Like many people nearing the big 3-0, I’ve spent some time thinking (obsessing) about where I am in my life and what I want to accomplish going forward. While many of those thoughts have centered around my personal life, I’ve also reflected on my financial life.
On my personal website, I document how I paid off my mortgage in 2 years at age 27. It’s something I’m very proud of, but I don’t think it would have been possible had I not laid the groundwork early on.
Here are 13 things I discovered about money in my 20s
1. Higher education doesn't have to break the bank - I graduated from college without any student loan debt by attending a community college, followed by a state school. Total cost? $10,000. I have a bachelor's degree just like all of my friends, but thankfully I’m not still paying for it. Graduating with zero debt helped me jumpstart my savings as soon as I landed my first career job.
Read more: 5 ways to save money on your college degree
2. Credit cards aren't always a bad thing - I've had credit cards since I started working at age 16. It only took one late payment fee early on to set me straight. Since then, I've paid off my balance every month without a problem. I've also redeemed credit card rewards for thousands of dollars in cash, gift cards, and travel expenses. Check out these 5 ways credit cards can improve your credit score.
3. Life is easy without a mortgage - I paid off my mortgage in 2 years at age 27. It was only possible because I bought a home with an original monthly payment that looked more like a car payment! That meant sacrificing square footage in order to live the lifestyle I wanted to.
4. It doesn't matter what other people think - I spent the first few years of my 20s buying “stuff” to fit in with people who I thought were my friends. This is no way to live. Now, I don't worry about not having the latest car, clothing, or gadgets. True friends will like you for who you are.
5. Recognizing wants vs. needs - Before I go shopping, I ask myself whether the purchase is a want or a need. If it's a need, I buy it without hesitation. If it's a want, I ask myself if the purchase will make me happy before going any further. One way to do this is to reevaluate your montly bills and cut any unnecesary expenses.
6. Negotiating pays off - When I feel like I'm not getting a good deal on TV, phone or internet service, I pick up the phone and ask for a lower rate. I've learned that it's best to have a competing offer in hand to get the best value. Most importantly, I've always been willing to walk away if the negotiating isn’t working out.
7. Budgeting is beneficial - This is the most effective way to make sure I'm not spending more than I'm earning. I use Mint.com to track my expenses. It also sends alerts to my smartphone if I go over my budget. Knowledge is power. Here are some more apps that can help you control your spending.
8. Eating out is dangerous - Food and dining is the most difficult budget category for me to manage on a month-to-month basis. Eating out is definitely a luxury, though I’ve found a balance between cooking at home and going to restaurants. My general rule is that I will only eat out when there’s an opportunity to make memories with family and friends—no solo dining. (Editor's note: See 8 Ways To Save While Dining Out)
9. Comparison shopping is worth the effort - This is where watching The Price is Right has paid off. I've learned over the years what things should cost, so I never pay more than I have to at retail stores. When I'm not 100% sure of a price, I can usually find the answer with a quick Google search. Here are some more ways to comparison shop your expenses.
10. Start saving for retirement early - I graduated from college at age 19 and started working full-time a few months later. Unfortunately, I didn't start saving for retirement until I was 24. I used the excuse that I wasn't making enough money, however looking back I know that I could have found at least 5% to contribute to a 401(k).
Read more: Baby steps to help you save for retirement
11. Manage your career wisely - I've held several positions in the decade since graduating from college. I've always worked hard to master my job and the jobs of those around me, which has led to several promotions. As far as moving on, I usually look for new opportunities when I realize there’s no more room for growth.
12. Side hustles make a difference - I’ve managed to supplement my full-time salary by working overtime, waiting tables, and picking up odd jobs, like pet sitting. Working just a few extra hours per week has provided me with thousands of dollars per year to spend on travel and entertainment—guilt-free. Check out these 5 ways to make an extra $5,000 this year.
13. Leasing a car isn't usually a good idea - I've owned 4 cars since I started driving at age 16. That's more than I'd like to admit, especially since I don’t drive all that much. I've also had one lease. The dealer talked me into it because it had a complimentary service package. However, the problem with a lease is getting out of it. Once you've signed on the dotted line, you may be stuck. I will never do that again.
What lessons did you learn about money in your 20s? Share them in the comments section below.
About the author: Michael Timmermann paid off his mortgage in two years when he was 27. Now, he shares his money-saving tips on his blog, Save on Almost Everything.