Twentysomethings, Future You Will Appreciate These 5 Financial Moves

If you’re anything like me, you graduated high school, attended college and entered the real world knowing the periodic table of elements, how to find a library book using the Dewey Decimal System and how to dissect a frog.


What they forgot to teach us through all our years of schooling is often the one lesson that has a lasting impact on our lives: money.

Now that I am 34 years old and earned a financial degree from the school of hard knocks, here are the top five things I would tell my younger self about money.

1. Create a Budget and Stick to It

Remember the old cliche: failing to plan is planning to fail.

Turns out it wasn’t just a line on a meme — it was the absolute truth.

My wife and I ended up in deep debt in the first three years of marriage because we never created a plan for our money.

We thought of budgeting as tracking how much money we spent each month and then telling ourselves we would either make more or spend less… next month.

Once we went completely broke, we had no choice but to make some drastic changes. Our first step was to create our monthly budget, thus create a job for every single dollar in our lives.

As crazy as this sounds, we instantly noticed the huge strides we made in our handling of everyday finances. We even paid off $52,000 in debt in only seven months.

2. Expect the Unexpected and Have an Emergency Fund

It never happens to us until it happens to us, right?

Think back to a time when you had a financial emergency you didn’t plan for. Did the car break down? Did your pet get sick? Was it the time your basement flooded?

Over the past decade, have learned emergencies will happen and they always cost money. The problem is we generally don’t have enough money set aside for when the unexpected hiccup in life occurs, making the emergency much worse than it needs to be.

After falling on my face financially one too many times, I finally had the bright idea of saving a small emergency fund before the next emergency struck.

The amazing thing was after I saved up the emergency fund, the financial emergencies stopped happening. Well actually, they still happened but they didn’t feel like emergencies because I had money, paid for the emergency and life simply went on.

3. Say “No” to Car Payments

The greatest separator of wealth in my opinion is whether you own your car or make payments. Unless you are a vintage car collector, you can almost guarantee every car’s value drops like a rock. In fact, a new car loses 10% of its value the moment you drive it off the lot and 60% in the first five years!

To make things worse, the average monthly car payment has hit another all-time high of $517. When you think about it, it doesn’t make much sense to spend over $6,000 every year toward a car dropping so quickly in value. Your hefty car payment can’t even keep up with the depreciation.

On second thought, maybe it was designed this way to make sure we are wrapped up in car payments for life.

If I could go back in time, I would stay far away from brand-new cars while in my 20s. Instead, I would find a 5-year-old car and buy it for 60% less than the original owner paid for it. This one decision could change your financial future.

4. Let Compound Interest Work for You

Albert Einstein famously said these words: “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.

He wasn’t kidding either.

We go to work every day to earn an income. But what if someone went to work for us, you didn’t have to pay them and year-after-year they added money to our nest egg? This is basically what compound interest is.

When you earn interest on money you set aside in an investment account, your money is truly working for you. What’s more, when you leave this money in this same investment account, you will start earning interest on the interest your money generated. That’s compound interest at work.

The key ingredient to really grasp the power of compound interest is time. The earlier you understand this phenomenon, the wealthier you will become.

5. Focus on Growing Your Net Worth

In “Secrets of the Millionaire Mind,” T. Harv Eker says, “Rich people focus on their net worth. Poor people focus on their working income.”

Have you ever noticed whenever there is mention about the finances of giants like Bill Gates, Jeff Bezos, Warren Buffett or Lebron James, the focus is generally on their net worth instead of their income.

It’s a big mistake to focus on just your income because it plays only a part in your net worth. You may make $250,000 per year, but if you’re not saving anything and you owe more debt than you have in assets, you would have negative net worth.

So, your salary is just the beginning of the equation. From there, you need to use your salary wisely to allow you to save as much money as possible while also gaining solid assets. At the same time, you want to limit debt, which drags your net worth down, by living within your means.

Final Thoughts

I often tell people today we are doing just fine because we started making really good financial decisions in our 30s. However, I also tell people I would be wealthy if I made these same decisions in my 20s.

Remember, you can always save more, make more and invest more, but the one thing you can never get back is time. The earlier you decide to make these five financial decisions, the easier it becomes to generate wealth — and your future self will one day thank you for it.

Chris Peach is a firefighter who lives in Phoenix, Arizona with his wife and two kids. He created Money Peach — a fast-growing personal finance website — where he focuses on removing the boring from the money talk and replaces it with no-nonsense financial help through his blog, podcast and straight-to-the-point advice for everyday money.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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