Thoughts on Saving Money in Your 20s
Fast approaching the end of my 20s, I am in a good position to reflect a bit on savings in our 20s.Saving is often discussed together with investing. While they may seem inseparable, we should distinguish between them. Saving is a learned behavior, a habit, and a discipline.
The habit of saving needs to be built up and then it becomes the foundation for future investing.
Having money saved in your 20s, and moreover, programming the habit of saving in yourself is the foundation of your financial future to come.
That said, to start saving, first you need to be clear about two things…
- How much you are making — This one should be easy for most people in their 20s because it comes from paychecks, calculating from the after-tax income rather than pre-tax.
- How much you are spending — For this one, we can first jot down the fixed part of the monthly expenses. For the variable expenses, spend a few months to learn the range and from there you can learn what their averages are.
Learning about these two things are required! If you really have strong intention about saving, you should be able to overcome both the resistance to sit down and track them and also the unwillingness to learn more about your personal finance… so that you are giving yourself the opportunity to self-denial.
Knowing how much you earn and spend leaves no room to question whether you are saving or not. In other words, doing so will help you to live within your means.
I know this seems very basic but basic things may be the hardest.
If you can keep tracking and maintaining your expense below income consistently staring in your 20s, there is no doubt that you will be in good shape.Having a saving account separate from checking account and seeing the amount grow could be exciting… at least for me, because it’s similar to what one does playing video game.
That said, I think everyone is different and we all have different preferences and therefore, we will all maneuver in the gap between the money earned and the money spent differently for which I will break it down into three saving approaches.
Note, there is no “right” approach. Rather, it is more about understanding yourself and picking an approach that works for you.
This is the most unlikely scenarios for people in their 20s because of the amount of discipline and sacrifice usually required to do it — like saving 70% or more of income. Not only is the discipline hard, I find it essential for the person to have identified clearly what they want out of life — like KNOWING you want financial freedom as early as possible — to subject himself through the process because otherwise, it may feel fruitless later on.
If you want to do this… ask yourself, for what purpose? Binging on anything could be unhealthy.
Slow and Steady wins the race
I find what I do fall more into this categories. the idea is to consistently save a good amount like 20-50%, on average. There will be months where it’s not possible but this is a balanced approach where you plan for the future while still able to enjoy things you like in the present.
If you’re in your 20s, perhaps your income is just not far above your expense or you are more into the experiential now, it is okay. Still, take the opportunity to learn how to consistently save by putting away 5-10% monthly into saving. Practice makes perfect.
As a last mention that really does not belong as a “saving approach,” there people who live paycheck-to-paycheck or even go into debt by overspending.
Without talking too much into debt here, it is safe to say that it is best for anyone in their 20s to stay away from consumer/credit card debt if they can help it. Not only will you not be saving, it takes away your future potential savings by having you to pay interest over time. Definitely try to minimize debt in your 20s.
At any rate, I leave you with what Bruce Lee’s father had said to him…
If you make $10 this year, always think to yourself that next year you may only make five dollars — so be prepared.”
And that… is why saving is a good habit to have.
What do you think someone in their 20s should know about saving?
Originally posted 2013-01-28 00:32:50. Republished by Blog Post Promoter