5 Obvious Pieces of Money Advice I wish I knew at 25
#1 - If money is the issue, you don't have a problem
Seth Godin wrote that the easiest way to get rich is to inherit. “This is the second best — knowledge and some discipline.”
I’m in the latter camp. My finance habits came through reading, listening to my parents, and making a shit ton of mistakes. Like so many mistakes.
Here’s a recent one. I got slapped with a $1,500 bill from the IRS last week. The charge came from an error on my 2020 tax returns. At the time, I was working in commercial real estate and responsible for withholding my own income taxes. A task I either didn’t have the knowledge to accomplish or was too immature to save enough.
A random $1,500 bill isn’t a big deal anymore. But it did remind me that I’m still paying for the financial mistakes of my past.
So here are a few obvious things I wish I knew about money at 25.
1.) If Money is the issue, you don’t have a problem.
First, I want to talk about a positive money mindset.
When people say they have a money problem, it’s usually when they owe something big. That’s when people get scared and act like their on death row or something.
Ryan Holiday wrote that no one is less at peace than the guy with debt collectors banging on their doors. Plenty of people in history can attest to that. Winston Churchill told his brother that “the only thing that worries me is money.” Really? Nazi Germany threatens your freedom, and you’re arguing with tax attorneys about how you’re going to afford Chartwell another year?
The point is money is important; everyone should prioritize personal finances, but it should never shake your character or your mental health.
So If you get slapped with a fine you don't know how to pay. Breath. It’s not the end of the world. Money is not the issue. You just have a bill to pay.
2.) Always have a buffer zone.
My dad calls them emergency funds. The economist Benjamin Graham calls them the Margin of Safety. Morgan Housel, the author of Psychology of Money, calls it Room for Error.
I think buffer zones are pretty cool.
The idea is to have enough money stored up to tackle the unpredictable events life throws at you. So when something crazy happens, you aren’t left with zero. This should be goal number one of personal finances: never to hit rock bottom.
The amount saved in your emergency fund changes over time. When you’re young, maybe the worst that can happen is you get laid off. In this case, you will want enough money to skate by for 3-6 months while you look for a job.
That IRS bill would suck if I didn’t do this.
3.) Spend $21,000 on nightclubs.
People shy away from saving because they believe it diminishes their lifestyle.
That doesn’t have to be the case. Keep living your lifestyle, but stop spending money on things that weren’t your life in the first place.
I’m reminded of a story from finance blogger Ramit Sethi. He has a friend who spends $21,000 a year on nightclubs all while earning an average salary.
Bad financial habit, right? Actually no. The guy has more saved and invested than all of Ramit’s friends.
How? Most people spend money on whatever impulse item the market says they should buy or whatever their friends are buying — which they normally end up regretting later. This guy spends his money on tequila shots and strip clubs and cuts out the rest. I’m not here to judge. He likes what he likes.
So instead of spending thousands decorating his home or bugging off to Europe every year, he spends money on what he cares about and saves the rest.
4.) Automate, Automate, Automate
I’m not sure how our parents managed their finances before the internet.
I remember my dad spending hours in his office looking over bills, writing checks, and balancing his checkbook. I even remember riding to the post office with him to send them out and getting a soda afterward.
No way I could balance a checkbook now. It would drive me insane. Automating all your bills might seem obvious, but I didn’t do it at 25, so maybe it isn’t. Go ahead and autopay everything: rent, electric bills, Wi-Fi, subscriptions, credit card payments. Set it and forget it. You’ll feel better and it will improve your credit score.
As for savings, your company’s HR software should have an option to disperse a percentage of your paycheck into whatever account you want. A certain percentage of each of my paychecks goes directly into a high-yield savings account separate from my debit account.
I don’t even see it, which is fine by me.
5.) No one is above making a budget
I handwrite my budget in a journal every month.
I’m the only person I know who does this. Is it the most efficient method? Absolutely not. Is it the best method? I think that’s up for debate. Does it work for me? Look, I’ve tried everything else. This is the only one I can stick with.
I’m a writer. Numbers aren’t and have never been my jam. Journaling my budget is the easiest way for me to form the habit and ingrain my finances in my head.
It doesn’t really matter what you do, just make sure it accomplishes the goal of a personal budget. That goal is to track everything that’s coming in and coming out of your bank account.
And don’t think you’re above making a budget. I did for years and paid for it. Maybe you could skate by without one, but it just makes saving so much easier and less stressful.
Read all you can about money
Let’s end here because it’s the most important thing you could do at 25.
The writer Cheryl Strayed says that everyone should read 10 books about poetry in their 20s and read them five times. “In your twenties, you’re becoming who you’re going to be, and so you might as well not be an asshole.”
I totally agree, but I would add at least 5 personal finance books to that equation. Life is just harder and more complicated when you’re worried about money. I read a lot of finance books in my twenties. They saved me from a lot of heartache. They also saved me from working more hours than I needed to.
Because of the habits I formed over time, I now have the freedom to read, train for marathons, travel, and focus on writing.
I think that’s a good benchmark of financial freedom.
Thank you for sharing! What are the five personal finance books you would recommend?