How I managed my finances in my 20s

Posted by mapetitechou on Jul 22, 2015 in financial planning, lifestyle

I was suggested to do a post on this topic, which is a great topic. I always get questions from people on whether or not I was financially “savvy” — so to speak — when I was younger. You know what, I wasn’t. Besides the advice that I got from my parents, work hard and save your money, I didn’t know anything about investing and I didn’t know anything about financial freedom.

To our conventional standards, you could say I was a good kid in my 20s. I was good at my job. I lived below my means and saved my money. I always maxed out my contribution room for my RRSP. I was very religious about that. And I always had a good size emergency fund. I bought my first car (a used Mazda Protege) with cash. I remember one time when I was banking at CIBC, this older teller lady took a look at my balance in my chequeing account and said “why do you have so much cash in your account?” I said “I’m saving it to buy a car soon.” She was like “Good for you. You don’t see many young people with a good size balance their bank accounts anymore these days.” Because I come from an immigrant family, it was just second nature to be a saver. I thank my parents for that. When I graduated university and started working, I did not inflate my lifestyle as much as other young professionals. Don’t get me wrong, I was not deprived. I went out with friends, I went on vacations. But I was always mindful about not to live it up so much so that I lost track of savings. I always put my bonuses into savings.

It’s interesting that a lot of people it felt like people didn’t want to see me saving my money. One time my parents’ accountant was doing taxes for us, he saw how much I was saving for my car, he said “you don’t need to save so much cash for a car. Just finance. You live in Canada, you should live like a Canadian person. It’s totally normal to borrow money.” Mind you, the accountant himself was Chinese, maybe he was speaking from his own personal experience. Maybe he went from being a saver to a spender in a process of assimilating himself into Canadian society. I think I mumbled something about not wanting to be in debt. Now looking back, it is kind of shocking to hear that from a financial professional.

My then-boyfriend (now hubby) and I lived in an apartment until we got married, then we bought house together. He wasn’t as big of a saver as I was. So I had to kick his ass a little bit on that. Fortunately we got on the same page. Because we had both been diligent about saving for a house, we were able to use our RRSPs plus savings to put down a 25% down payment.

So throughout my 20s, I was a very good saver, but I did not take full advantage of putting my savings to work. I wish I had known what I know now and had started investing in index funds as soon as I started working. But I had a complete lack of understanding in investing. I thought investing meant buying stocks and I was scared of stocks. I thought “I don’t understand stocks so I’m not going to touch that.” And because of it, I concluded that I had very low tolerance for any kind of risk. I put my money in GICs and mutual funds (little did I know, the mutual funds that I was buying carried a lot of risk, and they had huge fees). I didn’t get into index fund investing until I was almost 30 when I had my first baby and I was on my mat leave. I finally decided that I should no longer stay ignorant and started learning as much as I could about investing.

Still, I’m pretty happy that I had some really good habits that helped me to be financially stable in my 20s. They helped me greatly in terms of saving and staying out of debt, which is a positive aspect in wealth building considering a lot of people my age are in a lot of debt that they can’t seem to get out of. I think for young people, saving and accumulation of cash is so much more important than trying to figure out which ETF fund you to buy. If you are in your 20s and you still have some debt aside from a mortgage, you should try to get rid of the debt as fast you can. Don’t inflate your lifestyle. Live below your means. This is your accumulation stage. Then learn as much as you can about investing and put your money to work for you.

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