Things I Wish I’d Known About Money When I Was In My Twenties

As our kids propel at much too fast a pace toward adulthood, I keep thinking about the money lessons and life tips I want them to know before they fly the coop for bigger things. This list could be ultra-long if I include non-money tips, but since this is a personal finance blog I’ll stick to money stuff.

Growing up, my husband and I were taught nothing about money and/or its management. In my situation, if got to eat every day it was a good month, so for a long time I had a “if I can eat every day I’ll be grateful” mentality about money. There was a self-defeating mindset threaded among that mentality, and that mindset was that we were all “dealt” our money hand, for good or for evil.

I believed that some people had money because the gods had shone on them, and others didn’t because the gods had passed them by with the silver wand, so to speak. I truly never realized that our money problems were our own fault until I started snooping around the Net and reading PF blogs near the end of 2012. I simply assumed – as so many others do – that we didn’t make enough. I assumed that we weren’t wasting money – at least not as much money as most other people wasted theirs; another reason our money problems weren’t our fault.

However, over the past 3+ years I’ve gotten some serious revelations about money, the earning of it, and the management of it. Thanks to those willing to take the time to share their wisdom with grand bluntness, I’ve learned that the responsibility for our money problems – most of them anyway (we all have the occasional expense that isn’t our doing) – lies squarely in our own hands.

If janitor Ronald Read can amass $8 million in wealth through saving and investing, there’s certainly no excuse for our family. As such, I’ve been thinking lately about things I wish I’d known about money when I was younger. If I knew then what I know now (as the old saying goes) I’m certain we wouldn’t have crushed ourselves with massive mortgage and credit card debt for so many years.

So, in hopes of teaching my kids what I wish I knew back then, here is my money advice to them, and to whoever else wants to listen. 🙂

What I Wish I’d Known About $$ in My Twenties

1. Save at Least Ten Percent of Your Income

This one tip alone would have put us at early retirement status had we started back in our twenties. The book, The Wealthy Barber, Updated 3rd Edition: Everyone’s Commonsense Guide to Becoming Financially Independent , documented many who committed to this rule, and their fortunes outweighed any spending snafus, no matter how large.

2. Always Put At Least Twenty Percent Down on a Home Purchase

PMI (Private Mortgage Insurance) is  PITA (Pain in the A…..). We’ve purchased three houses during our marriage, and we always thought it was such a great deal that we could get into those houses with a paltry 5 percent down plus closing costs. Well, my mortgage statement tells me different. Right now we’re paying $182.99 a month just for PMI. What a freakin’ waste of money that is. Our next home purchase will have a minimum of 20 percent down, that’s for sure, and I encourage anyone interested in buying a home to consider putting at least that much down and avoiding having to pay private mortgage insurance.

3. Compound Interest Can Be Your Greatest Monetary Asset

Or your worst monetary enemy. Compound interest on investments will help to make you rich. Interest paid on debt will keep you poor. It’s that simple.

At our highest, we were paying nearly $1300 a month in interest payments on mortgages, loans and credit cards. Can you imagine how much fun we could have had with an extra $1300 a month?? Or how fast we could have reached financial independence by investing $1300 a month?  Another freakin’ waste of money. We’re done giving banks and credit card companies our hard-earned cash just for the “privilege” of using their money.

4. Debt Wreaks Havoc on Your Life

When I was working in banking many years ago, we were hounded on to sell credit cards. They even gave us promotional t-shirts to wear at work that said “Better living through plastic”. Are you KIDDING me? Yet, we drank the koolaid that they were selling, like so many other people do.

We thought that if we could afford the payments then it was a wise purchasing decision.

Money problems are said to be the number one cause of divorce. This does not surprise me. When money isn’t managed properly, it becomes the focus of life when it was never meant to be the focus of life. Paying the bills becomes top priority. And if you are struggling to pay the bills, the trouble starts.

Debt wreaks havoc on marriages, on health and on a host of other areas of life. Avoid it if at all possible.

