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What I wish I had known about money when I was 21

One day, you'll wish you'd known more about money when you were younger. Here are some paths to early financial maturity.

By May 2, 2014 1:32PM
This post comes from Gerri Detweiler at partner site on MSN MoneyAt 21, young people have all the financial responsibilities of adults ... without much experience managing them. So we asked some of your elders (via Facebook and Twitter) what they wish they'd known earlier -- or the best advice they'd been given.

Man with hat © CorbisMany pointed out that in young adulthood, time is on your side. You may not have much money, but if you put some aside, it has lots of time to grow -- and the money you put aside now will have a huge effect on the amount you have when you retire. (And yes, I know how hard it is to think about retirement when you are just beginning your career.) But save -- save as much as you can. There will always be killer deals and other temptations, but the money you can save now will be incredibly valuable -- whether you are saving it for retirement or for a trip you'll never forget.

Time is on your side in another way, too. You have time to travel, to decide what's important to you, to pick a life partner (or not) and to decide where to live. Chances are, you have lots of years ahead of you. You don't have to rush other life decisions (though getting started on saving is crucial).

How to save it

Savings tips from Twitter and Facebook included:

  • Learn to cook. It's easier to save money when you pack lunches and can make tasty and nutritious foods yourself.
  • From financial columnist and author Kathy Kristof: "Start saving young. Even though you think you're too poor, your financial obligations only increase as you age. And by starting young, you let compound interest do most of the work for you. Consider....if you saved $250 a month starting at age 25, when you're 65, you would have $1,581,000 (and change). The total amount that you saved was $120,000. If you wait until you're age 35, your nest egg will be one-third as large -- $565,000. In fact, if you save from 25 to 35, you could stop saving completely and still be better off than the person who started at 35 and saved for the rest of their career. That's compound interest for you....Einstein reportedly called it the most powerful force in the universe."
  • Putting something aside in your 20s can help keep you from panicking about retirement in your 40s.
  • Live with roommates -- and don't get a car unless you live in a city that absolutely demands it. In that case, drive a beater (hopefully one you paid for with cash). That old car will likely have far lower insurance premiums than a newer model, too.
  • "Start a savings account and pay yourself first. Look up your checking balance every couple days."

Where to spend money

If you've economized where you can, hopefully you have some money you can spend. And despite everything we're telling you about saving, it's also important to think about how to spend your time and money, even when you have plenty of the former and not so much of the latter. Know what is most important to you, and don't be afraid to spend money on the things that are!

In fact, travel came up a lot in the financial advice for 21-year-olds. When you're young, you're more likely to happily enjoy some of the cheapest options available (less-than-luxurious accommodations, unpopular flights, short-term jobs). And you may be able to fit all your worldly goods in a car trunk or trailer. Done right, travel is not necessarily expensive. It might even cause you to reconsider some of the things you thought you "needed" for a comfortable lifestyle. I regret not traveling more when I was younger. (But as one man noted, it's not as if you can't start seeing the world later -- it will likely be a bit more complex to arrange it, though.)


If you've not had a credit card in your own name before, now's the time to do that, assuming you have an income. And though the credit card "limit" logically seems like the amount you can spend, if your balance is more than 30 percent of your limit, your credit scores are likely to suffer. (Keeping it to 10 percent or less is even better.)

Before you apply for a card, though, be almost certain you will qualify for it. Some cards require high credit scores, and some are geared toward people who do not have them. (The ones judged more creditworthy generally get better terms.) But anytime you apply, it counts as a "hard inquiry," and that reduces your score just a little for a short time. You can buy scores or get them for free online from Checking your score monthly can give you an idea of where you stand and suggestions for how to improve your scores.

Your credit scores come from proprietary formulas using the information in your credit reports -- and you can get a look at those for free once a year ffrom each of the three major credit bureaus. It's important to make sure the information on these reports is accurate and to dispute it if it's not. Checking credit reports is a smart financial habit -- develop it while you're young.

