I recently turned 25 – officially a quarter of a century! It’s a little crazy to think, but life happens quick.
As I started reflecting, I realized just how far I’ve come on my personal finance journey. While I learned most of these tidbits of wisdom within the last couple of years, these are the 25 things I learned about personal finance by 25:
1. Just because you can afford to make payments, doesn’t mean you can afford it
I learned this one the hard way. I used to think, “If I can make the payments, why does it matter?” Here’s the thing: if you can’t afford to buy something once and be done, in cash (not charge it on a credit card), then it’s probably a good indicator it can’t be purchased right now.
I’m not talking about large purchases, either. I’m talking about the $100 Steve Madden boots I just “have to have right now” even though there’s $20 in my bank account.
While no one likes to wait for the things they want, you can make a plan to save for it by putting money aside each pay, or pick up a side hustle to bring in some extra cash. It feels so much more rewarding buying something in full and being done, verses keeping up with payments.
2. The financial decisions that other people make won’t necessarily work for you
Another major piece of wisdom I learned the hard way. I didn’t know anyone who grew up like me (low-income, raised by a single mom) so I never felt like I had any guidance when it came to major financial decisions.
From cars to college, I had to figure things out on my own, without any financial support from my family. Particularly when it came to buying a car, I saw most of my friends financing their cars and since I had such an urgency to get one (because my family didn’t have a car of their own), I thought, “Financing must work for me too!”
Wrong. It’s important to make decisions that benefit YOUR situation. Do the research, find what makes sense for you, because rushing into a financial commitment because it “worked” for someone else, can set you up for disaster.
3. Money is just a tool
Money has no real value unless you DO something with it. Whether that’s investing it, saving it, paying off debt – it’s what you do with money that brings value.
4. Your spending habits should reflect what you want in life
Following the idea that money is just a tool, it should be a vehicle to support your aspirations in life. Whether that’s traveling, buying real estate – whatever it is that you aspire to align yourself with in life, that’s where your money should go. Because I want to travel more, I started a travel fund!
5. Debt is not a death sentence
Debt is debt no matter how much you owe. It’s uncomfortable, it’s frustrating, it’s embarrassing. It’s a lot of things. While it’s hard to realize it, it’s NOT permanent. It doesn’t define who you are.
I’m in the middle of my $50K debt payoff. There are days where I get so mad at myself for making these decisions but there’s no use crying over the past. Make a plan to get it gone, and focus on that.
6. Self-education is the best education
Some people are fortunate to come from a family that’s smart about money management. Some of us are not. My mom has a warped idea of money and finances and never provided an example to follow.
It got to the point where I realized the way we were living is NOT the way that everyone lives, or the way I want to live in the future. But where to begin? Reading personal finance books has been a game changer for me and contribute to some of the defining moments I’ve had about personal finance.
Take control of your financial education and never look back.
7. Your parents may not know everything about money
Like, they may know very little. Following #6, your parents can be a poor source of financial information. If they are, it’s better to acknowledge it now and find your own source of truth.
8. Know your net worth sooner
Why is it important to know your net worth? Because it’s a pretty good indicator of your financial standing. Everyone’s goal should be attaining a positive net worth, and growing it as much as they can.
9. When it comes to investing, the earlier, the better
Thanks to the power of compounding interest, the earlier you invest, the better. They say the best time to invest is yesterday, the second is today.
10. Make your money work for you
This is more of a mindset thing for me. My mom would always stress out about money and felt like she was trapped at her job because she needed a paycheck so bad.
That’s what really pushed me to take control of my own finances because the life I grew up with is in no way one I want to keep living. When you’re intentional about your spending habits, you have more control over your money and don’t feel so trapped by it.
11. Talking about money isn’t “bad” or “improper”
We never talked about money growing up. When we did, it’d be so negative, you couldn’t wait to be done the conversation.
I think it’s healthy to talk about money. It helps you learn from others. I think it’s especially important to talk about money in relationships. I’m thankful that Mike and I share the same view point about finances, and it’s a conversation we can have openly.
