6 money lessons I wish I knew in my 20s

Being in your early 20s is full of exciting milestones, but it can also be a nerve-wracking time. With so much to learn—from choosing a career path to renting your first apartment—it’s not always easy to know if you’re making the correct choices, especially when it comes to your finances. You have to learn how to spend, save and invest your money, and to figure out which credit card to get or how to finance your education. And, if you’ve ever made mistakes with your money, it’s easy to feel like that one wrong move has thrown you off course for good.

Looking back, I made plenty of money mistakes along the way, too. The good news? I learned from them, which made me more confident in the way I handle my personal finances now. Here are six important money lessons I wish I knew when I was younger.

1. Your career choice is a financial choice

Reflecting back, it would have been wise to heavily research which types of jobs offered which salary ranges before beginning post-secondary education. Depending on your choice of degree, certificate or trade you could be on the road to a high-paying, in-demand job. However, you could spend time and money pursuing education in a particular field only to find out the industry offers low wages and poor job security. Interestingly, we are now witnessing an emerging trend where large companies such as Google and Apple no longer require you to have a degree to apply for a particular role, so it’s worth exploring those options as well.

2. Your salary is negotiable

It’s hard to believe, but you can actually talk your way into better pay. I implemented this strategy during my year-end performance review and I was able to receive a raise. A portion of this extra income was directed towards my registered retirement savings plan (RRSP) while treating myself to a nice celebration dinner.

Many Canadians don’t take advantage of this: According to a recent survey, just over one-third (36%) of Canadian workers negotiated a higher salary with their last job offer. This means there is money being left on the table. To take advantage of this opportunity, you can start by conducting industry research on current salary trends for your type of role. It’s important to show your boss that you know your facts along with how much value you bring to the table. 

If your employer will not budge on your salary, you can negotiate other perks. Some of these include paid time off, extra vacation days, a flexible work schedule, better performance-related bonuses, stock options, health benefits, and even an education budget. The more prepared you are, the more confident you will be when you have this discussion with your boss. 

3. Always maintain an emergency fund 

A job loss, dental bills or car repairs are all expensive problems that can happen at a moment’s notice. An emergency fund helps you cover these expenses and avoid stress and debt. This happened to me last year when I underwent an unexpected root canal surgery. Fortunately, I had partial dental insurance coverage to help pay for the costs. However, I still had to dip into my emergency savings fund, which made a $1,700 dent.

According to Statistics Canada, 64% of Canadians have an emergency savings fund to cover three months’ worth of expenses. If you are looking to build or boost your emergency savings fund, it’s recommended to have between three to six months of expenses saved up. You may even consider topping it up further if you are facing financial instability and you want to ensure you can make ends meet for a longer period of time. 

4. Treat credit cards with caution

A credit card is one way to build your credit history, which will be helpful down the road when you need to get approved for a loan or mortgage. Carrying a card comes with responsibilities. If you don’t pay off your credit card balance every month, it will harm your credit score and leave you in a snowball of debt.  

Another temptation is to opt into the buy now, pay later (BNPL) payment plans that allow consumers to split their purchase into several smaller installments that are often interest-free. Even so, if you stack multiple purchases with this type of financing, the payments can add up. Instead, ensure that you have enough money in your bank account to pay off your monthly credit card balance in full so that you don’t incur hefty interest charges. 

Take your time to research and find the best credit card for you. There are many types available, from one’s that earn cash back and travel points on everyday spending to pre-paid cards that give you flexibility without going into debt. Some require you to pay an annual fee, but you can opt-in for a no-fee credit card that provides decent perks. 

Also, if you ever decide to cancel a credit card, it may negatively affect your credit score by increasing your credit utilization rate and shrinking your credit history. I wish I knew this before closing one of the credit cards that no longer served me, but that I had used to build a decade-long credit history. Luckily, I implemented other methods to build my credit history including paying off my student loans, making timely payments for my cell phone bills and automating my mortgage installments. An alternative method is to switch to a different card with your credit card provider. This allows you to continue enjoying the benefits of having a credit card while preserving your credit history.

5. Spend on experiences rather than material things

In my mid-20s, I decided to take a summer trip to Europe with a tour group. I saved up $8,000 to visit 13 countries in a month, and I made lifelong friends. I had incredible experiences, such as going up the iconic Eiffel Tower, visiting the Anne Frank House in Amsterdam and taking a gondola ride in Venice. It was worth the money, and when I look back at the photos, it inspires me to plan my next trip with my family.

Turns out, my feelings track with the research: A study by the Journal of Experimental Social Psychology, shows that people are happier when they spend their money on experiences rather than material things. Purchasing an item may give you in-the-moment happiness, but when you spend time with family to go on a vacation, it creates memories you can fondly look back on. 

As tempting as it may be to keep up with your friends’ purchases and lifestyle (or how it appears on social media), it can become a cycle that can make you miserable. Just when you feel like you have “caught up,” they are already onto the next car, handbag or flatscreen. The next time you’re tempted to spend money, think of what you could do with that money if put toward experiences that matter to you, like seeing your favourite band with your friends or visiting that dream destination.

6. Talk financial expectations with your partner

Having been raised in a modest household with immigrant parents, I learned to become mindful of how I spend my money. When I dated men who spent lavishly on their wardrobe or fancy cars, I knew striking a balance would be a challenge. Thankfully, my husband and I share similar values and we have common financial goals that we are working towards together. 

If you’re in (or are looking for) a serious relationship, you want a partner who is financially compatible with you. If you have different mindsets for finances, finding a balance can still be achieved—it may just take more time and effort. 

Having an open and honest conversation with your boyfriend or girlfriend about money will help develop trust so that you both feel comfortable handling finances together. Come up with a plan to tackle any debt you may have and discuss what your financial goals are. You will also want to plan for the future. Whether it’s buying a home together or tying the knot, these are both big financial decisions that you will want to agree on sooner rather than later. 

Sandy Yong is a speaker and award-winning author of the book The Money Master: Inside Secrets On How to Make Your Money Grow and Stay Safe.

More on financial literacy:

• 5 money fears from childhood—and how to overcome them
• What is universal basic income?
• Guide to inflation: Price changes, the pandemic and your pocketbook
• How to start an emergency fund

About Sandy Yong

Sandy Yong is a personal finance writer, TEDx and Keynote speaker, and the award-winning author of The Money Master. She’s been featured in hundreds of media outlets including CTV News, Global News, Forbes, The Globe and Mail and The Toronto Star.

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