This post is sponsored by Lexington Law.
My twenties have been a huge decade of learning. I’ve learned so much about myself as a person, about what (and who) I value, about money, and about my self-worth. Really, the lessons I’ve learned feel endless and abundant, and for that I am grateful. My twenty-something decade has been one of cataclysmic growth and expansion that has set me up with a solid foundation for my future.
I am ending my twenties feeling confident in who I am as a person, as an entrepreneur, a friend, a wife, and as a mother. As I’m turning 30 next year, I’ve been in the process of reflecting on what my twenties have taught me. I’m saving up quite a few of these things for various pieces and projects in the coming months (stay tuned!) but today I wanted to share with you three financial lessons that have had the biggest impact on my life in my twenties.
These lessons are so big that they, in fact, are shaping my entire financial future.
3 Critical Money Lessons I Learned in My 20s
1. Always, always, always spend less than you can “afford” to spend.
This is one lesson that I learned very early on in my twenties. When my husband and I moved cross-country for his job, we rented an apartment that was at the top of our budget. While we could technically afford it on paper, it made it difficult for us to save anything substantial or pay off our debt.
Paying something so high even though it wasn’t putting us further into debt or anything definitely put a strain on our finances in other ways. We had to be careful about budgeting for our groceries and rarely splurged on anything. Our treat every month would be one meal out where we would split an entree between the two of us to save money.
There were two things that made it really challenging to cover our expenses during that year. One, we were still making quite significant debt payments (between $500-$1,000/month). Two, we wanted to still build up our savings. We were making slower progress than we would have liked on these other goals we had simply because we choose to rent at the top of our budget.
This was an important money lesson for me to learn so I don’t necessarily regret going through it. I cried almost every time we made a rent payment and a debt payment and constantly dreamed about the day we could move our debt payments to our savings and investment accounts instead.
Related: What I Wish I Knew About Money In My 20s
After we lived in the apartment that was at the top of our budget, my husband and I lived with two roommates for a year which saved us $900 on our rent (yes, you’re reading that correctly!). Doing that help us pay off our debt with 18 months. Following that year with roommates, we lived in a <700 square foot studio apartment for three years (at about the same rent we paid while having roommates) while we saved aggressively and increased our income. Doing this allowed us to build a significant nest egg as we prepared for our next phase of life. These were sacrifices we chose to make for our larger goals and it was worth it.
Going through this taught me to keep my fixed expenses as low as possible. This is advice I share all the time and strongly believe it to be one of the pillars to my financial growth. Even if you can technically “afford” something on paper, that probably also means it’s going to take away some financial flexibility in other areas. The lower your can keep the bills you have to pay every month the better!
2. Negotiate every chance that you get.
It took me far too long to negotiate in both my personal and professional lives.
On the personal side, I wish I had started negotiating bills sooner. Not too many of my bills are flexible, but I have had success negotiating my rent and negotiating a car insurance payment. Most of the time just asking for a better rate is enough to get you some sort of a discount. Companies want to retain you as a customer and can offer various discounts or packages to to try to do so.
You can even negotiate with your creditors to find credit solutions if you find yourself facing financial hardship. Many things are negotiable so don’t simply give up or assume the answer is no before asking.
On the professional side of things, I hardly negotiated for anything at all until three or so years into my career. Eventually I realized that I had negotiating power and had more say than I gave myself credit for in my compensation. In the past year and a half I have negotiated between 40-60% more on every project I have worked on. I have also walked away from projects that were not a fair rate.
No matter what your employment status is, it’s important to negotiate your compensation. According to a CNBC article from 2018, only 34% of women (and 46% of men) tried to negotiate their last salary. Leaving money on the table can potentially cost you millions of dollars in lost income over your entire lifetime. Especially if you don’t start negotiating early. Pay increases and salary bumps are often increased from your base pay. So the higher your base pay, the more you’ll make over time.
Must-read: The Ultimate Guide To Making More Money
3. Your credit plays a major role in almost every big financial decision you’ll make.
Our credit scores can truly have a massive impact on our financial lives. Improving your credit score is a way to a better life. A higher credit score shows that you’re less of a risk to creditors and lenders because you are financially trustworthy.
I first established my credit with student loans. Then, I applied for a store card in college because I couldn’t get approved for anything else. I realized I needed to start building my credit and I needed to do so as soon as possible. My store card had a low limit and I was able to spend and pay it off each month from my part-time job I held while in school. Soon I was able to open up another card with a higher limit and kept building my credit history.
I didn’t know the importance at the time, but I was somehow able to keep my credit utilization ratio under 30 percent. Practicing this simple method has helped my credit score improve over time. And now as I’m looking to buy a house soon, having a credit score over 800 is working in my favor.
Because our world moves on credit, credit repair is an important step in achieving financial freedom. And with unfair negative items on your credit report, you’re likely being held back from achieving your financial goals. If you don’t know where to start with the unfair negative items on your report or are unsure of even how to check your report and score (this is a handy guide), credit repair might be an option for you.
From the interest rates we pay on homes or cars to where we’re employed to our credit limits and car insurance premiums, a poor or low credit score can severely limit the financial choices you can make.
If you are struggling with low or poor credit, don’t give up! You can call and speak with credit consultants at Lexington Law, help establish a game plan, and discuss your path to improved credit. It is always worth the effort to improve your financial situation.
Of all of the financial lessons I have learned in my twenties, these are the three that have been the most impactful.
Keeping your fixed expenses low, negotiating to raise your income and lower your bills, and improving your credit score are three ways to build a strong financial foundation for your life going forward. Having control over our finances gives us the power of choice — and that’s just something you can’t put a price on.
What is a major financial lesson you learned in your twenties?