Being young and naïve, I thought that by the time I had my first checking account, I was well versed in money. My parents taught me how to balance a checkbook. I’m frugal-minded and don’t make a lot of impulse purchases, and by the time I went to college, I had a carefully planned monthly budget that I was good about following. I knew the basics about not spending more than you make, socking some away for a rainy day, and yes, that even a small $3 purchase can overdraw your bank account, making that a $38 coffee with the overdraft fee. Now that I’m safely out of my teens, looking back I can see that there was much more about money that I wish I knew when I was younger.
Keeping Up With The Joneses Is Real
It’s hard to have an honest conversation about money with your friends when you’re 20, and it’s hard to say that you can’t go out to dinner or go on vacation with friends when you don’t have the money. Keeping up with the Joneses is not just about having the cool new phone or a designer purse. It’s more about doing whatever your circle of friends is doing. It’s hard to keep up if you can’t afford that restaurant, and it’s even harder to say why you can’t go. Being afraid can lead to credit card debt and avoiding spending time with friends. Be honest and plan to do something less expensive, otherwise, unwanted bills alternating with depressing Friday nights home alone may become a hallmark of growing up.
Plan Your Retirement In Your 20s
When you’re just starting out in the workforce and beginning your career, the last thing you can really fathom is retirement planning. But honestly, that’s when you should start. Compound interest can do amazing things for your retirement savings. Even if you just put in $5,000 between ages 20 and 25 (just $1,000 a year, or $83 a month), it can balloon to over $200,000 at an average 10% interest by the time you’re 65, even if you stop putting money into savings. If you keep saving, then your money keeps growing. You could forget that you saved that money all those years ago, and when you retire, you’ll have a nice nest egg with enough money to pay off the average American home.
You’re Richer In Your 20s Than In Your 30s
This may seem silly since your salary hopefully will have increased as you gain more experience and climb the corporate ladder, but your expenses will also increase along with your salary. A working individual in their 20s making $35,000 a year, even with student loans to pay, likely has more disposable income than when they’re in their mid-30s, married and making $80,000 a year with a mortgage, a child in day care, car payments, etc. As you grow, usually so do your bills. Lifestyle inflation is a real thing, and it’s important to keep an eye on your budget to keep it in check. But even if you live frugally, the list of financial responsibilities creeps up. That budget can look tight and lack disposable income even with a larger paycheck.
So use that disposable income to your advantage: live life on a budget and sock away money for retirement before there comes a time when you need that money for family expenses a decade from now. No matter what your level of wealth, working with The Harvey Group can help you pursue your goals. We’ll guide you through a comprehensive process for managing your financial life, creating a long-term plan that’s customized to your needs.
Contact us by emailing email@example.com or calling (703) 549-5447.
Steve Harvey is a financial advisor with more than 34 years of industry experience. He is also the founder of The Harvey Group, an independent investment consulting firm based in Alexandria, Virginia. He works closely with middle- and upper-middle-class families to help them address their critical financial planning challenges, from investing with confidence to planning for retirement. Based in the Washington, D.C. area, he works with clients throughout Virginia and Maryland. Learn more by connecting with Steve on LinkedIn or visiting www.steveharveyllc.com