If You Have Savings In Your 20s, You’re Doing Something Right

A few days ago, I read an article containing the absolute worst financial “advice” I’ve ever read. I don’t want to reward it with a link, but if you really want to read it, you can find it by Googling for the title. It’s called If You Have Savings In Your 20s, You’re Doing Something Wrong. It appears at Elite Daily and is written by Lauren Martin.

The entire article is a justification for spending all of your income and more under the idea that your “future self” will bail you out. In short, it sounds like the exact set of excuses I operated under in my twenties. Here’s an excerpt:

I couldn’t enjoy my life because I was too busy worrying about my bank statement. I was too busy watching my savings instead of savoring my youth.

Why did I feel so guilty about spending money on myself and my life?

When did our 20s start to feel like our 40s? When did we get weighed down with the same pressure and stresses as a woman with four kids and a second mortgage?

We don’t have kids. We’ll be renting for the foreseeable future, and we have no problem eating McDonald’s when we’re skint.

I’ve recently figured it out: This pressure, this third-party stress, is ingrained within us. It’s this looming doom our parents carved into our unconscious, only to come out anytime we make an impulse purchase or have to spend the night without Netflix.

But like most things our parents have ingrained in us, we must consciously work to push it out. Because while they may have the best intentions, they don’t always have the best insight.

They want us to save because it provides us with a safety net, but that’s exactly why we shouldn’t. Their need for us to have a safety net is just a giant metaphor for the difference between our parent’s generation and ours.

So, Lauren asks the question why did I feel so guilty about spending money on myself and my life?

Well, I can answer that, because I lived through several years of my twenties where I spent with reckless abandon. I figured out why I felt guilty about spending money on myself and my “life,” and the reason is multifaceted.

First of all, almost everything I spent money on was completely fleeting. If I bought an expensive meal, I enjoyed the experience, sure, but it didn’t last. Two or three days later, I honestly barely remembered it. I couldn’t describe to you a specific meal I had in my twenties as a result of the place that I ate or the food that I consumed. Why? Those kinds of things scarcely matter in life. They just don’t last – they’re instant fulfillment that’s quickly discarded.

Restaurants are just one example of that. Most non-essential things follow that same pattern. You buy them with a burst of pleasure and joy, but then that joy fades out and you’re left with nothing except a lighter pocketbook.

Beyond that, hedonic adaptation is a real problem. Hedonic adaptation is our willingness to very quickly start to view a pleasurable experience as completely normal once we start repeating it. A rare dinner at a fancy restaurant is a great, pleasurable experience, but if you do it weekly, it becomes ordinary and normal but it still costs an arm and a leg.

So, what’s the other concern? The stuff that’s actually lasted in my life are the things I spent time on. I don’t remember fancy meals at restaurants, but I do remember the people I ate with. That experience could have been transplanted almost anywhere else because it was the other people that mattered.

I don’t remember the books that I purchased, but I do remember the books that I read. Thus, it made sense to use the library rather than buy them. The same thing goes for DVDs. The meals I remember most in my life were ones that I made myself or together in the kitchen with my wife.

Most of the things I’ve ever spent money on in my life are completely forgotten. Most of the things I’ve spent real significant time on are things that changed my life for the better.

The final part of the picture? Money, properly used, gives you the opportunity to spend your time in ways that are more important to you. A big part of my ability to walk away from a 9-to-5 job and start off on my own entrepreneurial dreams was due to my realization that buying things that didn’t last in my heart and mind was ensuring that I wasn’t going to have that dream.

Oh, don’t worry, Lauren wasn’t done yet! Here’s another bit from the article.

They want us to save because it provides us with a safety net, but that’s exactly why we shouldn’t. Their need for us to have a safety net is just a giant metaphor for the difference between our parent’s generation and ours.

A safety net is nice, but the real value in saving is that it provides opportunity.

If you’re constantly broke, it’s almost impossible to walk away from a job that doesn’t treat you well unless you already happen to have another job lined up. You can’t launch a business without savings unless you’re allowing a bank to come in, take a bunch of the equity, and suck all the value out of it for you. You can’t afford to spend a big chunk of money on something you can flip quickly for a profit, like when I flipped $1,000 worth of Magic: the Gathering cards into about $4,000 a few years back. You can’t walk away from your job to take care of an unexpected child if you’ve got nothing in the bank.

