I recently asked on Twitter what people wish they knew about finance when they were younger.
It’s interesting to think about. We’ve always been good with money. If you check our Savings Reports they start when we were in our early 20s. We’ve been saving & investing since then, and doing pretty well for ourselves. We’re mortgage free at 35 and are on track to retire in our early 40s.
But you should always be improving. We could have taken a different and more effective path…
If we’d have done things differently when we were 20…
So, let’s wind back time…
And unleash some wisdom…
“Wear sunscreen. If I could offer you only one tip for the future, sunscreen would be it. The long term benefits of sunscreen have been proved by scientists whereas the rest of my advice has no basis more reliable than my own meandering experience. I will dispense this advice now.”
1. Don’t be afraid to take career risks.
@FI_Squirrel points out you should apply for that promotion. Change career. Take a step down if stress is hurting you. Quit the 9-5 & try out your business idea. Take a risk. Risks are not so bad when you are young. You have plenty of time to learn from your mistakes and try again.
2. Know your value.
Know what value you bring. To your job, to your business, to those around you. Quantify it. Don’t be afraid to ask for compensation for the value you bring.
3. There’s no such thing as a job for life.
The majority of companies don’t view you as a valuable asset. Companies will discard you as if you didn’t exist. Remember that. Check if you can earn more by applying elsewhere. Or check if you can earn the same for less responsibility elsewhere. Have a backup plan. Side hustle and build multiple income streams. Have an Emergency Fund if shit hits the fan.
4. Time is precious.
Time goes quickly. Start saving & investing early. Spend time with those you love, you don’t know how long they have on this earth. You don’t know how long you have on this earth. @uitklokken says “Investing in yourself pays dividends for the rest of our life. I have wasted a great deal of time on crap. And time is all we have”. @latestarterfire says “Don’t stop investing. Time passes quickly. Suddenly you are in your late 40s & you haven’t saved enough to retire. Your exciting job is now stressful & demanding & you are burnout“
5. Read. Read books on money, you’ll enjoy it.
My good friend @JoneyTalks is spot on. Educate yourself in personal finance. School won’t teach you, you need to teach yourself how to manage your money. Blogs like this help.
6. Live close to work.
We spend around 220 hours commuting per year.[] Unpaid! @moneysavvyt3ach mentions the benefits of living close to your place of work. Not only do you save money on travel, you save time. We’ve already established that Time is precious, What would you do with 3 weeks of time back every year?
7. Associate with the right set of people.
You may have heard you become the average of the 5 people you spend the most time with. It’s a good heuristic but it’s not quite right. You become the average of everything you surround yourself with. So be intentional about who and what you associate yourself with. Have strong principles, and stick by them.
8. Spend Less.
It may sound obvious, but @FireAndWide highlights living within your means. Live frugally. Spend less than your peers. Find happiness without material stuff. Don’t increase your living costs if you get a payrise. Invest instead.
9. Start saving and investing early to get your money working for you.
Lots point out the power of compounding and investing early. @financesfriends of Finances With Friends points out “When you’re young, you work for money. Change that paradigm and ensure that your money works for you.” My good friend @journeymillion says “I wish I’d have known about the power of compounding.” and “I would have loved to better understand compound interest. The idea that I could earn interest on interest would have prevented me from making some really stupid consumer purchases. The longer your time horizon, the more you feel the effect.” from @turningptmoney of Turning Point Money
10. Invest in Low Cost Index Funds.
@IQbySusieQ points out the power of low cost index fund investing. “I wish I’d known about index funds (though they weren’t very prevalent when I was in my 20s so it may be a case of true wishful thinking). I hired someone to manage a part of my portfolio and it was a poor decision - high expenses for not very good returns.”, so does @journeymillion “I wish I’d have known about investing in global funds. Starting to save and invest at 20s would have given me over 10 years extra of compounding, and that’s a lot of money ”lost””
11. If you are going to buy something, invest in quality products.
Do you research when buying. Avoid snap purchases. Think, and wait a week. Develop a ‘buy it for life’ attitude. Proven high quality products that last are a good way to save money. Don’t buy the latest and greatest, buy last years. And buy outright with cash. But be careful… a high price point doesn’t always mean quality. As @mpgsheep points out “Spending more on an item (particularly household supplies) doesn’t automatically mean you get a better quality product. So much money wasted on branded goods until my wife made be blind taste some things against own brands!”. Be careful about falling into the branded = better trap.
12. Don’t neglect your retirement savings because you are young.
Thinking about retirement when you are in your 20s sounds dull!!. But you’ll thank your 20 year old self when you come to retirement age if you contribute to them early. The power of compounding will see them grow, and grow some more. Don’t neglect your retirement savings when you are young.
13. Make use of tax advantaged accounts.
Tax advantaged accounts are a great way to save and invest for your future and for goals. LISA or help to buy schemes for saving for property. ISAs and Pensions are all great ways to save and invest tax efficiently. “Tax-advantaged accounts are called that for a reason. Use them.” says @FireAndWide
14. You don’t have to be wealthy to invest.
“Investing outside of a standard bank account is not just for the rich - it’s for everyone” says @FireAndWide and this is true. Anyone can open a Stocks And Shares ISA and contribute a couple of hundred pounds. Learn how to invest, and get started investing when you are young. Get started with a low risk global indexed tracker and a balance of equities and bonds (high % equities if you are happy to take a risk or high % bonds if you are risk averse)
15. Money is not the goal.
Understand why you are saving & investing. Figure out your goals first before you get started. Are you saving to buy a house? Are you investing to retire early? Are you contributing to your pension for retirement? Are you saving for a life experience like round the world travel? Figure out your goals. “Money is a tool, not a goal in itself. Understand what you need it for+what you want it for. Two different things!” says @FireAndWide. Money is not your goal. And Money will not bring you happiness in and of itself. Figure out your purpose, or you’ll just end up rich and lonely.
16. That there were ways to make it other than the 9 to 5.
A 9-5 job isn’t the only way to earn income. As @moorefinancialm points out - take a risk if you are young on a business idea. Try being your own boss. If it doesn’t work out, you’ll have a wealth of learning from the experience. Here are a bunch of ideas.
17. Don’t invest what you can’t afford to lose.
Investing can be risky, there is a reason the FCA says ‘Your Capital is at risk and you might not get back what you put in’. Don’t invest what you can’t afford to lose. Don’t ever become a guarantor for someone, even family.
18. Understand the difference between investing and ‘gambling’ dressed up as investing.
Beware of ‘too good to be true’ investments. Beware of investments that are gambling. Stock picking & daytrading is volatile and high risk. So are options. Buying stock on a Tuesday in the hope that it goes up 10% to sell on Wednesday is Day Trading and is not investing. Sure, you may have a skill. But that the majority do not. Diversify your investments and hold them for 5 to 10 years, Global Index Funds are a great way of doing this.
19. Delay Gratification.
Would you rather have one marshmallow now, or two later? Our consumerist, capitalist society and its inherent marketing pressure convince us we need everything right now. Like right now! Now! now! now!! Learn to get comfortable with waiting. Good things come to those who wait.
20. It’s ok to have fun.
We are only young once. So live. Experience. Make mistakes. Set aside some of your money to do have fun. Just don’t set aside all of your money! And don’t set aside more money than you have! Travel. See the world. Experiences are lasting. They are memories. If you are going to spend to have fun, spend on lasting experiences instead of ‘stuff’. And remember: you can have fun without alcohol.
What money tips do you wish you knew in your 20s? Let me know in the comments below
Subscribe now, follow me on Twitter @moneymagery, stick by your principles and you’ll be mortgage-free in no time.
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