Mo Money: Five Steps to Build Wealth in your 20s

mo money - 5 steps building wealth 20s

When we first started budgeting and saving, we found different parts of the process challenging. I had no problem going days without an impulse buy, but I hated tracking my purchases or paycheck amounts. Sam meticulously monitored our expenses and income, but as a craft beer fan fanatic, he tended to rack up unplanned purchases each month.

This list is a short summary of the subjects I plan to tackle over the next few weeks in the Mo Money series. It’s not vital to change all these things in your life at one time. Focus on one or two points that speak to you and the challenges you face with managing your finances. If there’s one thing I’ve learned in this whole process, it’s that changing your worst habits and tackling the scariest financial burdens yield the greatest rewards. Getting to the root of your struggles helps everything fall into place.

KNOW YOUR INCOME AND EXPENSES

It sounds simple enough, right? Right.

When we first started budgeting I honestly had no idea how much money I spent on groceries, or even the value of my paycheck. These days, I know how much money I make and where it goes. I can sense when I’ve over-spent in a category because I know what quantifies as “normal” spending in a month.

One thing that really hit home for me during FPU was the notion of telling my money where to go instead of wondering where it went. Budgets aren’t something that are stagnant from month to month: maybe you’ve got a vacation planned, or you need to buy a wedding present. You can adjust your budget for those kinds of one-off purchases every month if you have a firm sense of what you must spend in housing, food, utilities, debt payments, and transportation. Once you know the costs of things you must pay every month, you can see what funds are left for secondary expenses (paying down debt, saving, travel, clothes, socializing, etc.).

Even though it might seem annoying, do yourself a favor and track your income and expenses for one month. This will help you determine where you are spending the most amount of money every month and if it’s possible to cut back anywhere.

You can download the Monthly Cash Flow budget we fill out every month (yes, every month!) to get started with your tracking! Don’t worry about the “budget” section for now; focus on tracking what you’re spending, and we’ll get to setting up a budget later.

UNDERSTAND YOUR PRIORITIES

We would rather save our money and have an awesome meal while traveling the world than get the same takeout meals for lunch every day at work.In fact, we rarely exceed $50 (total…for the two of us!) in purchasing food from restaurants every month.It requires a lot of effort to pack lunches and cook enough food, but we know we are saving money for the thing that is most important to us: experiencing other cultures, trying new things, and seeing some unbelievable places.

But maybe travel isn’t important to you. Maybe you like meeting up with your friends at a local restaurant every week. Or you have a hobby that keeps you sane. Whatever it is that you find most valuable, make sure you remind yourself of how much you’d rather have that thing over anything else that tries grabbing your attention over the month. Financial temptation is everywhere, but keep your eyes on the prize.

TACKLE DEBT FIRST

It’s important to set aside the right amount of money to cover your basics, as mentioned above, but if you’re serious about truly growing your wealth, you need to free yourself from debt. If you have non-mortgage debt—credit card debt, car loans, student loans, any other loans—throw all your spare cash at your debt payments.

Make sure you make the largest payments possible towards your loans every month, even if this means cutting way, way back on things you currently enjoy. This might mean limiting the number of times you dine out, turning down a shoe sale, or alternative work commutes. Even if these things seem like a burden now (jump to the end of this post for the takeaway point), nothing has made a greater impact in our personal finances than freeing ourselves from non-mortgage debt. Now that we are debt-free, we can do so many more things that used to stress us out when we watched our bank account dwindle.

HUSTLE. HARD.

Everyone has a talent or skill they can put to use to generate extra income. I do freelance work as a writer and graphic designer, and worked part-time at Family Video for two years. Sam picks up extra projects at work and coached high school baseball. I’ve seen other friends do personal training, videography, dog-sitting, house-sitting, crafts for special events, website design, knit beanies and scarves, handy-man jobs, playing an instrument at weddings…the list goes on. Believe me, you have a skill that someone wants, and they’ll pay for it!

The catch? It’s called hustlin’ for a reason: it requires effort. You’re going to need to put in time that might otherwise be put to use binge-watching Netflix (#houseofcards). But putting in this extra effort every month can help you make the extra money you want to put towards things you really, really want. Or maybe it’ll cover your holiday gift-buying so you’re not stressing out in December. Since this is considered “extra” income and requires extra time, feel free to put this towards those little somethings that make you feel good.

“LIVE LIKE NO ONE ELSE.”

The other phrase Dave Ramsey loves to say time and time again is this: “To live like no one else, you need to live like no one else.” I’ve stopped counting the number of times people have called us frugal, cheap, stingy, and—yes—crazy. Instead, I’ve started focusing on how many of our peers ask how we’re able to see and do all the things we’ve been able to accomplish in our short lives.

So what’s our secret? In truth, we are a little crazy. We are willing to do things that most of our peers might deem strange or unnecessary. We prepare almost all of our meals at home instead of picking up take-out for dinner. We’ll walk two miles instead of driving or taking an Uber. We invite friends over for BYOB fun instead of meeting at a bar every weekend. We’ll volunteer at community events instead of paying money for a ticket.

We do these crazy things because we’ve our sights are set on something bigger than whatever convenience tempts us at the moment. By constantly reminding ourselves of our long-term financial goals, we’ve escaped debt, saved for our future, and we’re building wealth. Small day-to-day sacrifices really do pay off in the long run—literally!

This is just the tip of the iceberg, but it’s a pretty comprehensive overview of how we’ve managed to live the life of our dreams so young in our lives. I hope one of these points speaks to you and your biggest financial struggle.

Do you plan on making any changes in your life after reading these tips? Share in the comments!

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