When you are in your early twenties nobody expects you to be rich or financially sound. You can use that to your advantage and spend your precious money on acquiring skills and building wealth. Sadly most of us do not follow that path. During my twenties, I made a lot of mistakes with money. It wasn't that I didn't understand the concept; it's just that I didn't know how to deal with some of the responsibilities — like student loans and credit card debt — that go along with being an adult.
Saving Instead Of Investing
It’s hard to imagine that there was a time in my life when I didn’t know how to invest. It seems so obvious now. Investing is a long-term strategy; it takes time for your money to grow and mature into something that can provide financial security and stability in your life. That's a harsh reality! If you are lucky, then you might get rich overnight. But what's the point if you keep it in a savings bank account?
Starting early is key—the earlier you start investing, the more time you give yourself for compound interest to work its magic (and make no mistake: compound interest will work its magic).
I learned this lesson the hard way after saving 15% of my paycheck for the first five years of my job without investing any of it. In hindsight, this was a big mistake because even though I had saved lots of money by not spending any on anything besides necessities like food and rent, those savings were still sitting in the bank earning zero percent interest while inflation ate away at their value year after year.
Spending Money To Look Rich
This is a mistake that I made more than once. Especially after I quit my 9-5 job. It’s the idea that if you don’t have a certain brand, or wear certain clothes, or drive a certain car, then people will think you’re not successful. The truth? No one cares! They are thinking about the same petty things in their lives.
I remember when I was 21 years old and working as an intern at an IT firm in Hyderabad. Everyone around me seemed to have these fancy clothes and watches. They were always talking about how much their car cost or how much their engagement ring will cost but now it doesn't seem important at all! I didn't care how much money my friends made or what they did for work; what mattered most was who they were as people and whether we would be friends forever. So why did I spend so much time & money worrying about what other people thought of me? What a huge waste!
Taking Bad Debt
In your twenties, you’ll have to make some tough decisions about how you want to manage your money. One of the biggest ones is whether or not to take on debt.
When my wife and I were in our late twenties, we decided it would be fun for us to move into a nicer apartment together even though we were living on our parental property. We were both working full time and had decent salaries, but neither one of us had enough cash saved up for the kind of down payment we needed for a place like that. So we decided to take out a loan from the bank. And not just any loan but one with an interest rate of 8 percent! That’s right: 8 percent! 😂
At first, this was fine because it was only small amounts each month that we paid back while still having plenty left over at the end of each paycheck (we often lived paycheck-to-paycheck). But then something happened: We had a baby and suddenly there wasn't enough money going into our checking account anymore—and yet we still had all this debt coming due every month! Btw I love the baby and don't blame him for any of this. In fact he made me realize the fuck ups I was doing with my money.
Don't Repeat The Same Mistakes
Okay, so I did them but you don't have to. In your twenties, you should plan & act for the future:
Should start two funds - one for emergencies & another for investments. This way you will be able to create an enormous amount of wealth by acquiring more assets along with security measures in place. All in due time.
Take risks, but only when you know what you're doing and have a plan in place to help mitigate them i.e., don't gamble. You can always do that once you have enough money. Then take a small portion to play riskier bets.
Just remember, the decisions you make today are going to affect your financial future and set the stage for all of those adventures later on in life. Because of all those mistakes, I deprived myself of those adventures now. No problem. It's better late than never. I still have a lot of time to make up for it but you might be in a much worse situation if you delay any further. Get your shit together bro and safeguard your future.
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