Savings may look like a simplistic math equation, but it takes grit, discipline, and a few money saving hacks. In your 20s it's incredibly easy to let expenses creep up. You've worked hard for your money and can justify spending it.
In your 20s it's also easiest to save heavily because quite frankly, coming out of college you should also be more used to being cheap. If you can't live off rice and beans in a railroaded apartment where your room is the size of a closet, then you better be confident about your income streams.
Building wealth doesn't just come from having a lot of income, but it does come from hanging on to it and compounding it. Here's what your 30 or 40 year old self will thank you for later.
Mind Your Funny Mental Accounting
Especially when you are young and can “afford” it, bottle service at a club one night, a Michelin starred meal, or a new handbag might seem like justifiable one offs. The trouble is one offs start adding up, and once you get into the habit of one offs, they seem pretty hard to pass up.
When these purchases are justified in our head, we classify them outside budgeted expenses, like they belong in a different bucket. But there will always be one offs. (and I suppose once in awhile we're human and it's ok) Just watch the habit.
Watch your beverage intake
Ever notice at restaurants that sometimes the drinks cost as much as a meal? If it’s a freshly made juice it will cost the same as an appetizer or small meal. One of our money rules growing up was that we would never buy beverages (or snacks) outside a supermarket. Even the supermarket purchases were few and far between. Not only are the margins on drinks higher but water is by far cheaper and in most cases healther.
Deflect Social Pressure
Unless someone else is buying, order soda water with a lime. Alcoholic drinks are a double whammy – they’re a killer to the wallet and not exactly kind to your body. They also lend themselves to more excess.
Find Your Tribe
Maybe you have a social crowd that spends a bit more money, but you still enjoy hanging out with them. Try planning events with them that don’t involve alot of spending, like hiking or day activities. Even house parties are cheaper than going out in a bar. You can also find social circles that are a bit more thrifty to balance out the spending.
Redefine Treat Yourself
When i went traveling for a year, a big chunk of it was spent on a camping trip. Having a great time doesn’t have to mean white glove service all the time. And what we consider to be a amazing is truly at the cross section of novelty and quality of experience. has to be at the brink of novelty and scarcity.
Can you get a great massage at a slightly run down Thai massage parlor? Or is it worth paying $50 more for a swanky massage decor. What you “deserve” to have is truly a mindset.
Use Anchoring To Your Advantage
Sometimes we just need high dollar amounts to give us pause before pulling the trigger. So think about what the value might be in 30 years if you had $50 in savings every day compounded.
Make Trade Offs
In Hong Kong despite being on an expat package I consistently chose really cramped places to live. Location mattered much more to me so it was a happy trade off. My sink was basically over the toilet, bright side being I could sit down while brushing my teeth. That could have been taken even further, and I've stayed in Airbnbs in HK where the shower is basically over the toilet as well. Get a good clean in while showering.
Keep Your Expenses Level
If you can stave off expense creep, which are rising expenses as your income increases, then every time you get a raise or a new bonus, that goes straight to your bottom line savings.
Reaping The Benefits
In my 20s I just kept stashing away cash for all kinds of reasons. I had a thrifty mindset, wanted a huge safety net for myself and family, and knew I didn't want to keep up the banking lifestyle.
Did I pause to enjoy life? I took nearly a year and a half to travel around the world, enjoyed the occasional Michelin rated meal (gasp), and lived in centrally located apartments. I really can't even tell you what I could have missed out on.
If you have a burning desire to retire early, the choices you make along the way that advance your goals end up being incredibly satisfying. If that commitment feels more like a constant chore, then that plan probably doesn't work for you.