21 Financial Tips I Wished I Knew at 21 Years Old

There are times I reflect on my life and wished I knew a few more things about personal finance back in college. It would have smoothed out the tumultuous relationship I had with money and credit. I’m sure I would have accomplished more goals earlier if I wasn’t stressed about money.

Here is my attempt to help you get right with your money much sooner than later. When you’re less stressed about your finances, you’ll have more mental bandwidth to grow in your career and life. And as you read these financial tips, I want you to know that your future is the result of the financial choices you make today.

Ready? Here are the 21 financial tips I wished I knew by the time I was 21 years old.

1. Keep your vision for your life front and center

A vision is all your hopes and dreams and all your thoughts and feelings that constitute your ideal best life.  Get clear about how you wish to live your life, the things you’d like to accomplish, own, and experience. Think of your vision as your destination for your life. It will change as you mature and gain new experiences. The key is that you’re always striving towards something. This will keep you motivated and focused on the bigger picture. You’ll find yourself spending your money on things and experiences that move you closer to that vision. Additionally, the benefit of a vision statement is how you can reverse engineer

2. Don’t invest time or money on “opportunities”

Your time and money are extremely valuable. Chances are you’ll get a lot of people who’ll want your energy and youthful resourcefulness. Keep yourself on alert about opportunities that require upfront investments or recruiting your friends to join you before getting paid. There’s a difference between an opportunity that’ll open doors and one that will drain your wallet.

3. Find yourself a money mentor

Mentors have helped me throughout my life and career. Honestly, I didn’t even call them that but they were people I admired, trusted and wanted to model myself after. Mentors can be a parent, uncle, godmother, a boss, an expert in an industry or anyone else you can establish a relationship that pushes you forward. A mentor is someone who is steps ahead of you with their finances and can offer guidance in navigating your growing financial responsibilities. If you can’t find a mentor yet, books and personal finance experts through their tweets, blogs and videos can serve as virtual mentorship.

4. Break the social taboo about money

“I’d love to attend the group dinner, but my goal is to pay off my student debt, not equally split a check after only drinking water.” It’s not bad manners to talk about money with your family and friends. Sure, this can take some time to establish and awkward at first. This doesn’t mean hourly conversations about money issues but rather a thoughtful discussion about money situations. There’s a difference. We already have money conversations with people around us without realizing it. The new car or house, vacation photos, and going to a fancy restaurant are experiences that have a financial component.

5. Don’t keep up with the Joneses

Live your life but don’t chase a lifestyle in order to impress others or distract you from actually living. We are influenced by the people around us. Next time you see a friend, coworker, or neighbor roll up with a new luxury car be conscious of your emotional reaction. I’m sure you’re happy for them but it may arouse a desire to keep up with them. Keeping up with the Joneses is spending your money to live their lives, not yours. Spend to keep up with others will just have you looking back in your early 20s with the lost opportunity to build a solid foundation more reflective of your financial values.

6. Keep your lifestyle in check

As your income grows, so will your ability to afford more expensive things. This isn’t necessarily a bad thing. You earn money to spend money. However, spending what you make can lead to overspending and reliance on credit just to afford the basics. Two things to keep an eye out–lifestyle creep and lifestyle inflation. They both have a tendency to lock us into a spending pattern that creates an allusion of luxury but often keeps us from truly living a free lifestyle.

7. Get experience as soon as possible

Don’t wait until senior year to gain experience in the field you’re studying. Find an internship in the profession or the industry so you can begin building your skills and network. This can also be a valuable experience that may influence whether or not the degree you’re working towards can lead to your dream career. Even better find the internship that pays and use that to pay down any student loans you may have.

8. Learn as much as you can about personal finance

Learning finance doesn’t sound as fun as spending money. But the more you know about how money works and the financial systems built around it, the more money you’ll actually have to spend on fun. If you didn’t have the financial education forced on you as a kid, then you may not have been exposed to fundamental financial terms. This can be a disadvantage but you’re reading this so you’re catching up. I recommend reading my book, You Only Live Once, to get a better understanding of your motivations and frame yourself to succeed. Then, read Erin’s book Broke Millennial that goes into specific details that I glossed over in mine.