5. Being a Giver Can Make You a Better Money Manager

There’s something about giving your money away on a regular basis that makes spending it on yourself no longer a priority. As we focus on increasing our giving – even as we are paying off debt – we are faced with how good we have it, and that makes us not want to spend our money on ourselves. And the more money we give (at the Lord’s leading) the more money we seem to accumulate.

It’s a weird paradox that doesn’t make sense from a logical standpoint, but we’ve found it works. The caveat, though, is that you have to give with a heart to help others who need it – and not give for the purpose of getting more money.

6. “Stuff” Will Never Truly Make You Happy and the Joneses Don’t Matter

For many years we lived under the mentality that if we drove nice cars, had a nice house, wore fine clothes and lived a pampered life that we would be happy. We thought that giving ourselves “the best” meant accumulating stuff.

Well, after driving that road for 17+ years, we finally realized that it doesn’t lead anywhere. In our journey to be debt free, we’ve chosen to buy older, paid for cars. We have a great house but it’s not a fancy McMansion by any stretch of the imagination. I now do pedicures, manicures and all other beauty treatments (including cutting and coloring my hair) at home.

We rarely go out to eat or to the movies. Our clothes leave much to be desired by Joneses’ standards but they are comfortable and we like them. We don’t have cable or satellite TV, or magazine subscriptions, or iPhones.

And guess what: we’re happy!!

What we learned after we gave up pursuing the Joneses is that it’s a completely fruitless activity. Someone will always have more than you, and people – if they do admire you for your stuff – will only admire you for a very short time because someone will soon come along with better stuff and you’ll again be yesterday’s news.

This is not to say that “stuff” is bad. But accumulation of stuff for the purpose of gaining happiness or being accepted by others is a waste of time and money. And I’m SO glad we’re off that merry-go-round. What a relief to be living a life where we make financial decisions because they’re best for our family instead of because we’re concerned about impressing others.

In a way, losing that stress of competing with others is like being on a permanent vacation. It brings a peace that – at least for us – far outweighs anything we could possibly purchase.

If you’ve got a young person in your life who is just learning the ropes of adulthood, I hope you’ll share this with them. My prayer is that no other people/families have to go through what Rick and I went through as we struggled with mounds of debt.

What money tips do you wish you knew in your twenties? 


*Image courtesy of Craig Sunter via Flickr

22 comments on “Things I Wish I’d Known About Money When I Was In My Twenties

  1. A great list Laurie. We are teaching our three teenagers so much more than my wife and I ever knew at their age. I’ve thought a lot about #2 on your list. Our house payment is now our largest bill and liability. I would suggest trying to stick to a 15 year mortgage, and only 25% of your take home pay as your monthly payment. This leaves enough for the other things like savings. I’m glad we have a home, but be sure homeowner is for you, they are a lot of work.

  2. Great truths, Laurie. I wish I would’ve understand retirement accounts and compound interest better! Luckily we avoided consumer debt & put 20% down on our house but focusing on retirement sooner would’ve been nice. Also, I very much agree that giving money makes you better at managing money, and it can be more motivating that just saving for yourself.

  3. I love this list! I am particularly fond of #6 – letting go of trying to keep up with the Joneses, not only gives the finances a boost, but really allows us to focus on what’s truly important in life – our family, friends, and time! Life is so much simpler without those Joneses!

  4. I have about 3 months left to enjoy my 20s. I definitely recommend saving at least 10% for retirement, although I slacked a couple years to pay off student loans. I saw a graph the other day how even delaying saving retirement until 30 made projected earnings significantly lower.

    My advice to 20-year olds is to stay out of debt. It makes it easier to change careers or move to pursue a better lifestyle.

    I also recommend taking time to smell the roses. I was (still am) a workaholic, you only live once & it’s easier to do things in your 20’s when it’s still easier to live without sleep & stay in great physical shape.

