7 Things I Wish I Had Been Told About Money in My 20s

I’m now almost hitting my 30s, and there are mistakes I’ve made financiallly that almost cost me dearly. I’m glad with time, I developed an interest in reading and began poring through financial books.

The first book that changed my mind set about money was Rich Dad Poor Dad by Robert T. Kiyosaki. Every time he highlighted the lies that middle-class income earners believe, I cringed.

I learned that to get wealthy, you need to think differently about money. Almost everyone believes that we all work for money. However, the wealthy know that money should work for them.

The 7 things I wish I was told about money in my early teens or 20s include:

1. Pay Yourself First

Meaning, save part of your income before spending it. Like I did before, most people start spending right away when they get their paycheck.

I used to cover for all expenses and bills, as a responsible young lady hoping to have something extra to save when the month elapsed.

It never happened.

Instead, all the money drowned in daily expenses, and went into debt to cover for the few weeks or days before my next paycheck.

This is a wrong approach to handling money. You'll notice how most of the time, the income from your paycheck is never enough. And, without a working budget, your money simply vanishes in thin air.

Treat your savings as a priority, just like your house rent and utilities payment. Take about 10-20% of your income every month and put it away in a savings account to secure your future.

First pay your future, then learn how to make that money work for you.??

2. Put Your “Pay Yourself First" Money To Work

I mentioned that the rich have their money work for them while the poor and middle-class work for money.

Once your savings start growing, start investing. You can invest in stocks, money market funds (MMF), mutual funds, bonds, treasury bills, etc, from which you earn interest in the short-term or long-term depending on how much you invested in them. (These investments apply to the Kenyan market).

You can also save some cash in a SACCO if you intend to start a business in the future.

3. Take a Financial Education Class/Work on Your Financial Literacy

Work on your financial literacy. No school at the moment teaches students about money. Everyone is programmed to get good grades, go to college, get a good stable job, and work till retirement, worse, hoping that the government will take care of you in your retirement.

This is a concept that needs to be brushed off people’s brains fast. As early as they’re in early grade school! Colleges are now producing a historic number of graduates, but the job market keeps shrinking.

4. Learn to Create a Budget and Stick to It

Nothing is as important as creating a budget and developing the discipline to stick to it. If you can’t direct where your money goes, then you won’t be able to account for it when it disappears.

Budgeting means telling your money where to go. And it’s best to do it before receiving any income, whether a paycheck or income from a business or investments.

Being accountable for your money gives you a sense of responsibility, which is fulfilling. It also helps you prioritize needs and savings before spending on what you want. You’ll also be able to give responsibly when it comes to charity.

5. Build an Emergency Fund From Your First Paycheck

I remember the first few times I got my first paycheck. I would imagine myself living in a lavish apartment furnished with luxury couches, a comfy queen-size bed, a big cooker, a washing machine, and exquisite decor that would wow my visitors.

This kind of mindset led me to a series of debts that kept my hamster wheel rat race spinning faster and faster. It only burned me out, drove me to frustration and depression, and made me afraid of staying jobless because I didn’t know how I would pay my debts.

I’m not sure if this was your thinking, but I’ve seen many young individuals making the mistake of falling into the temptation of keeping up with the Joneses. It’s a real lifestyle inflation “disease” that has crippled many young professionals’ financial lives.

If I were to start over from the day I got my first paycheck, I would immediately open an emergency fund account, and then save an equivalent of 3-6 months of my monthly income. That way, in case I find the work environment pretty frustrating, I could call it quits without worrying about how I’d pay my next month’s bills.

Emergency funds also cushion you from unexpected events and emergencies that knock on our doors unannounced.

6. Quick Money Doesn’t Lead to Real Happiness and Doesn’t Build Real Wealth

Others enter the gambling industry hoping to make 10x more than what they have, hoping they’ll pay off their debts and have excess money. Unfortunately, some have committed suicide after losing their hard-earned money, school fees, etc., to such schemes.

It’s sad watching a parent losing their children to such. I think it’s much better to face the wrath of your parents or whoever trusted you with the money or business than to commit suicide, knowing very well that the dread of the world of the dead awaits you.

At all costs, I’d say avoid every kind of scheme involving gambling. It can lead to toxic addiction, making you an “innocent” crime-doer.

Honestly, there's no advice I'd give on this except avoid it!

7. Read as Many Books and Be Open to New Ideas

Read financial books to get different perspectives from different people. Great minds mostly inspire us by the wisdom inscribed in books.

One idea or technique may work for you while another one may not. Take one idea and experiment it with your financial life. For example, debt consolidation is one technique that some use to manage their debts. But for me, that was the biggest mistake I made as it doubled the debt I already had!

It’s also essential to pay attention to timeless techniques that have proven to work over the decades. For example, working on a budget. I love Rachel Cruze's approach on how to spend your monthly paycheck. Try it. It worked great for me and helped me downsize my crippling debts.

Conclusion

If you're in your 20s, I'd advise you to take these points seriously. Money follows the compounding rule effect and is directly proportional to your age.

The earlier you start, the better the returns for your future.

If you landed on your first job, congratulations.

Now imagine your future in the next 10-20 years. Then imagine how you'd look like in your old age. What kind of life would you like? How do you want to retire? Remember, we don't work forever. The energy to work lasts about 30-40 years on average.

Yes, money doesn't buy happiness, but, without money, it's easy to get frustrated and end up with the life you'll likely hate.

Pay yourself first, build an emergency fund, invest, avoid get-rich-quick schemes, and keep learning.