12. Wait at least a day before you want to impulse-buy something
If I could walk into Gucci and buy a bag, I would. If I could walk into DSW and buy five pairs of shoes, I would.
No matter what you want to buy, think about this purchase a little more before you buy it (especially if the price point is high). I used to be really bad with impulse shopping. As a result, the buyers guilt would be so real.
Walking away or keeping it in your cart for a few days can make all the difference on your bank account.
13. Cash flowing a purchase feels a lot better than financing a purchase
See #1: saving up and cash flowing a purchase feels so much better than making payments and leaves you much less stressed out.
14. Don’t buy the first car you test drive
Guilty as charged. I thought it was okay to finance the $12,000 Pontiac I test drove (the ONLY car I test drove) when I was looking to buy my first car. I’m on my third car, and I’m still paying for it.
Oh and that Pontiac turned out to be a lemon. The transmission blew a few months shy of owning it for a year.
15. Don’t charge consumer items on your credit card unless you plan on paying it right off
I sound like a broken record but it’s really what’s hit me hardest. Consumer debt sucks and I’m dealing with paying off $9,000 of it. Credit cards do come with some perks, but those mean nothing if you’re miserable paying a minimum balance each month.
16. Save first, spend second
If you take away one thing from this list, let it be this: save, save, save!!! Saving more money than you spend will be your foundation to building wealth.
Saving sets you up for a rainy day. The worst feeling is being hit with an unexpected emergency and have no money to pay for it. Saving for events that are coming, whether its for the holidays or a vacation, will leave you a lot less stressed.
17. It only works if you work
Your financial situation won’t get better unless you make it better. I’d be lying if I said I don’t wish I had parents who had more money and we didn’t have to struggle.
But guess what? I can’t control their decisions. I can only control what I do, and that’s making sure I start building my wealth foundation now.
18. Take full advantage of your company’s 401K
Don’t leave free money on the table! If you aren’t taking advantage of your company’s 401K plan, get on it! Make it automatic so you can set it and forget it.
19. Learn how to build wealth, not get rich quick
Trying to get rich quick can become fleeting, fast. It’s building wealth you want to be after. And building wealth means it’s not going to happen overnight.
20. Sometimes it’s a spending problem, not a lack of money
I’ve been in that situation where I felt like I don’t have enough money. I’ve also been in that situation where your paycheck literally only stretches so far.
But more recently, I’ve re-evaluated how I was spending my money. After I put money away and allocate for my bills, I realized I could do okay with what’s left. Making small changes, like cutting out a bill or packing your lunch, can make a huge difference.
21. It gets easier
There are so many times where I’m frustrated and feel like there’s no end in sight. But if there’s a will, there’s a way, and it does get easier. Faith and patience are key.
22. Personal finance is very much personal
Everyone has their own view of their finances (you’re currently reading mine!) and as I started to open up about my financial journey, I’ve heard different view points.
While some mesh with my views and others do not, it’s always interesting to get a glimpse into other people’s perspectives.
23. Start packing your lunch
Why is this important? Because it’s what is represents. Instead of spending money on lunch every day, I put that money towards healthier groceries and meal planning.
The result is more money in my pocket and more motivation to cut costs elsewhere.
24. Credit is crucial
Take care of your credit! My credit has taken a hit as I started my debt payoff journey and it’s been a sore spot for me.
Your credit determines the rate you get on your mortgage. It’s affected my ability to re-finance my car note for a lower rate. Make sure you take extra care of your credit. You’ll be thankful you did.
25. Enjoy the journey
There’s more to life than money, but lets face it: having money helps. While you’re getting your finances in order, it’s important to take it easy on yourself. Feel good about the wealth platform you’re building, and take time to enjoy the life you’re living.
I feel like there’s still so much to be learned! What’s something you’ve learned about personal finance? I’d love to hear it. Let me know in the comments!