If you’ve gotten this far, continue reading for more specific financial tips.

9. Understand how banking works

There is an assumption that everyone knows how banking products work. Having worked in the industry and working on financial wellness programs, I can confidently say many more people have yet to understand how banking works. Do you really know how your bank operates? Or how your checking accounts work and debit card rules? The less you know the more you’ll end up paying. There’s no reason to pay more for a product or service simply because we didn’t know how it worked. I suggest asking a rep at your current financial institution about your accounts. And if they can’t explain without jargon or help you understand the services you use, I think it may be time to find a better financial relationship.

10. Make saving a priority

Okay, so you’re probably focused on making more money than saving money you haven’t yet earned. But I’m telling you right now that saving is a habit. If you’re not saving anything with the money you are making today, then chances are you won’t be saving when you make more tomorrow. Remember the lifestyle creep I shared earlier? Help your future self by prioritizing saving in the present day. Saving might seem like you’re delaying gratification, but it’s ensuring long-term satisfaction. Make it easy on yourself and automate your savings each and every payday. Set up automatic transfers into savings when your direct deposit hits your account. And consider a purposeful approach to saving money that works.

11. Have a rainy day fund

It’s guaranteed one day you’re going to need cash to pay for an unexpected expense. You’ll want to give yourself peace of mind with a savings account dedicated for those rainy days. A survey by discovered 47% of people can’t cover a $400 unexpected expense with cash. Emergencies will happen and it’s not a matter of if but when it’ll happen. Aim to have $400 and start your rainy day fund.

12. Never too early to start an opportunity fund

So, what’s an opportunity fund? It’s a savings account aimed at allowing you to seize opportunities when you’re income is disrupted. I call it an opportunity fund because when you have money to cover your basic living expenses when you’re not getting a paycheck you’re given an opportunity. That opportunity is more free time on your hands. When you’re not stressing about finding a job to pay for basic living expenses, you’re able to find the right job in the field and company. Calculate your monthly living expenses. First aim to save one month of living expenses into an account. Once you do that have a goal to save 6 times that amount. This gives you six months of opportunity to find a job or money to cover expenses if you’re furloughed, hours reduced, or can’t work because of sickness or hospitalization.

13. Invest in a freedom fund

You can trust me on this and thank me later. Invest in a freedom fund to allow you the opportunity to take a sabbatical from work or what I call gap year for adults. Taking time away from a job can open so many new doors. Not only will you get a break from the routine, but you’ll also have time to focus on projects and possibly explore a career change or spend time with your future babies. Getting burnt out at work is real. Getting jaded at a job you once love happens more often than not. A freedom fund can allow you the reboot you need to see a new career and life perspective. The fund works like the rainy day fund and opportunity fund but it’s set aside for a specific purpose. You won’t be intentionally using the money for a few years into your career. You’ll want to get the best returns possible and consider having the freedom fund in an investment platform.

14. Start your retirement plans

The financial magic happens when you invest in your retirement as early as possible because of the power of compounding. In savings terms, you’re earning interest on the interest you’ve already earned. With investing, your portfolio continues to grow with dividends reinvested back in purchasing more stocks or funds along with any appreciation in the actual stock price. Okay, you don’t have to think about retiring but you can still invest in your retirement. Because retirement will happen whether we choose to retire early or wait until the official retirement age to receive government benefits or we just can’t work anymore due to illness or disability. Contribute to your company’s 401(k) plan at minimum to get the full matching dollars. Go a step further and contribute to a Roth Individual Retirement Account (IRA) too.

15. Use company benefits and perks

So you have a job and getting your first “real” paycheck. I want you to know that way too many leave money on the table. A big part of your job compensation is the benefits. Don’t neglect them because you’ll discover how cheaper it is to have insurance through an employer than buying one in any marketplace. But benefits don’t stop at healthcare with most employers. Get to know all your benefits and perks offered. Speak with your HR and ask about tuition reimbursement, employee stock purchase programs. special discounts, professional services like free legal or financial help, credit union and gym memberships. And don’t forget about workshops that help you grow in your profession.

