What I Learned About Money in My Twenties

I’m 30. By virtue of that fact, I should be qualified enough to tell you about how to get your finances in order during your twenties. Luckily for you, I am not going to dole out the same tired financial advice that you’ve heard time and again. I bet you already know all the “right” things you are supposed to do with your money. And there are probably a lot of reasons why you’re not doing them. But what I will tell you is that you’ve got to figure out why you spend (or don’t spend) money if you’re going to start solving your own financial woes.

Everyone has his or her own very personal and unique relationship with money. Looking back on my twenties, I realized that I spent my money mainly because I wanted to feel richer than I actually was. This single desire was probably the most fundamental problem I had with money during my twenties, and admittedly, it is one that I still struggle with today. 

My parents were small business owners who worked 12 hours a day, seven days a week. We weren’t poor, but we definitely went without things found in most family households, most notably, cable television and an abundance of toys. Knowing how hard my parents worked, I decided that I would have to rise above my upbringing and make the best of it. I traded in my dreams of going to a small Northeast liberal arts college for a free ride at a nearby state university. While in school, I supported myself on waitressing tips until well after I graduated.

I got my first office job in my early twenties, complete with a paltry, yet steady, salary. Suddenly, I was hungry to experience the full spectrum that life had to offer, and all too eager to ignore the wide disparity between my means and aspirations. It was still a time when everything in the world seemed novel, and by virtue of its novelty, was mandatory to experience. Bottomless mimosa brunches? Buying that $200 used guitar on a whim? Impromptu road trips? Yes, yes and yes.

I knew I shouldn’t have been spending my money so liberally, but for the first time, it felt like a relief to just have the nice things that always seemed missing from my life. Somehow, it seemed perfectly fine to drop at least $200 a month on sushi dinners, to purchase designer handbags, to drink endless rounds of American craft beers, and to have and to hold each new Apple product in my hands.

As I marched towards 30, I had desperately wanted to bid farewell to my purely middle class upbringing, as I had been seduced by the fantasy of a more beautiful and perfect life. I started to swap out my particleboard furniture for something with clean mid-century modern lines, and leather upholstery. I bought brand new suits at retail price, at around $400 a pop, because I subscribed to the cheesy adage of dressing for the job I wanted, not the one I had. I longed for French cookware, said yes to happy hours that lasted until midnight, and snapped up luxuriously scented (and priced) organic shampoos, because I wanted it all, and didn’t want to wait.

As the years went by, I felt as though the wage gap between my peers and myself was growing wider, and I wanted to pretend that it wasn’t. I was still struggling to find a decent paying job, while others seemed to be steadily advancing in their careers. There were little hints to suggest that my life was not as finely appointed as those of my friends’, like when I still carried a flip phone when everyone else had smartphones, or when I still drank milk chock full of artificial hormones instead of organic milk that cost twice as much. But in all honesty, I didn’t really know much about the state of my friends’ personal finances, as discussions of money were (and to a certain extent, still are) the ultimate taboo.

When I actually took the time to look through my crumpled receipts and credit card statements, I got mad at myself. Why had I paid almost $40 just to eat breakfast at a restaurant? How did I drop $140 on cosmetics alone in the prior month? Did I really want to pay nearly $80 a month for the privilege of doing yoga poses in a room heated to 100 degrees—if I went to Bikram yoga class at all? Whatever my reasons were, they just weren’t worth it in the end.

It was clear that I had refused to live within my means, and I needed to do something to change my situation. On one too many occasions, I had ransacked my short-lived savings to pay off mounting credit card bills. I still had an array of credit cards I had accumulated during my early twenties while playing the balance transfer game. And my credit score had taken a sizeable hit.

By some twisted logic, I decided to borrow six very big figures to get rich. At the time, I believed that I could become financially set for life if I went back to school to become a lawyer. My then-boyfriend (now husband) was reluctant of that proposition, given the expense. When I enrolled in law school, we both understood that it would be up to me to repay my student loan debt. As I approached graduation from law school, I went numb when I realized exactly how much student loan debt I had accrued, and how terrible my job prospects were. (This was after 2008, when the economy tanked and law firms basically stopped hiring.)

At 29, I had reached the most financially vulnerable moment in my life: I had no permanent job prospects, no savings and no way of knowing how I would begin to pay back my federal student loans. Even though I was married and had a supportive husband, I had never felt more unstable in my life. It contrasted starkly to how I began my twenties, back when I had no credit card or student loan debts. I could have been one of the smart ones, those sound individuals who amass a small fortune by my age, instead of spoiling myself. The sense of regret and fear was enough to wake me up from my decade-long denial.

Eventually, I was lucky enough to find a full-time job that not only paid the bills, but allowed me to save a little bit. As for my federal student loans, I had consolidated them and entered into an Income-Based Repayment Plan, which I wholeheartedly admit has been the saving grace of my life, making it far more affordable for me to pay back my debts. I paid off all of my credit card balances, and actually have the makings of an emergency fund. I scrupulously record my expenses every day, stick to a budget and always try to come up with new ways to reduce my spending. Most of these, of course, are very basic things I always knew how to do, even back when I was just 20 years old. It still surprises me that I spent the past decade squandering my earnings on my fleeting desires to feel rich, when deep down I knew exactly what I needed to do to build wealth.

