20 Tough Money Truths We Wish We Knew In Our 20s

Ageing brings about a dearth of experience. As you run up against new challenges, triumphs, and personal interactions, you'll continue to grow as an individual and discover new truths that were once hidden to you. One area in which growing wisdom is typical centers on your relationship with money. Whether through scrapes with the "school of hard knocks" or simply as a result of discussions with others, growing older often brings about revelations surrounding the use and management of your finances. These realizations can be found in workplace relationships and in direct budgeting, but they sadly are often discovered later than might be truly helpful. For instance, saving for retirement is an exercise in compound interest leveraging. The earlier you start the less money you have to actually contribute yourself, in an exponentially growing fashion. This and many other tough truths can be found in the world of money management.


You get what you pay for

One of the first lessons that many consumers will learn as they grow into adult life is that you get what you pay for. There will always be some outliers that enjoy surprisingly low price tags or an unwarranted sticker shock but you'll often find that a $100 pair of sneakers will last you roughly twice as long as an alternative that only costs $50. This kind of relationship exists in generalities across goods and services of virtually all types. Generally speaking, you'll find more value or greater longevity in a more expensive item when comparison shopping.


Warren Buffett often says, "Price is what you pay; value is what you get." When buying a new item you'll need to understand the relationship between price and value. Often, these two facets of a purchasing opportunity work in coordination with one another through an intimate causal link.

Company loyalty doesn't always translate into promotions

People who are fresh out of high school or college might enter the job market with big plans and booming aspirations. Many are still under the impression that finding a job at a great company and then staying there for the long haul is the best career move. This might be an arrangement that works for some people, but the vast majority of workers in the modern workplace will find that company loyalty won't translate into things like a rapid and consistent bump in salary or even great promotional opportunities.


Instead, the best approach for young workers looking to earn a quality salary involves constant mobility. A wide variety of factors have led to systemic disloyalty in the modern employment relationship and savvy employees can take advantage of this to continuously improve their financial leverage.

Start contributing to an emergency fund right now

It's never too early to start saving, and this goes for all manner of opportunities. Beyond the importance of retirement planning and other money management goals comes one of the most important tools that you can bring to bear in your personal finances. Finance experts like Dave Ramsey advise consumers to start small and work up to a goal of $1,000 put away in an emergency fund. Ultimately, you'll want to balloon this money to a much larger figure that can cover as much as six months worth of living expenses. However, even a modest emergency savings reserve can see you through common financial difficulties. If you're hurt and can't work for a few days or weeks, your emergency savings will support you through this hard time.


Focus on company match programs for your retirement

While office politics have shifted for employees, perks embedded within compensation packages haven't. Employees across the country still enjoy company match programs through 401K accounts, but many don't take advantage of this benefit. Simply by contributing to your retirement, you can add free money to the pool in matched deposits from your employer. Leaving this on the table is a great way to ensure that you're less prepared than you'll want to be leaving the workforce long down the road.


It can be difficult to have the foresight to fully capitalize on this and other easy money additions. This is especially true for early career workers who may be focused on setting money aside to buy a house or are enjoying early twenties social life. But understanding how valuable these programs are can make life far more relaxing later on.

Debt is a basic financial tool

There are two common schools of thought surrounding debt. Some personal finance personalities would have you believe that all debt is bad and that living completely debt free is the only way to go. Others move to the opposite end of the spectrum and categorize debts into "good" and "bad." The reality is that debt is simply a financial tool. A mortgage, for instance, is a lump sum payout designed to help you buy a home. Over the course of your working life you'll earn the value of your home, perhaps tenfold, but you may never have enough capital to make the transaction at any one point in time. The cost isn't the principal, but rather the interest: It's the price of using your future capital today. Debt is therefore simply a financial tool. You can certainly misuse the tool, but strategic knowledge and utilization of the concept can also be immensely fulfilling.


Your car isn't actually all that important

A lesson that many people learn far later than they should is an understanding that the car you drive isn't actually very important. Younger people who have just entered the workforce are often tempted to purchase more expensive vehicles than they can realistically afford. A good rule of thumb pegs transportation expenses at a cap of 10% to 15% of your monthly income, with public transportation and the running costs associated with owning a car baked into this figure. Not only will a car take up portion of the monthly budget repayments but there's also gas, insurance, and routine maintenance to take into consideration. A flashy car ultimately squeezes other parts of your monthly financial picture.