The credit advice from your elders:

  • Don't charge anything that will be gone when the bill arrives -- dinners out, concert tickets, etc. (Yes, we know about rewards cards, but if you're new at handling your finances independently, it's smart to establish the habit of paying the balance in full every month before applying for a card that incentivizes spending.)
  • "Make keeping your credit healthy as big of a priority as keeping your body healthy. With a few exceptions, if you can't pay cash for it, you probably don't need it that bad." (We would add that keeping your body healthy can also be good for your finances, with lower insurance rates and health care costs.)
  • "Beware of anyone who is quick to tell you, 'You can afford the payments, and I know people that can finance almost anyone.'"
  • "Find a banker to explain how loans work. Stay out of debt as long as you can."
  • "Learn something about auto financing before you are in a dealership buying your first car."

Have a plan

You need a budget. No one likes the b-word, so think of it as a spending plan. It's your road map to those travel adventures and to financial comfort in your old age. If you have never made one, there's lots of advice online, as well as books and classes to help you learn. If you have a life partner, make sure the two of you are on the same page.

Also know that you will have to make choices and trade-offs. You may be able to do all the things that are important to you, but you probably can't do them all at the same time.

A couple of observations from people who aren't 21 anymore:

  • "If you marry and have children really early, you could end up living with your in-laws in your 30s while you finish school."
  • "Think about where you get your first or second job because you may end up living there forever."

And last, a couple of warnings -- don't even think of buying a house unless you are pretty sure you'll want to stay put for at least five years, and don't spend too much on happy hour or at casinos. (Remember that budget?)

Enjoy -- you're learning about yourself, the world and your finances. Accept that you'll learn some of it by making mistakes. And before you know it, you'll be past 25 and offering your own sage advice.

Contributing: Bev O'Shea

More from

May 2, 2014 3:03PM

Try not to have kids until you're fully supporting yourself.


When you start working full time, put an amount that you can afford to part with every month into a Roth IRA invested in a broadly invested index fund, and stick to that religiously.  Put 50% of pay raises into that until you hit the max.


Have a savings account with at least 3 months of living expenses saved before you splurge on yourself.


Dont buy a NEW car until you buy a house, and always pay cash for your vehicles.


I will be surprised if a 20yr old reads this...



May 2, 2014 7:03PM

What I wish I had known about money when I was 21:

It's better to save a little then to not save at all..

May 2, 2014 2:32PM

Best financial advice I ever got came (at age 19) from many pages of the book, "The Seven Laws of Money," by Michael Phillips. This book is as close to a set of "practical secrets of the socioeconomic universe" as you'll ever find.


Why doesn't everyone know about it? Well, someone once said something about needing eyes to see and ears to hear, and that many have neither. I think that's it.


May 2, 2014 2:44PM

You're a real buzzkill Bev. I broke most of your rules and at 63, I don't regret a thing. I do have some killer memories though.


Einstein reportedly called it the most powerful force in the universe ?


In the mid 80s I got 10% on a cd. Now you may a well put your money in a jar and bury it in the back yard.

May 2, 2014 5:16PM
Okay, young ones... take some notes:

I wish I knew at 21 that having a graduate degree will never pay off. I would have been better off getting a job at the Post Office. I wish I knew at 21 that it is harder to lose 'a few pounds' when you are younger rather than twenty years later. I wish I knew at 21 that having a good relationship with my family was the real key to life. I wish I knew at 21 that listening more than speaking can make all of the difference in what you learn and how you learn it. I wish I knew at 21 that casting a vote does count for something.

May 5, 2014 10:14AM
At 21 I knew all it had to about money.  I didn't have much, had to work my butt off, keep my mouth shut and find better jobs each year.
May 5, 2014 1:53PM

Since 1913 we have moved from equal treatment under the law to special treatment for the dependency class. Since their ranks have been growing there are a greater number of politicians that use the tax code to keep them as a captured voting block. Now they are in a position to keep voting themselves increased benefits at your expense, all in the name of "fairness" and "social justice".


I wish I had paid more attention in history class to know what a devastating effect this would have on American society and the urgency with which we need to roll back these laws! However, I'm afraid it is to late.


The socialistic policies that were started in 1913, flourished under FDR, expanded under LBJ, and have come to full bloom under BHO are now embedded into our society in such a manner that there are a large group of those that feel entitled not to equal opportunity but equal outcome.

May 2, 2014 5:37PM
If I knew everything at 16 that I do now, I would still probably be at the bottom of my class.

The American Dream is just a slavemasters Dream for everyone........

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