20-Something Finance: How to Be Footloose and Frugal

The other day, I posted an answer from GoGirl Finance on the importance of being tight with your money. It inspired a conversation between three friends and me about saving for the future vs. spending in the moment.

As we all wished we had saved more, we agreed with GoGirl Finance that you should get in the budgeting habit as soon as possible. It’s just too easy to spend more than you have. Then before you know it,  you have your own growing domestic deficit. Start by keeping a “financial diary”.  For my friend Meredith, this was an eye-opener.

Take a few days to write down everything you spend your money on. It’s nauseating. I spend $20 dollars before I even start my day. There are just things you can cut back on and then you can put money away to go on a fun trip or something like that.”

That’s the first step. Figure out what you don’t need and what is crucial to your sanity (for one person the $6 mocha frappe is a not crucial, for another it’s the only thing that gets them through the morning).

It’s hard to value saving when your whole life is ahead of you. It’s a battle of the wills – between instant or delayed gratification. But there are ways to be footloose and frugal. Here are a few forty-something tips and traps:

1. Don’t Spend in Excess of Your Lifestyle and Age

When you’re entering into adulthood, it’s tempting to think you should buy big girl furniture, a widescreen TV and a power wardrobe…but don’t do it all at once.

Recalls Samantha, whose first job was in Chicago, “People would just furnish entire apartments on their credit card. It was almost as if they were buying into a lifestyle that was more 30s than 20s.” 

Meredith related to Samantha’s comment…she was one of those credit card spenders..l

“I felt like such a poor person when I first moved to New York. I thought I deserved certain things. I had a salary and there were things I needed to buy to prove I was an adult. That thinking got me nowhere but in debt. It’s much harder to give things up because you have to than because you choose to. You shouldn’t stay home every night…but don’t put yourself in a hole.”

Despite my friends complaints back then, I survived my twenties on a 13 inch TV (and now love watching TV on  my 13 inch AirBook),  so it’s all what you get used to. You don’t have to go full tilt. Target, Ikea and more have plenty of fun home options.Flea markets are fun.

In the end, there are more important things to do in your twenties than spend time in your fully decked out apartment. There will a time where you can afford it and cherish it. In the meantime, I’m sure you can think of a few that are free.

2.  Don’t Call Me Later 

It’s great that you have a job now but that may not always be the case. You know this better than we did. But even without the recent recession, you can’t count on your income automatically increasing with your age.

Two women in the group went through longer than they would have liked periods of unemployment. They learned first hand that saving for a rainy day not only gives you financial health it gives you emotional health. It’s way better than Xanax to deal with joblessness–stress.

If you think you’ll start saving when you get to the next financial floor on the career elevator…. you may have to keep walking.  For well into my 30s I rationalized that I would start seriously saving just after that next apartment, next raise or next promotion. Sheer stupidity. I wish I had started earlier…as did everyone in the discussion regardless of how much they had socked away.

Instant gratification isn’t always all it’s cracked up to be. Start thinking of saving as your Mr. Right now. Those savings play hard to get when they are in the bank but you may be surprised how they grow on you.

3. Be “Experience-Wealthy”

As much as we lamented not having more savings we know we had fun in our twenties. The trips, laughing with friends and adventures stood out…not the material things. We realize now we’d have more in the bank if we had spent differently.

As Meredith shared, “I was frivolous and frittered it away. I was “thing” wealthy rather than “experience” wealthy. It about what you do. You don’t want to look back and say, “I have five Gucci bags but I’ve never been to Europe.”

Having the right bag or right dress didn’t make us any more interesting. What if we had spent our money on an interesting trip or a surfing class instead of a dress? That would have given us confidence …and interesting things to talk about.

4. Don’t Trade Up Too Soon

You spend what you make. That is what Samantha believes.

“If someone handed me a check for 10 million dollars – I would spend to that. You spend what you have and you think those things are important. Your life-style elevates with your income.  To avoid this you really need to decide from the start that you’re going to save x amount every month. And then allot for things that are meaningful. Not a bunch of expensive shoes.”

I can relate. I never bought uber-expensive bags but many of my friends do. I fear the minute I do, I’ll be hooked on the details, the quality, the style.

When we were in our early twenties, Ann Taylor was aspirational.  Then there’s this progression. I bought pants from Banana Republic and then one day I splurged on Theory. Then I discovered Marc Jacobs a salary rise or two later.  Once you trade up, you can’t go back.

So hold off as long as you can unless you think it’s really doing something for you professionally. It is wonderful and fun to discover better fit and beautiful fabrics, but you can dress nicely a lot cheaper today. If you want something to stand out at a party or meeting buy an interesting statement piece/accessory that will spark conversation. Shoes in a standout color will almost always elicit a comment. Then… you can save for Botox, as the ladies joked, “You are going to want that.”

5. There Are Times To Just Go with the Flow

Don’t be that person who itemizes the dinner or drink bill every single time. Do know places that are cheap and so that when you are with a group that gets out of hand you can suggest an affordable meeting place. Of course sometimes it’s not fair, but unless it’s your last dollar, be a team player. You don’t want to become knows as that person. When it’s a smaller group of friends, be honest and forthright and offer to pay the tip or pay what you owe. Lastly, if a friend offers to pick up your check…say thank you. Return the favor when you do have some money. Enough said.

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