Chasing new money opportunities isn't always the best approach

It's easy for young people to see opportunities to incorporate a side hustle or work overtime on a routine basis as good financial options. But the more you work the greater the threat of experience burnout becomes. There will always be times when working more isn't the best use of your time, energy, and mental load. Everyone needs to relax on occasion and constantly chasing new opportunities is a great way to find yourself ineffective and drained.


As well, for those who work in freelance or gig arrangements, it's not always the best idea to take on every contract under the sun. There will always be more jobs, and it's perfectly okay to pass on occasion in order to spend time with friends or family, or recharge in some other way. Getting caught up in a cycle of prioritizing work over all else is unhealthy and unsustainable.

Budgeting is more than just a planning task

Many people — both young and old — consider budgeting to be a simple planning exercise that sees them explore their existing incomings and outgoings in an effort to establish and maintain financial continuity. Do it once and you're set for the forseeable future. Budgeting is a constantly evolving task that goes well beyond a static planning experience, though.


Monitoring your income in real time and taking steps to shore up leaks in your budget factor dramatically into the task. Using budgeting tools (personal finance management apps, for instance) can help you analyze your spending in a more comprehensive way and make changes to improve your financial standing without delay.

Its never too late (or too early) to act on your dreams

Some young people entering the workforce have developed a long term plan to bring them toward a dream job or career trajectory. This might involve launching a company or climbing the ranks in a particular corporation. But it's easy to think that these rungs of the ladder have to be traversed in a particular order or on someone else's timeline. Whether it's entering the management suite in your office or maybe even making detective on the police force, there's no single, correct path.


A rigid reading of norms and standards can make younger people timid when asking for raises, chasing promotions, or pursuing personal decisions that might feel as if more experience might be needed. The same can be said for older workers considering a career change. It's never too late or too early to chase after what you want.

Focus your financial weight on buying experiences, not things

It's easy to get wrapped up in consumerism. Seeking out the newest thing is a psychological fact of life that has seemingly been passed down since we organized in prehistoric communities. But this habit's financial impact can toss unwanted stress into even the most pristine budgeting practices. There's always going to be an appropriate time to buy something new, whether large or small. Things are generally disposable in some form and eventually require replacement, after all, whether it be a pair of socks or a 35-year-old roof.


Instead of falling into the trap of overconsumption, focusing on experiences can be immensely rewarding. As you grow older you'll look back fondly on the experiences you've had, rather than the things that you brought with you. Leverage your capital to purchase great times whenever you can.

Setting cash aside opens up new career opportunities

An employee that hates their job is effectively stuck if they haven't set aside cash to see them through a sudden job hunt. Young people have cracked the code on job hopping, but a turbulence-free shift from one office to another demands working conditions conducive to all that an employee needs. If you've been harassed at work, for example, you may find it impossible to simply hang it up and move on if you don't have money saved up to close the gap between paychecks.


Similarly, a cash reserve allows people to make a more severe career change if they eventually become stymied in their workplace existence. A major career change often requires some form of retraining, which can mean a period of time without pay. This becomes a possibility for those who have saved for the eventuality of living temporarily without a salary.

Credit cards can facilitate much joy today, and plenty of hardship later

The first credit card account you open can bring about a unique feeling of freedom. A credit card opens a financial lifeline that allows you to rely on funding outside your standard cash accounts. The newly acquired ability to overspend can be seriously tempting. Many young people start using their credit card to purchase things and experiences that make the here and now immensely exciting. From trips away to the latest gear to support a hobby, spending with a credit card can seem like a simple borrowing opportunity that lets you pay back these purchases over time rather than all at once.


But the pains of repayment can far surpass the joy that a credit card can facilitate now. Without set repayment timelines, you might end up paying off the debt for many years, ballooning its cost in the process.

Your chosen career path is really a financial decision

It's easy to think about future work opportunities as just that. A career path has long been thought of as something people follow after careful deliberation about what they want to do for the rest of their lives. But your decision about whether to be a veterinarian, accountant, or electrician is more than just a consideration about how you'll spend your weekdays. Indeed, the choices you make when joining the workforce in one profession or another is really a financial decision.


