Know Your Hand: Don’t assume you have an endless flow of cash waiting to be spent. Be aware of what you make monthly so you don’t accidentally overspend your budget. Remember, you have commitments to pay off whether it’s bills, debt, or emergency funds. By carelessly spending your income is trapping yourself in a dark room.

5. Check Your Report Card: A good habit to maintain is to annually check your credit score. This gives you a chance to see the total amount you still owe, whether you paid your bills on time, and types of credit you use and your overall credit score. You can request a free copy of each of your 3 reports once a year at AnnualCreditReport.com.

Quality versus Quantity

Don’t flush your money down the toilet by buying something you’re going to end up repairing or replacing in the future. In other words, avoid being a cheapskate to save yourself future hassles. For instance, you might want to buy that old used car that’s only $5,000 versus the new car that’s $10,000.

Let’s keep in mind you have no idea how to fix a car other than how to put gas in it. Although it might seemed you’re getting a great deal for a used car for only $5,000, you eventually realize that during the time you have it, it starts to break on you.

You have to keep on replacing part after part. Just when you get your car fixed, something else happens to it. As you’re sponging away on your car, you’re slowly draining paycheck after paycheck on it. Before you know it, you’ve spend nearly $5,000 repairing that used car just so it can work for a few more years.

However, if you bought the new car for $10,000 you wouldn’t have to worry about the same problems occurring. And if there was something wrong with the vehicle, you can force the dealership to fix it for free.

A mistake I made was being a cheapskate when it came to buying cheap products such as backpacks. Nearly every month, I bought a new $10 backpack that would only tear apart after a couple of weeks. After replacing seven backpacks, I decided the best economic choice was to just buy a $60 backpack and call it a day. Was it annoying to pay for a backpack that expensive back then? Yes. But that backpack is still as strong as ever over the years.

You don’t have to buy the most expensive products, but try avoiding the cheapest thing you can find if you’re looking for it to last long term. You don’t want to buy a used bookcase for $5 only to see it tear down after a month when too many books are placed on it. Save yourself the hassle from continuously replacing something and buy the better quality object instead.

The rule of buying used objects:

Let’s not throw buying used objects out the window just yet. If you’re in your 20s, chances are you’re not in a position to buy everything at a new value. Thus, comes the act of being smart about your future purchases. Some of the best items to get are the ones people are trying to get rid of that still have a lot of potential in them.

For example, a pal of mine used Craigslist to pick up a nearly brand new desk from someone who was moving and couldn’t take it along with them. The desk was amazing and he still has it in his office.

Appliances such as stoves and fridges are items you’d want to search for through Craigslist, Backpage, or eBay. Just be aware of why the user is attempting to get rid of their appliances so you don’t get a broken item in your home. Most of the time, people usually get rid of their furniture because they have no room for it in their new place or they’re upgrading their living room. It’s pretty rare for someone to try to sell you their dresser because it’s cursed.

Know Your Resources:

Although the guidelines above can help save you a ton of money in the future, they aren’t meant to really teach you how to make money on your own. After all, one of the best parts about gathering money is knowing where it comes from in the first place.

And that requires knowledge. You don’t have to know everything about finances and the best ways to turn your dollar into two. But it helps to familiarize yourself with ways billionaires built their income levels and what you can do to reach the financial freedom you’re searching for. A few recommended tools that will help you are:

1. Think and Grow Rich: The Landmark Bestseller – Now Revised and Updated for the 21st Century : This is a great book for teaching you how to outsource your knowledge. You can’t do everything by yourself and you sometimes need a lending hand to support you. Thus, it gives you strategies to get people to do the small tasks you need completed while you stick to bigger issues. This book teaches you how to think for yourself rather than the common thought most people incorporate.

2. Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth : An amazing book that puts you in the mind of a wealthy person. This book is excellent when explaining how to cultivate your value when it relates to time and viewing possible opportunities.

3. Mr. Money Mustache: This website covers the way to save money and grow your income. It saves you from accidentally buying a luxury lifestyle, but enslaving yourself to debt. If you’re searching for good advice on money management, this website is a great place to start.

4. Money Crashers: Another great website on the best ways to save money. With advice ranging from investing, credit and debt, real estate, and lifestyles, you can discover just about anything you have a question on in relation to how to save your money.

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