How to manage your money when you’re in your 20’s
Mike at the Financial Blogger has lots of great material for young adults. This particular article is NOT your everyday boring money management segment. It’s more of a lifestyle piece with financial benefits. You will also find links to other great stuff he has written. This article was originally published in July, 2011.
Here’s Mike again:
“The last two weeks here I’ve been really getting into the core of money management topics. I shared with you why I think that earning more money trumps frugality and I went into the importance of saving money in your 20s .
Today I wanted to dive into some money management tips that you likely won’t find anywhere else. I wanted to think outside of the box and to dig deeper when it comes to money management. I wanted to look past the typical “invest in yourself” and “brew your own coffee” sort of tips that we can easily find anywhere else. Let’s get started:
Travel lots in your 20s.
While it’s very important that you save some money in your 20s, there’s just something amazing about getting out there and actually seeing the world.I think that every 20-something should find a way to travel once in a while or even attempt to work overseas for a little bit of time.
There are many benefits to traveling in your 20s. You might find a new place you want to live in. One of my friends ended up in Toronto because he traveled here one time to visit friends. He quickly found out that he enjoyed the lifestyle in the city and was impressed by the amount of work opportunities. Now because of one trip to the next province, he finds himself living somewhere he never imagined. Now think of the possibilities when you visit exotic parts of the world?
You’ll also explore opportunities you never knew existed with traveling. My trips to Cuba have shown me that there’s more to life than constantly working and chasing the dollars. My trips to Europe have provided me with an insight to different cultures and ways of life. You really can’t quantify the lessons that travel WILL bring you. On a beach vacation you can meet amazing people with strong business connections from other parts of the world. Working abroad you can experience a new culture that you might want to adopt. I think that all 20-somethings need to find a way to experience the world.
Don’t be afraid to use credit cards to your advantage.
Credit cards are not evil and they don’t have to ruin your financial picture. Just because there are many horror stories out there from those that have gone into massive amounts of debt due to not using a credit card properly, it doesn’t mean that you have to suffer the same fate.
You need to find different ways that you can take advantage of credits. What are some of these options?
- Automate all of your monthly payments. This will prove that you have the ability to make prompt payments. In turn you should see an increase in your credit score.
- Use relevant rewards. I currently use the basic cashback rewards style credit card. I can a few hundred dollars back each year. You can get a points based card where after enough usage you can find yourself with free flights.
- Take advantage of hidden perks. Some credit cards will automatically extend your warranty or provide you with insurance for a car rental. Find out what perks you have and take advantage of them.
You don’t have to go into debt with a credit. If you’re wise, you can use that piece of plastic to your advantage.
Learn to cut your losses.
I find that all of us have a tough time with cutting losses. It’s critical that you understand the concept of a sunk cost.
This means that there are certain costs that once you incur them, you’ll never see the money again. You need to just accept this. An example of a sunk cost would be your college education. You can never get the money refunded that you spent to earn your degree. You can use your degree to make more money and to improve your earning potential. You can’t get the direct costs back. If you learn to cut your losses, that means that you’ll comprehend that you don’t have to work directly in the field of your degree just because you paid for it.
There are also many other areas in life where we need to cut our losses. A few more areas include:
- Relationships. If you’re not happy and there’s no solution, you should get out.
- Investments. If you make a poor investment, learn from your mistakes and move on.
- Food. If you’re not happy with a meal, forget about it and think about your next meal.
Pay someone to do the boring stuff.
Do you hate accounting? Do you hate blog design work? I hate both. This is why I outsource both of these tasks with a smile on my face. There are “money experts” out there that advise us to learn these skills so that we can save a few bucks. In reality that’s not how us human beings work. You need to focus on your strengths. I nearly lost my mind when I tried to work on my own blog design. I’m much happier paying someone to do the boring stuff, while I focus on doing the things that I enjoy and bring higher value.
Those are the best unconventional money management tips that I could think of. Is there any rarely-shared advice on the topic that you would love to mention? What personal finance advice are you tired of?”