What I would do in my early 20s to succeed with money

From time to time, I get an enquiry from a person in their early 20s.

We commonly work with people in their mid 30s to mid 60s and not so much with younger people. Whilst financial advice can be useful at this time, the cost of our service doesn’t really make sense until you’ve experienced some financial success on your own.

But I really wanted to put something out which would be the advice I would give if we could sit down. So here is what I would do if I was in my early 20s to succeed with money.

1. CAREER

The most important decision you’ll make in your 20s is who you are going to marry. But since this is a finance blog, we are going to focus on the second most important decision, your career.

Your career is the lynchpin of your entire financial life so getting this right is a big deal.

Your 20s are the time to find a fulfilling and high paying career. The problem with this though is the choice of “every job in the world” is overwhelming.

How To Pick a Career

When it comes to choosing a career, I believe people over-index on passion.

Very few people are ‘passionate’ about their career type. Unless you’re a photographer or artist, your career isn’t going to be something you would do in your spare time.

Instead, passion is developed as you become world-class at what you do.

In picking a career, I would be looking at what you can do that you feel is ‘common sense’ but for some unknown reason other people struggle with it.

We all have those things that come naturally to us. The idea of charging somebody for such a simple skill will seem ridiculous to you. But know that other people have things you find hard that they find easy.

Picking an Industry

It’s no secret that some jobs pay more than others.

The real secret is that those people in the lower paying jobs are just as smart and work just as hard as those in the higher paying jobs. They’re just in the wrong careers.

If I was in my 20s, I would be researching different industries and finding those with large amount of job shortages and high average pay.

It’s often seen as taboo to openly say you’re pursuing a career because it has the opportunity to earn a lot of money, but life is a lot easier when you have a high paying job.

I’ve met a lot of people in their 30s and 40s who chose a low paying job because they believed they were passionate about it. When their peers started buying houses and going on holidays they couldn’t afford, they started to regret their decision.

Getting Started

If you’re unsure where to start, I would suggest getting a job before going to university. Gone are the days when you could just get a degree and walk into a good paying job.

If you start with an industry and get an entry level job, you’re going to get an opportunity to better understand the pros and cons.

You’ll be able to talk to different people and get a sense of what works and what doesn’t. The best part about this is you’ll also be paid for the experience.

At this stage I would favour getting experience over getting paid as high as possible. Making an extra $3k a year isn’t going to make a huge difference to your life but getting experience which can then put you in a position to have a thriving career can be life-changing.

You may have to eventually go to university (potentially part-time whilst working) but when you do, you won’t be wasting any money studying degrees which won’t help you in the future.

2. DO FUN THINGS

There are things you’ll find fun in your 20s that you’re not going to want to do in your 30s and beyond.

You may think this is true for every decade of your life but it isn’t. As someone in my late 30’s, I could probably go on holidays with someone in their 60s and we are likely going to want to do similar things. This isn’t true for your 20s.

Your 20s is your time to party. It’s your time to go backpacking and stay in cheap hostels. It’s your time to have 6 roommates and live in the middle of your city’s party district.

You’re going to feel like you have all the time in the world but this is going to slow down way quicker than you think. Go out and do something interesting.

3. AVOID CONSUMER DEBT

I’ve spoken to a few people in their early 20s (think 21, 22) who are so incredibly focused on getting a house or investing.

I’m here to tell you focusing on your career makes a lot more sense than trying to buy a house or invest before you’ve figured out some basic things about who you are.

So give yourself a break on the getting ahead financially. But one thing you should avoid is consumer debt.

Any debt you take on now is going to be an anchor for your entire life. Avoid car loans, credit card debts, personal loans, Afterpay etc.

There is a prevailing wisdom that you need some debt to build a ‘credit score’ but this simply isn’t true. Avoid debt in your 20s (the exception to this is HELP debt or a home loan).

4. DON’T PARTICIPATE IN STATUS GAMES

When I was younger, it was easier not to get caught up in status games.

Social media wasn’t as big and the only people who saw what you were doing were the people immediately around you.

My friends and I dressed cheaply, we went to bars that had low-cost drinks (and were not very pretty), we drove cheap cars. It was easier to live life on a budget as everyone was doing the same.

But the times have changed and social media has changed the landscape.

Fancy restaurants are full of 19 year olds, wearing expensive high end clothes, drinking very expensive cocktails.

It’s all well and good for me to say “just don’t do that”, but when the choice is actually have a social life vs saving money, it’s hard to do.

The only solution I can see here is finding a group of friends who all agree not to play the status game with you.

Since it’s so outside of the normal, you’ll need to call it out. You’ll need to negotiate what you’re all willing to do vs what you’re not.

For as long as you can, avoid the status game. You’ll be tempted to join the game all throughout your life so try to avoid this as long as possible.

5. LEARN TO MANAGE A BUDGET

As a general rule, if you can’t handle a budget when you don’t have much money, you won’t be able to either when you have more money.

Whilst it might seem that if you had more money, it would be easier, if you don’t have a process for slowing lifestyle inflation, you’ll end up in the same spot regardless of your income.

If I was in my early 20’s, I would focus on getting good at budgeting.

Each pay period, I would assign money to bills, fun and longer-term savings.

For my longer term savings I would focus on trying to build a base which will help me in the future.

This might involve buying a solid but low cost car (so you can get around easy) or putting together savings so when you’re ready to buy a house you don’t need to start from scratch.

SUMMARY

I really could go on forever with different things I would do but I’m happy to leave it here. If you get value from this and want a part 2 then let me know.