Money in the bank gives you options, and if you’ve spent that money instead on a bunch of forgettable things, you’ve sacrificed your options for literally nothing.

Let’s keep going!

When you’re too worried about your bank statement, you’re not making your own.

When you live your life around your retirement fund, you may as well retire now. You can’t make a mark on the world if you’re too cheap to live in it.

Refusing to give yourself the luxury of enjoying your money negates the whole point of making it.

Do you want to hear how I enjoy my money?

I enjoy it by being able to work in a t-shirt and a pair of comfortable jeans.

I enjoy it by being able to be sitting at the front step when my kids come flying home off the bus, giving their dad a big hug.

I enjoy it when I’m able to show up at my wife’s work during her lunch break with a bouquet of hand-picked flowers, kissing her on the cheek.

I enjoy it when I can not worry at all about the future and not have to put my hopes and dreams in the hands of a completely unreliable “future me.”

I enjoy it when I’m in control of the decisions in my life and I’m not relying on the whims of the job market being in my favor.

The luxury of enjoying my money comes from having money in the bank and not from having spent it on things that I won’t remember in a week.

When you’re saving for yourself, you’re refusing to bet on yourself.

People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues.

Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking.

Do you want to spend your twenties building your life for a long-lasting and lucrative career? Go to graduate school or build a business or crank out some amazing projects at work. Don’t spend your evenings going out “networking” and definitely don’t spend them buying a bunch of forgettable stuff.

I used to spend many nights out networking with my peers and with people ahead of me on my career path. Do you want to know what it got me? It got me nothing in terms of my career, but it did give me a pretty hefty credit card bill.

Of course, like many people, two years later I found myself on a completely different career trajectory. While I still keep in touch with a few of those people, almost all of the relationships from my previous career have faded away.

Networking is overrated. I’d far rather have five valuable, lasting relationships than two hundred people in my “network.” Spending nights out “networking” never did a thing to build those valuable, lasting relationships, because those people sailed right out of my life the instant one of us had a career or life shift. Going out for “networking” is the equivalent of throwing darts while blindfolded.

Do you want to know which of those people I still connect with? It’s the people I had over to my house for home-cooked meals. It’s the people with whom I watched Office Space on a borrowed projector late at night. It’s the people with whom I watched the World Cup in their living room while eating some of the rice and tofu they had prepared. It’s the people that I sat out in the hall with discussing algorithms and life.

Again, it’s about the time, not the money. You don’t have to spend money to build valuable relationships with people.

If you want to “bet on yourself” in your twenties, do the things I suggested. Step up to the plate at work and take charge of some projects. Connect with an older mentor or two. Go to graduate school. Start building a business in your spare time. The other things, like “networking,” are just excuses to spend money under the pretense that they’ll help your career but are just as forgettable as almost any other way of spending money.

When you have something to bank on, you have nothing to reach for.

When you have nothing to lose, you have everything to gain.

You’d be surprised at how cautious people get with just a few thousand in the bank. This isn’t the time to safeguard — it’s the time to bet all your chips and hope to make it big.

You think that if you have something in the bank, you have nothing to reach for? You’d be surprised at how cautious people get with just a few thousand in the bank? Do you want to know what I did when I had a few thousand in the bank? I quit my very secure, well paying job to stay at home and write for a blog. Please, explain to me the caution in that decision.

The thing is, that’s not a decision I would have made if I didn’t have a few thousand in the bank. Having that few thousand in the bank stripped away most of the fear of making that decision. I knew that if I fell flat on my face, I could pick myself up off the mat and get back on another track without having to starve or to rely on my parents.

That brings up another issue: if your parents are your “emergency fund,” then you are not a financially independent person. A person who is actually on a financial tightrope is a person who cannot possibly risk losing their job unless they have another one firmly in hand. A person who is on a true financial tightrope needs money in the bank for situations where their car fails or they show up to work and find a pink slip.

You need something for those situations or else you’re going to eventually fall to a very difficult situation to get out of. If your “something” for that situation is to call the parents, then you’re not standing on your own two feet.

