The Best Financial Advice I Learned in My Twenties
Hello, hello! How are you all doing? The world has been an interesting place the last couple weeks, and I hope you all had some time to reflect on the changes that will hopefully be happening! I am back today with a post on the best financial advice I learned in my twenties! Some took a while to learn, but all of the advice I have for you today is so valuable!
Also, little disclaimer: I am not a financial advisor. This is just the financial information I have gathered from my experiences.
Set and Follow a Budget
This may seem basic, but there are so many people that just estimate what they spend and I was one of them for a while! People, just hear me out. If you do not know what is actually coming in and going out of your checking account, you cannot know what you are allowed to put into savings or use to pay down debt. Those savings goals (which we will get to) are the really fun things you get to do with your money!
I recommend that you either track monthly or by pay period. Jarrett and I do not have variable paychecks (at least not by much), so I budget monthly. Now, the actual way in which you track your spending does not matter, as long as it is a method you will do consistently. I personally use an app, because I put my charges in as I spend money. So, when I get in the car after I grocery shop, I input how much I spent.
The main things with budgeting are consistency and flexibility. If you mess up and overspend, don’t have the attitude that you blew your whole budget. See if you can pull from another spending category to cover the cost. If you can’t, you just have less going to savings and you learn a lesson. Also, your budget does not need to be the same month-to-month. Ours changes every month, depending on events coming up, birthdays, annual subscription charges, etc.
Big takeaway here: find a method of budgeting that works for you and start consistently tracking your spending to determine which categories you spend the most money on. If those are not categories that you value, change how you spend.
Recommended: I really like watching Marissa Lyda’s channel on Youtube. She has a ton of budgeting videos and just had a baby! Here is a link to her website, The Budgeting Wife.
Always Meet Your Employer Match
If you are lucky enough to have an employer match a percentage for your retirement account (401K, 403b, etc), please, please, please do not miss out on that match. It is free money! Let’s say that your employer matches 3%. That is an additional 3% of your salary going into your retirement, as long as you also contribute 3%.
There’s not much more to say on this topic. If your employer offers a retirement match, please contribute at least enough to meet that match.
Recommended: 15 Top Tips to Save Money
Utilize an HSA or FSA
Now, this is something Jarrett and I just discovered and fully recommend. This is probably the last bit of financial advice that I learned in my twenties!
An HSA (health savings account) can only be used if you have a high-deductible health insurance plan. Typically, it is offered as an extra benefit (one you need to sign up for), when you elect your benefits. Your employer will contribute to an HSA, and you can as well. This is pre-tax money that you place into this fund to be used for health-related expenses. We have used our HSA to pay co-pays and make normal purchases, like medicine. HSA funds fully roll over between calendar years.
An FSA (flexible spending account), is still an account that you can use to pay medical expenses. There is no employer contribution to an FSA and you are eligible with standard medical plans (not high-deductible). The only downside to an FSA is that you can only roll over $500 at the end of your calendar or benefit year. We now have an FSA, but this year, we did not contribute much per paycheck. It will be much more beneficial to contribute to once I am either pregnant, or we have kids, since it can be used to pay hospital bills, for infant supplies, etc.
So, if you have annual medical expenses and are able to financially contribute to an HSA or FSA through your employer, I recommend it.
Have an Emergency Fund
This advice has been put into play in the last couple months. We just moved to NH, in the middle of the COVID-19 pandemic. Luckily, Jarrett was able to secure a job. I, however, have not been so lucky. You think being in healthcare, that you can just find a job anywhere. However, when elective surgeries are cancelled, it’s pretty impossible to find a physical therapy clinic that is actively hiring. So, I have been unemployed for the last 7 weeks. We really have not had to dip into our savings yet, but thank goodness we have an emergency fund! I have not been receiving any unemployment benefits during this time and I cannot even imagine how stressed we would be if we did not have money set aside for circumstances like this.
Obviously, this pandemic is not a common occurrence. But losing a job or having a car break down could be. Try to set aside 1-3 months of your expenses into an emergency fund. And do not touch it unless it is a true emergency. This is not your fun money. This is your security blanket.
Put Savings in a High Yield Savings Account
This is the place to put your emergency fund! Or any other savings you don’t plan on needing to utilize immediately (like saving for a house down payment). A high-yield savings account is a savings account that earns you more interest on the money you have within that account. The percent interest is set by the federal government, so it does fluctuate. However, a high-yield savings account will always grant you more interest than a standard banking savings account.
Jarrett and I have money in Marcus, which is a Goldman Sachs savings account. At the time we put money in, the return was 1.5% interest. That has since decreased due to the FDIC, but it is way more than the 0.01% we were getting.
Recommended: How to Save Money with Free Mobile Apps
Pay Down Debt
I feel like this should be another obvious tip, but having debt is so engrained in the American culture that it is considered normal. Having debt does not help you achieve any of your financial goals. Let me rephrase that: having a negative net-worth does not help you make money!
If the interest rate you have on debt is higher than the return you would make on an investment, you are losing money monthly.
Jarrett and I have been using the “snowball” method of paying down debt, because I really enjoy the feeling of kicking a loan to the curb. Ha! This is for our student loans, which are broken down by interest rate. The interest rate on student loans is higher than our car loan, so we are focused on those at this time.
The exception to using the snowball method is credit cards. If you have credit card debt, you are accumulating interest at greater than 19%. Please, pay off any credit card debt first!
Have Long-Term Financial Goals
Final tip is the fun one! Once you have set your budget and paid down debt, you get to decide where your “extra” money goes! Are you saving for a house, a new car, a vacation? Thinking about what you want to use your money for, will help you stick to budgeting and your savings goals. Everyone likes dreaming about how they would spend a million dollars, right? Well, get yourself on a good financial path and maybe you could actually do that some day! This has to be the best financial advice I learned in my twenties.
Do you guys have any financial advice that you want to share? Disagree with me on anything or have more questions? Let me know! I hope you learned something from the financial advice I learned in my twenties!