“Why don’t you just work at McDonald’s?”– This is what my friend suggested to a mutual friend of ours. The mutual friend was complaining about how he had no money left for one week until he got his next paycheck. Let’s call the broke friend Mark. Mark has been in the same viscous cycle for the last five years with his finances. He makes over 40 grand a year and lives at home with his parents. Yet he has no savings and is always broke. He’s always complaining about not having money. Mark has to often swallow his pride and ask people to pay for his lunch. On the flip side, he purchased a new car (financed) and just came back from a 10-day trip (credit card).
What’s the point of this article? While last week I stressed the importance of finding ways to earn more money. Today I wanted to write about the inherent significance of saving your money in your 20s.
Why is it so important to even bother with saving money when you can spend it?
Build for your future.
What will you do when you need money in the future? You’re going to need to have some savings for when real life starts to kick in and the expenses start adding up. Let’s go over a few examples:
If you live at home now, you’re going to want to move out eventually.
As an ambitious 23 year old, you’re going to want to invest money in yourself by taking some courses.
You’re going to want to go on group trips with your friends.
You might want to quit your job and finance a side business that you’ve been working on.
These are just a few of the examples that saving money right now can help you build for your future.
Make working worth it.
What’s the point of working and trading away so much of your time if you have nothing to show for it? Working becomes redundant and painful for your soul when you’re always on the go and it feels like your not going anywhere. The only way to feel like work is worth it is to save some of your money so that you have something to show for all of those hours that you put into your job.
Let’s be realistic here– It really sucks to work because you have to due to debt. Saving money gives you a strong sense of flexibility. With a decent emergency fund you can easily quit your job when your health is totally at stake. You can also take career risks (start your own business or move to another city). Saving money provides you with a unique sense of flexibility.
Those are the main reasons for why I think all 20-somethings need to get into the habit of saving money. If you’re not saving money or if you’re stuck spending money on useless crap, why bother even working hard? Why don’t you find a minimum wage gig?
If saving is so important and being constantly broke totally sucks, what can you do? You need to get proactive with your finances so that you can gain control of your money once and for all.What are the best ways you can avoid being constantly broke in your 20s?
Stop adding to your current level of debt.
If you can’t manage to properly budget your expenses and save money in your 20s, the last thing you need is to increase your current level of debt. This means that financing a car or obtaining a mortgage are both horrible options. You need to first figure out how to save some money. Then you can worry about upgrading your car or moving out into a home where your expenses will be much higher. For now you need to stop adding to your current level of debt.
Increase your income over time.
If you’re always broke then you could simply just not be making enough money to justify your current lifestyle. This means that you’re going to have to start making more money. Since this is a whole new topic in itself, allow me to share a few quick points on making more money:
- Ask for a raise.
- Switch careers.
- Start a side business.
These are just the most common options for increasing your income. You also need to watch out for lifestyle inflation. It’s really easy to start spending more money once your income increase.
Pay yourself first.
This is the absolute best strategy for saving money. You can’t think that you’ll wait until the end of your paycheck cycle to save some money. This never works. You need to set aside a specific amount of your paycheck as soon as you get it in your bank account. I often recommend automated savings plans. These plans force you to save money before you even see it. This guarantees that you won’t spend the money on drinks.
Do you have a friend that’s stuck in a horrible cycle with always being broke? How would you help someone gain control of their finances for once and for all?
[Note: I'm not trying to mock anyone that works at McDonald's. It was just the best example that I could think of for a minimum wage paying job.]