Congrats! You’ve gotten this far in the article. Now, let’s go over credit and student debt.

17. Credit is a tool

Don’t be afraid of credit. Credit is a tool that can help you achieve financial goals. But keep in mind credit that’s misused can lead to debt. The ball and chain that can prevent you from bold career and life moves. Know how credit works then you’re less likely to mishandle it. Credit can be used as leverage to enable you to do things that have a profound financial wellness impact. With credit, you were able to afford a college education to get into a career. Credit can help you purchase properties as a home or as a rental. On the flip side, credit use to buy things of short-term value can easily trap into long-term debt.

18. Establish your credit

Whether you agree with credit reports and score, our society uses them for other purposes than just approving a loan. Employers look at your credit report. Landlords may want to see your credit score. To hook up utilities, they’ll request a review of your credit history. When you’re starting out, you probably have no credit or very limited history. So, you’ll need to establish your credit and the sooner you do the better you’ll be. To establish credit, you’ll need to get a credit card or loan (and student loans don’t count if you haven’t started repayment). Get a secured card from your bank or credit union. Or use a credit-builder account offered by financial services companies that specifically help establish credit.

19. Monitor your credit report and track your credit score

By law, you are given access to credit reports from all 3 credit bureaus once every 12 months. You can request free credit reports through AnnualCreditReport.com. However, getting your score is a little different. There are no federal laws that require giving you access to credit scores. So you’ll need to buy your score from the credit bureau or use a free credit score app that provides educational credit scores. Using a credit report monitoring tool with free scores can help you stay on top of your credit and alert you of any changes in your report. But, a credit reporting app doesn’t replace the need for you to review your actual reports once a year.

20. Limit the number of student loans

Don’t max out your student loans. It’s tempting to get every single penny you’re offered but it’ll cost you more in the long run. Any additional money disbursed to you from student loans can be repaid back to lessen the amount you’ll owe after graduation. Remember, it’s not free money unless it’s a grant, scholarship or any funds you don’t have an obligation to repay. While in school, continue looking for scholarship money as they are fewer applicants trying to get them

21. Pay off student loans

Do what you can to pay off your student loans sooner rather than later. There is no purpose in holding onto student loan debt because some call it “good” debt. It’s still an obligation and reduces your monthly cash flow. Do what you can to pay your student loans while still in school. You don’t have to wait until six months after graduation. Start by paying the interest accrued on unsubsidized federal loans and private loans.  And if the loans are subsidized federal loans, you can still make payments on those too. After graduation, you have the option to consolidate or refinance your student loans for better rates or terms. There are things to consider when refinancing federal and private loans such as losing federal repayment benefits. In any case, make extra payments on your student loans so you’re no longer thinking about college and focused on creating that life you dreamed about when you were in school.

22. Buy a good reliable used car

A new car may be nice but you’ll be paying more than twice that of a used car. You don’t have to get a 10-year-old vehicle either. Buying used means you’re spending less and if financing you’re borrowing less. Things to consider when financing a used car, don’t accept a loan for more than 3 years. Don’t fall for a car salesman telling you how much you can afford or how a new car is almost as much as a used. Also, don’t let a financing officer or a lender convince you on how to spend your money. When in doubt, walk away and do more research on buying a car. Just remember buying a good reliable used car means you can possibly buy in cash or finance a smaller amount. It’s definitely good to have a down payment to cover at least the registration, fees, and taxes. Remember, there are also other ownership costs such as annual registration fees, auto insurance, maintenance cost, fuel cost, and parking tickets.

Woohoo, you’ve made it through all 21 financial tips. Continue learning and my next suggestion is to head on over to Road to Financial Wellness page to learn about balancing life and money.

But, you’ll be 22 soon so here’s a bonus tip.

22. Start investing

With so many apps that let you invest with $1, you can afford to invest right now. Investing early can help you achieve financial goals sooner than your peers. And you benefit from a longer time period that allows your investments to grow through compound growth. Investing can seem confusing with trying to decide what’s the difference between robo-advisors and online brokerages and trading platforms.