Your 20s are the most dramatic and uncertain years of your life. You never know when you might move cities or jobs or careers! The possibilities are endless!
In the midst of this uncertainty, saving money can be a challenging feat. Especially when personal finance just sounds like a bunch of complicated rules! But I promise that it gets easier! If budgeting, retirement planning and investing sounds like too much right now, that’s okay.
Your 20s is when you become independent, get your first job, move out and live by yourself, and taste true freedom for the first time in your life! If you’re anything like me and you haven’t had any exposure to personal finance, you might start spending your entire paycheck. And those spending habits become annoyingly hard to break!
This financial literacy month, I have curated the MOST important money saving lessons that will help you get the right start. So let’s take a look!
7 Life-Changing Money Saving Tips to Live By
1. Live below your means
Do you know how millionaires become millionaires? (This one took me a long time to figure out.) They live below their means. Now that doesn’t mean that they don’t buy expensive stuff, it just means that they spend less than they earn.
So you don’t need to dive into frugality, you just need to make sure that your expenses and credit card bills fall well within your income so that you have money left over to save. When I first started earning, my mindset was that if I earn a $3000 paycheck, I’m going to live a $3000 life! But that mindset was what kept me broke and living paycheck to paycheck with nothing to fall back on!
2. Avoid lifestyle inflation
Closely related to the point above, lifestyle inflation means upgrading to a better car, apartment, wardrobe, furniture etc. when you get a raise, promotion or a bonus. Society makes us compare ourselves to our peers but that is a slippery slope. Trying to keep up with your friends could lead you into debt, overspending and stress!
An important point to note is that just because someone appears rich, doesn’t mean that they are financially well off. A lot of people with flashy cars and homes are in severe debt to maintain those appearances. They just value their image more than their finances.
3. Meal Planning
It’s all too easy for us to order in. I see an ad from Grubhub, Doordash or Dominos at least thrice a day! I know that $5.99 might seem like a great deal for pizza, but the expenses add up quickly.
For most people in their 20s, dining out is the second largest expense. You can easily cut this down by creating and following a meal plan!
Before you go grocery shopping, make a list of all the dishes that you are craving. Look up the recipes to see if you can re-create them at home and add those ingredients to you grocery list. This method works out great and it’s easy on the calories and your budget!
If you spend $60 on groceries a week, that’s still a lot better than dining out and spending $60 in 2 or 3 days!
4. Spending on your car
As a student living on a budget, we were used to commuting by public transport, car pooling etc. They are great alternatives to owning a car because they are cheap and eco-friendly!
But as soon as you land a new job or get that bigger paycheck, buying a new car becomes a top priority. This is one of the biggest lifestyle upgrades that we all yearn for! But it could also become the single biggest drain in your paycheck.
You might be very tempted or convinced by the salesperson to get the latest model of your favorite car, but hold that thought before you regret it! It’s crucial to research and understand about how much car you can really afford. Go through this checklist before you decide!
5. Renegotiate bills
A chunk of adulting is making sure that you have enough dough to cover your list of monthly expenses. And that list seems to grow each year!
The most effective way to save money is to reduce or cut back on these recurring monthly expenses. For example, rent, internet, car payments, insurance, phone, tv subscriptions etc.
Take some time out to research competitive pricing. Also, consider if downgrading your current plan will still fulfill your needs. There is always room for negotiation, especially for services like internet, car insurance, phone bills etc. Set up a call with your landlord or your service provider to chat about it. You’ll be glad you did because small savings go a long way!
6. Save money on rent
When you are young, you have great flexibility in choosing your living situation. You can choose to live in a studio by yourself or rent out a spare room or move in with your friends.
Sharing apartments is common in all big cities because of the exorbitant rents. No matter where you live, if you consider sharing an apartment, you will be able to save quite a bit of your paycheck.
This is the only phase in your life where you can choose to live in a shared apartment! As you grow older, you would have other commitments or you would prefer having a place all to yourself.
So whether you are living by yourself or with a friend/partner right now, look into renting a larger apartment and splitting the rent with a roommate. Your housing costs could go down by 50%!
7. Take advantage of employer contributions
Paychecks feel so great! But don’t settle for just that. Every employer offers a variety of additional perks that are a part of your salary package.
For example, health insurance, RRSP match (Canada), 401K match (USA), HSA allowance and performance bonus are worth thousands of dollars. RRSP / 401K are both types of retirement accounts and employer matches are great opportunities to get started with investing. Companies offer to match your contribution dollar for dollar up to a certain percentage of your paycheck. It’s basically free money! So definitely take advantage of it to maximize your contributions.
When you are negotiating for a new job, make sure to ask about all their benefits so that you can negotiate your paycheck accordingly. If you are already employed, then make sure to reach out to your HR to get more information about benefits that you aren’t currently enrolled in.
Parting words
When you think of saving money, you may be tempted to make big changes like cutting out all entertainment expenses. But such changes are not sustainable in the long run and you’d probably last a month before you go back to your old ways. The key to saving the big bucks is to get the fundamentals right. So focus on setting up your personal finance foundation correctly before taking the next big step!