In retrospect, I’ve come up with some new goals for my thirties. I am going to contribute at least 10 percent of my salary towards my retirement. I am going to chip away at my student loan debt until it is paid off or forgiven, whichever one comes first. I am going to embrace the very simple concept that I must spend less than I earn. And I am going to be richer than I have ever been in my entire life. But you already knew that, didn’t you?


S. L. Bathgate writes when no one is looking. She lives in Baltimore. Photo: Flickr/sidewalk flying


14 Comments / Post A Comment

Oh yeah — it’s all about the IBR. (The huge, private loan I signed up for when I was 17, that’s another story.)

Technical question: is there a reason that Billfold posts are coming out all bunchy today? I just had four hit my RSS reader in the same minute.

mlle.gateau (#417)

So…can someone please explain IBR to me? If I’m in (grad) school right now, can I start it? Is that a bad idea? Will it cover my hideous private Sallie Mae loan? The whole thing sounds way too good to be true to me, and it makes me nervous.

Only Federal Loans can be consolidated. There are a lot of options in addition to IBR when it comes to consolidating Federal Loans. IBR is a good choice if you want to go in to nonprofit work because it forgives your Federal Loans after 10 years of on time payments.

@mlle.gateau IBR is income-based repayment. You consolidate all of your government loans (Perkins, Stafford subsidized & unsubsidized, and GradPlus) into one master loan when you graduate, and then select “IBR” as your payment option.

Your monthly payment is calculated by taking 15% (soon to be 10%, I think) of your AGI, and then dividing that by 12. It’s re-calculated every year to take into account changes in your income, and you pay that for 25 years. If you don’t pay off the entire balance…. it’s forgiven.

Unfortunately, you cannot consolidate commercial (“private”) loans, so the best advice is just to suck it up and make big (as big as you can afford) payments towards those as soon as you can, and just get them paid down.

Figuring out the intricacies of the program is not the most intuitive thing ever, and the Dept of Ed is really screwing the pooch on the consolidations, but IBR is a wonderful thing.

Evergreen (#826)

This is a great post, and one of the reasons The Billfold is now among my favorite blogs. Thanks for your honest, S.L.

Money is definitely a taboo topic. When it’s not talked about, I think we all tend to believe our peers are much better off than they really are. I have a distinct feeling that despite appearances to the contrary, the financial lives of many of my friends is a hot mess.

I’m turning 28 this year, and while I think income disparity is becoming wider as we age, the big leaps I see people make have to do with getting help from parents. Of all my friends who own houses, only two did it without a downpayment gifted to them from mom and dad.

@Evergreen Thanks for your kind words!

Was all of this spending really “not worth it in the end”? The $40 breakfast–was it consumed with good company and relationship-building conversation? Were you able to use the $140 cosmetics daily and did they last you for a while? Did they help you feel confident for a job interview or a first date with future husband? Did you reap no benefit at all from the yoga class? I’m not being rhetorical here; maybe these purchases actually did screw you in the end. But 20-something you could not have been ALL bad. :)

@Scarlton Banks – You’re absolutely right, there were definitely some things that were worth it in the end that I didn’t specifically mention, like when I bought my friends breakfasts at Waffle House when we were on the road (where it cost $40 to feed six of us), or when I borrowed money to travel and study abroad in the UK.

@S. L. Bathgate $40 for six friends is pretty sweet! But yeah, the relative value of each transaction becomes obscured once we go overboard with the sheer quantity of transactions. Thanks for a relatable and insightful lesson!

It would have been nice if you wrote me an email in 2003 saying: dude, allthough you live 8 hours from here by plane, you are not alone! (p.s. yes, you do need that jacket, now shut up and buy it allready)

Oranges84 (#842)

This is me. I tried to spend less this month and I’m still going into my savings to pay my rent. The worst part is I check my credit card daily.

Good commentary. Many individuals sadly do not learn these lessons by 30 (40 or 50).

I always recommend that individuals utilize direct debits from their bank account to an investment account or mutual fund. If the money is not readily available, people adapt their spending behaviour to the lower level. And even a relatively small monthly investment pattern can compound greatly over time for young adults.

For additional wealth commentary, please visit http://www.personalwm.com.

Roger Britian (#874)

I have two words for you: Dave Ramsey
( http://www.daveramsey.com/home/ )

It sounds like you’re already on that path to some degree.

Don’t let this month end without reading “The Total Money Makeover”
Skip the preachy bible quotes if they bother you but hear his message… it’s real.

“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants — but debt is the money of slaves.”

ceereelyo (#3,552)

this article really spoke to me, sans the law school loans. I spent my 20s doing all of the above, and even now I still need to get my spending in check now that I am 30, married, and want to do things like have a baby buy a house, etc. I also went through the same career cycle, where now as I’m 30 I’m working in a position that will eventually pay off in the long run, after working a couple of years part time retail and in a start-up. My salary is still somewhat entry level, but I have great benefits and it is stable and secure, and in a couple of years or so after completing further industry education, I can probably move around, learn more about different lines (i’m in insurance), and further succeed (plus my raise will kick in this May so yay). Just got to nip my credit cards in the bud, and luckily after we got married we really built up our savings through our crazy generous friends and family.

I definitely need to take a step back from time to time when I see friends my age who have it figured out career and spending wise – they’re buying houses and starting families, going on exotic vacations and I get a little envious or freaked out to why I’m not doing those things, but then I just say to myself, you can’t dwell on what other people are doing, and you just have to learn from your financial mistakes and career wise, for me, things happened for a reason and I’m pretty happy to see where I’ve landed. Good luck S.L. – I’m right there with you!

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