When you live your life by numbers, you strip yourself of poetry.

What memorable experience does money in the bank give you? How well-rounded can people become sitting at home, watching their limited funds gain interest?

Life is to be lived, not watched from the inside of your rent-controlled apartment.

When you deprive yourself, you don’t learn how to TREAT YO SELF.

It’s good to be cautious and plan for unexpected events. It’s also good, however, to learn how to release and destress. Everything works out, and if you’re smart, able and had a job once, you’ll have one again.

Don’t waste your youth worrying about expenses when you should be worrying about experiences.

In the last seven days, I went to a concert with hundreds of people, I watched a presidential candidate give a speech, I got utterly lost while going off the trails on a hike, I ate a mind-blowing butternut squash risotto, I hung out with a bunch of friends playing board games for several hours, I tasted a crazy chocolate peanut butter stout beer, I read a book that has left me thinking for many days… and many more things that I can’t list here.

The total cost of those things was virtually nothing. The beer and the risotto were homemade. The book came from the library. The concert was free, as was the speech. The board game night was free, too.

People who are careful with their money aren’t “watching life from the inside of their rent-controlled apartment.” They’re actually out there finding experiences and living life. They’re just creative enough and open enough to new experiences to find lots of engaging things to do without emptying your wallet.

This last one, though… this one takes the cake.

When you care about your 401k, your life is just “k.”

When you’re 40, you’re not going to look back on your 20s and be grateful for the few thousand you saved. You’re going to be full of regret.

You’ll regret the experiences you didn’t take, the people you didn’t meet and the fun you didn’t have because you were too worried about a future that came and went.

After all of the money I wasted on completely forgettable things, the one financial thing I don’t regret from my twenties is that I made some retirement contributions.

Why don’t I regret that? It’s because of the power of compound interest. Let me explain it in detail, because this is apparently a concept that even published writers seem to miss out on.

Let’s say, for convenience, that the stock market returns a steady 7% a year going forward. Let’s say that you put away $50 a week into your 401(k) at age 23, adding up to just $2,600 for that year. That amount will impact your paycheck even less; if you’re paid weekly, it’ll only go down $30 or $40. When you’re at age 70, that $50 a week you contributed at age 23 will have turned into $62,518.

Now, if you waited until age 40 to contribute that $50 a week to your 401(k), adding up to just $2,600, it would be much worse. At age 70, that $50 a week you contributed to your 401(k) at age 40 will have turned into $19,791.

The amount is exactly the same – $50 a week – but if you put it off from age 23 to age 40, you lose $42,726.

Contributing to your 401(k), especially in your early twenties, makes retirement savings incredibly easier throughout your entire adult life. It will take the pressure off in your thirties, forties, fifties, and sixties. It will make your entire adult life easier.

On the other hand, not contributing puts extra weight on your future self. You’re choosing to make things harder on yourself throughout the rest of your adult life.

Final Thoughts

In the end, the real message of this article is that there are a lot of excuses for instant gratification.

Most of this article is all about excusing instant gratification for people in their twenties. Almost every argument is that it is okay to spend your money now rather than later.

There’s no consideration whatsoever of approaching one’s spending with thoughtfulness. There’s no consideration whatsoever of the countless options we all have to have meaningful experiences without throwing money at it. There’s no consideration whatsoever of saving your money for meaningful, lasting purchases rather than things you’ll just forget in the next few days.

It all comes across as an unthoughtful series of excuses to spend money now on whatever happens to be the faint desire of the moment, without any degree of self-reflection.

If there’s one simple thing I’ve learned over the past several years of living a more financially responsible life, it’s this: Almost all of the good things in life, the things that have genuinely lifted me up and brought me lasting joy and happiness, were bought with time and not with money. On the flip side of that, the times that I just threw money at something have virtually never brought me lasting joy and almost always brought me sadness when I looked back on them and reflected on the money that I spent and the opportunities that I lost because of that spending.

That’s a guideline that I truly wish I had in my life when I was in my latter years of college and throughout my twenties. If I had followed that kind of guidance, instead of following many of the ideas in this article, I would be in an even better place than I am right now.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.