Did you ignore finances in your twenties? Or did you meticulously budget?
If you chose the latter, you’re in a very small group, because most twenty-somethings don’t worry much about finances–especially if they’re still single. I remember speaking once at a women’s event, and a representative of a Christian financial company had sent a guy to come give a quick talk and a draw for a prize. He was only 22, but he was married, with a kid, and he had his finances in order. I was super-impressed.
So I wrote this column about him, and I thought I’d rerun it here today.
Let me give you the stories of two men. One we’ll call Jim. He married straight out of high school—rather an anomaly today. He didn’t go to college, but immediately took a job at a financial planning firm in Windsor. He became certified in investments, and worked his little butt off building his own client base. He looks about 12, but he always dresses impeccably in suits.
Jim’s first child was born two years ago, when he was about 20 or 21. Today his family is still doing quite well, despite the economic downturn. They’re saving up for a downpayment on a house, building their little nest egg at a time when most men his age are still living in their parents’ basement. At one point Jim would have been quite typical; today he sounds like a dinosaur.
Now let’s talk about Bob. When Bob was Jim’s age, marriage was the furthest thing from his mind. He concentrated on working as little as possible so that he could play as hard as possible. He took extended vacations to the Caribbean so he could scuba dive, renting apartments with other twenty-somethings. He lived a carefree life until well into his late thirties, working odd jobs, minimizing his income and maximizing his fun.
At 38, though, he met the woman of his dreams and settled down. They’ve since had three kids, and while both he and his wife are working, money is tight. They’re starting almost twenty years after Jim did, and neither of them used those in-between years to shore up any sort of nest egg.
Many people just don’t worry about saving when they’re single.
But in the long run they do themselves a disservice, because when they do marry (if they do), they’ve lost about a decade or so of good earning years and saving years.
Now 44, Bob is juggling saving for a house, putting money aside for his kids’ education, and contributing to a retirement savings plan. He’s in a really difficult bind, because time is no longer on his side. He has to put money into a retirement savings plan if he’s going to have anything at retirement, but he also has incredible family expenses right now, too.
One thing Jim teaches his financial clients is that if they save $2000 a year in a retirement account from ages 19-26, as he is planning to do, they can then afford to stop for a bit and save up for a house. If you wait like Bob did, though, and don’t start contributing until you’re in your late thirties, putting in $2000 a year until you’re 65, guess who has more money in the end? Jim does, even though he actually contributed far less. That money has more time to accumulate and grow! It’s starting early that makes all the difference.
If you’re in your twenties right now, even if you don’t have a family of your own, chances are one day you will.
And if you want the rest of your life to be much less stressful, squirrel away money for a house and retirement now, before you need it, to avoid feeling the crunch later.
I know cash is short when you’re in your twenties, but you don’t need a big-screen TV. You don’t need to eat out every night.
You don’t need all the latest gadgets. It may seem like responsibility is a long way off, but think instead of these years as the breather years. You don’t have any major expenses, so now is the time when saving is actually the easiest. Don’t just coast through life until responsibility hits. Act responsibly now, and you’ll be so much more comfortable in the end.
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I went straight from school into banking when I was 17. My parents always taught me that I should not spend what I do not have. I have lived my life with that philosophy. Of course I did have a house mortgage, but this was paid off in about 12 years. I did once foolishly borrow money to buy a boat. I learned my lesson and sold the boat after 1 year! Now I only borrow money if it tax deductible and if I could pay it off in 30 days if called to do so.
If you’re young in 2014 (and therefore are the audience of this message), you’re likely a Millennial who was hit very hard by the recession. So you probably have lots of school debt and were not employed into the field you went to school for, and are therefore making less than you anticipated. So it’s very hard to save now. I am in this age bracket, so I get it. I definitely sympathize, and I just wanted to acknowledge that reality.
BUT. It’s not going to get easier. Cost of living goes up, there’s inflation, and adding kids to the mix makes saving harder, not easier. As a young person without dependents, you can scrape by on less: less of a fancy phone, less food, less living space, etc. Once you have kids, you really can only pare down to a certain extent. (I do think kids have too much “stuff” these days, but that’s another matter.)
So yes, following this advice is hard, and harder than it was for generations before, but that doesn’t make it incorrect.
Such good advice, Sheila, and so well needed! Anne is right, it IS harder now than when our parents were in the thick of it (mine married at 21 and 20), but that makes financial responsibility much more important. Our pre-marital financial counseling has been at least as helpful as our ‘regular’ pre-marital counseling!
Thanks, Sheila! Needed this! I graduated from a small private university last year (2013) at 23, and thought that just because I went to a school that’s highly respected that I’d find a solid job within the first few weeks of graduation. HA. 🙂 I was ambitious – I couldn’t find a good full time job, but I found a house to rent, moved out of my parents’ house, and decided to take on 5 part-time jobs. But I knew that if I didn’t get something figured out quick, come November when I’d have to start paying on student loans, I was going to be in trouble. Thankfully, God provides and I fully believe he blesses hard work, perseverance, and supplements where we lack. February 2014 I was hired full-time at a company that’s paying me about 36% more than the average job pays for where I live. It’s nice to pay off loans every month and be in a position where I was able to buy a newer vehicle (drove a good ol’ beater all through high school & college) and I can still afford all other monthly expenses, tithe, and still put money into savings. The $2,000 a year thing isn’t hard. If you’re paid twice a month, that’s about $84 each check. Totally doable.
I always appreciate the random posts for singles, so thank you! And this was a good reminder to not stray from the savings track – it’ll pay off eventually! All pun intended. 🙂
So very true! I was very frugal in my teens and 20’s and it’s paid off big-time. I have never taken out a loan for anything, and always pay my credit card balance before it’s due. In fact, I actually paid off my hubby’s college loans when we got married! Now in our 30’s, we have a mortgage-free home, payment-free cars, and I only have to work part-time.
Great advice. Being in my twenties and paying off debt has been huge!
Stumbled on this post. Thanks alot. Was thinking of taking a vacation this year. But was somehow discouraged by parents. I was wondering if I’ll ever have the time and resources for that if not now. Felt I’d not be able to bring out money for that when responsibility hits like family, kids and all. So just didn’t want to miss out on it. This just put me on the right track. Have made some reasonable investment so far, so maybe I should just go ahead. I really hope it pays off and i’ll be able to take my vacations in the future. This blog just sets people on the right track.