Money mistakes from my 20s
Many people think because we paid off our mortgage early when I was 34 that I must be a natural saver, love being frugal and that money has always come easy for me. This could not be further from the truth. I am a born spender, lover of the finer things in life (that is why I teach intentionality not frugality) who dabbled with debt in my 20s.
That is why I am passionate about empowering others to take control of their finances - I truly believe that if I could do it, anybody can. You get good at what you practice and financial wellbeing is a muscle that you can flex and train over time. I can truly say that taking care of my money now is effortless and an enjoyable process and something that I can maintain for the rest of my life.
Here is a round up of mistakes from my 20s that you can hopefully learn from.
Not investing in my 20s outside of Kiwisaver
The cost of this is roughly $1.2million!!!! Yes you read that right! If I had started investing at the age of 20 (instead of 30), based on an investment of $200 per month and estimated annual return of 10%*, I would have just over $1.2million more at the age of 65. Even though the face value of extra money put into investments over 10 years is just $24,000 - the magic of compound interest when given enough time turns that $24,000 into $1.2 million! Why am I not counting Kiwisaver? Because like many millennials living in NZ I ended up pulling out the maximum amount I could for our first home deposit, so that money is not going to grow until I am 65 or beyond.
Not knowing what I was saving for.
My dad had always told me the importance of ‘saving’ my money so I did. What he didn’t mention (because to him it would have been common sense and obvious) was that I should have a purpose for that money. This never occurred to me at the time, so I was stuck in a cycle of saving a pile of money then binge spending it all (mostly on clothes and stuff that I didn’t need).
Not having an emergency fund.
I had never even heard of the concept of an emergency fund until I started teaching myself about personal finance in my late 20s. I am ashamed to say that my concept of an emergency fund was the bank of mum and dad. Although I was lucky enough to never have to ask them for money, if I was to do it again I would ensure that I had a safety cushion of my own.
Living paycheck to paycheck.
I thought I was ‘good’ with my money because although I ‘only’ had student loans (which is interest free in NZ) and an interest free gem visa loan for laser eye surgery, I always paid my credit card balance off in full and on time and never missed a payment on bills or rent. In my mind I was living ‘the good life’ and being financially responsible and everything was going fine. When I look back the reality was that I was living paycheck to paycheck. I was spending everything that I was earning. If I was saving money it was quickly spent in the near future - on holidays and shopping sprees. I had no savings when we bought our first home and was extremely lucky that my husband is a natural saver. With his savings and pulling out the maximum amount I could from my Kiwisaver we were able to secure a deposit for our first home.
Relying on ‘things’ to make me happy - they don’t
I found minimalism during my path to financial wellness and the most important takeaway I have learnt is that buying the next ‘thing’ on my list won’t give me lasting happiness and I actually enjoy the calm of having less in my life. This doesn’t mean that I don’t buy anything and live in an empty home - it means that I am intentional with the things I surround myself with and choose quality over quantity. If I truly want something, I indulge in it guilt free knowing that it has been accounted for as part of our monthly budget.
* Historically, the 30-year return of the S&P 500 has been roughly 10-12%.
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