  5. Ouch. You described the first 20 years of our marriage to a T. It was a financial hamster wheel to nowheresville. The best thing it taught our son was what NOT to do. At 30, he has no debt, and never has had any, and plans to forever keep it that way by never applying for credit cards or loans. If he can’t afford it, he says he doesn’t want or need it. So while it’s not the way I would have chosen to teach him about finances, I’m glad something good came out of it in the long run. Super post Laurie, as always. 🙂

  6. I’d try to hammer home #4 as much as possible. I realized that ~1/3 of my pay was going towards credit cards only after i’d racekd up enough debt on them to make it that way. I started working on the snowball principle and paying off one, then another, etc… but I still found myself using them to eat out, go out with friends, go to Target on Sunday to stroll around and mindlessly purchase crap I didn’t need because it’s “on sale”. Ugh, What a waste…

    The only other tip I can think of is that being able to say, “I can’t afford it” isn’t an indictment that you’re failing at life. That’s how I felt, so I would go out, even when I knew that I ahd $6k in credit card outstanding balances and I should put that money towards paying it down instead of whatever else I was spending it on. But, I didn’t have the courage to say, I’m too broke because that equaled failure in my mind.

    Seriously, #6 is the other best one to try to get across. Keeping up with the Joneses costs some serious coin and doesn’t make you any happier. Even though we live in a neighborhood that is surrounded by that type of posturing and showing off of vehicles, pools, landscaping, Christmas lights, and more, I just think – 2 more years and we’re done and can move into a rural area somewhere. Ahhh….

    1. “The only other tip I can think of is that being able to say, ‘I can’t afford it’ isn’t an indictment that you’re failing at life.” LOVE that, Mr. SSC!! We found that rural living really was a huge eye opener to us in regards of the Joneses. We didn’t really see the hamster wheel of keeping up with the Joneses until we got out of the suburbs.

  7. I think number five may be the most important of all. I never had good money habits except I learned early about tithing and giving to the poor. Since my parents emphasized that these ought to be the top financial priorities, it made it a little easier to keep other expenses in check. By late in college (when I started to have a good income on a regular basis) the “generosity with training wheels” that I learned early in my life helped me prioritize not spending down to my last dollar. I never wanted to be caught without money if an important cause came up. It took longer to figure out investing and saving for the long term, but cash flow management became incredibly important early on.

  8. “At our highest, we were paying nearly $1300 a month in interest payments” – Oh that hurts! I don’t know what your interest payments are now, Laurie, but I trust and hope that they’re lower that that amount. You have a very powerful story to share, and it will just grow in power as you stay the course and close in on zero debt. For me, #4 is most significant. I think about the spiritual toll debt takes. Just recently, I realized a connection between indebtedness and the parable of the sower. “The seed falling among the thorns refers to someone who hears the word, but the worries of this life and the deceitfulness of wealth choke the word, making it unfruitful.” We do that to ourselves via debt. Thank God we can undo it too!

  9. I wish I’d learned much earlier to track my spending. There’s nothing like writing down your spending to remind you that yes, you did waste some money when you got a latte every day this week and yes, you have room to save more/pay off more/invest more. Heck, I wish I’d learned that in my 30’s.

    And #2 killed me….I’ve finally gotten rid of PMI but it was a really expensive lesson and I could have avoided it if I’d waited a bit longer and saved a bit more.

  10. “Save at least 10% of your income” is such important advice Laurie, I totally agree! I wish I had managed my money better when I was in my 20’s along with starting a 501K when I first got a full-time job 🙂

  11. I totally agree with the last one! There is so much pressure to keep up with the Jones’s especially on Social Media! Instagram gives me FOMO or fear of missing out every day!
    I would add two mistakes to the list since I am in my twenties and already made them. 1) Never buy a new car and 2) Don’t buy more house than you need.

    1. Great advice, MB!! The new car one can be a huge roadblock to financial stability, and I know SO many people who are living a house poor life because they bought more than they could afford.

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