A teacher will bring in far less than a lawyer, and a web designer might earn more than a nurse. Your salary will facilitate the remainder of your life — that is, the things you do beyond your commitments at work. It's worth taking the time to research average wages in an industry and how they change over the years.

Don't get accustomed to spending all your earnings

Young people entering the workforce for the first time might quickly get into the habit of spending all their earnings every month. For a teenager earning from a first job, the entire paycheck may indeed become disposable income, but this doesn't mean it should be treated that way.


It's not the end of the world if you do spend all this money on things that enrich your life for a time, but if you do it's crucial that you kick this habit as soon as possible. Financial habits are built through long-running effort. A habit that can sink your budget is overspending. Once you have to start paying bills, do your own grocery shopping, and manage the entirety of your financial life, this bad habit can take over and massively hinder your ability to effectively manage anything unexpected that takes place.

Don't be afraid to take risks

Whether in investing or during the course of everyday life, risks are an integral part of the mix. Calculated risks, that is, offer immense rewards. Investing in upstart companies with good financials is much the same as taking a chance in the dating world for a young person. There's always the potential to fall flat on your face, but you won't know that until you try. Likewise, a risk taken today could prove to be the best decision you ever make.


Wonton gambles aren't the same as carefully crafted actions, though. Take time to research career jumps, investment opportunities, and even social decisions and then don't be afraid to go out on a limb for the things you want.

Little habits become major returns

Integrating a small financial habit today can translate into powerful returns later on. When it comes to saving, for instance, the potency of compounded interest makes every year more valuable than the last. The result is a goal reached with less invested dollars coming directly out of your paycheck for each year you add to the growth pile.


This is also a good piece of wisdom when it comes to other financial habits. Going grocery shopping with a list, for instance, can help save heaps of money over the long term as you consistently ward off the effects of decision fatigue.

Salary and benefits packages are always negotiable

There's a bit of a taboo surrounding in depth discussions of money and finances, especially in the workplace. During an interview or even after you've taken a job and might be up for a raise, it's always a good idea to think about your level of happiness with your compensation package. Managers might let on that they aren't happy with this type of conversation, but the reality is that virtually everything is negotiable, including your salary and benefits.


When interviewing for an open role companies put together a list of attributes they want, as well as a salary range they're willing to pay for those skills. You might not be able to wrangle a $25,000 increase, but something more modest may very well fit into the hiring budget. Alternatively, you might ask for other benefits in lieu of added money: additional vacation days, flexible working schedules, or a favorable parking space and corner office.

Build a cohesive strategy for dealing with student loans

70% of American college students graduate from a four-year university program with at least some educational debt. It's easy to write this off as a problem for later, especially if the volume of student loans required has become a substantial weight. But this isn't a financial obligation you can just push to the side. Responsible debt management remains an important factor here, as is the case with any other lending product you might use. However, there's more to educational loans today than in the past. With Income-Driven Repayment plans and more coming from the federal government, aggressively paying off student loans is often not the best option for borrowers.


Buy life insurance

The earlier you buy life insurance the cheaper it is. This is a fact of life underpinned by insurers' actuarial tables. The math just isn't on your side: The more years you spend in this world, the fewer you have left before you die. It might sound morbid, but it's just the reality of the human condition.


The sooner you buy life insurance the cheaper it will be, and the more value you can extract from your coverage. Life insurance is often purchased by couples who are planning to grow their family, but these aren't the only people who should be securing future expenses with the protections of a life insurance policy. If you have a loved one you want to care for, buying a policy to help cover routine expenses or the remainder of your mortgage is essential.

But don't forget to have fun in the here and now, too

Not everything has to be focused on the future. While many financial lessons that young people can take from the experience of others revolve around planning early and acting on opportunities sooner than later, this isn't always the best approach. There must be some room left for enjoyment in the present. Your 20s are a time of great change and the exuberance of youth. It's a decade of life when full-time employment allows for expanded financial support for all the hopes and dreams you hold in your heart. If you want to travel, buy yourself plane tickets; if you enjoy live music, get to as many shows as you possibly can. These years are filled with opportunity and you should make the most of them. Plan for your future, but don't forget to enjoy what's in front of you.