The Best (and Worst) Money Decisions We Made in Our 20s

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In my ripe old age of 31, I’m feeling a bit nostalgic. I thought about some of the best and worst money moves we made in our 20s, and how they have affected our financial situation today. The good news is that we have more good decisions than bad decisions. The bad news is that our good decisions came in our late 20s. Even more bad news is that the bad decisions we made have “lost” us more money than our good decisions have gained. It’s a reminder about just how important smart money decisions can be when you are younger.

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Best Decisions

Took Advantage of My Company’s Full 401k Match

When I started with my current employer, they offered a 3.5% match when we contributed 6%.  Luckily for me (any probably many others) they automatically enroll their workers at a 6% contribution.  I am grateful that I had just enough sense to not do anything to it.  Today, I earn a 5% match when I contribute 5%!

Saved $500 per Week at 22 Years Old

After were married, we were a couple of 22 year olds with over $80,000 in combined income and very low living expenses.  We started saving for a home and socked away $500 every week into our Wells Fargo savings account, earning a sad 0.01% interest. I wish I knew about the 3 Bucket Emergency Savings System back then. But hey, at least we were saving!

Fully Funded our Roth IRAs (once)

I can’t find statistics on how many people under 30 maximize their Roth IRA. However, I did find that 21% of Roth IRA owners “make maxing out their contribution a priority”.  So us doing it at all is better than what nearly everyone else is doing.  That’s something to be proud of.  In the last year of our 20s, we both fully funded our Roth IRAs for the first time. As of today, I’ve fully funded my Roth IRA 3 years in a row (both for 2 years in a row).

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Payed off our Mortgage Insurance (PMI) as Quickly as Possible

When we bought our home in 2012, we qualified for an FHA loan and only needed to put 3.5% down.  We put the 3.5% down and received ~$8,000 in seller assistance to make up for the cash we put down.  Our PMI required us to pay PMI for a minimum of 5 years and pay off 21% of the original loan.  We put an extra $475/month towards our mortgage payment for the next 5 years. The first month we were eligible (February 2017) we dropped PMI.  We also stopped overpaying on our mortgage since the interest rate was so low (3.75%).  We immediately had an extra $725 at our disposal each month! See below for what we did with it…

Created a Budget

Several years ago, my wife and I finally created a budget. We started with Mint as a way to set our spending based on different categories. If you are just now starting out, Mint is an incredible tool to get yourself started. The one-two punch of budgeting and instant tracking can keep you honest, and help you make adjustments sooner, instead of waiting until the end of the month to find out you over-spent in some category. We still use Mint today.

Tracked Our Net Worth

Shortly after we created our budget, we created an account with Personal Capital to track our net worth. I feel like Mint is for day-to-day budgeting/goals and Personal Capital is for the long term goals and planning. It really put our situation into perspective on where we were financially, and what we needed to do to accomplish our goals. It was one of the most important things we did for motivation to take this seriously. If you haven’t started tracking your net worth, I strongly encourage you to do so. Personal Capital is a great (and free) way to get started. And, if you use my link, it helps me offset the costs of this blog at no cost to you.

Worst Decisions

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Didn’t Increase My 401k Contribution with My Pay Increases

When I changed companies to the one with the 401k and auto enrollment, my pay jumped from $31,200 (plus some overtime) to ~$52,000.  I could have maximized my 401k at 23 years old and never looked back.  We wouldn’t have missed the money either, because my pay increase ($20,800) was more than the 401k max ($16,500).  I could have maximized my 401k while still enjoying an $80/week increase in my pay.  I had the opportunity to maximize my 401k the next 2 consecutive years as I was promoted each year. And each year I failed to painlessly maximize my 401k. This single financial decision (or inaction) has cost us over $150,000 today.

Spent the $500/wk Savings (mentioned above) on 1 Lavish Vacation
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After essentially putting next to nothing down for our home, instead of saving that money, we went on a vacation that cost more than $20,000 for ~10 nights.  The emotional side of me is very happy that we took that trip.  We had an incredible time together and it meant a lot to us that we left the country and did our own thing for the first time.  That being said, we could have spent half that amount, went on an amazing vacation outside of the country, and kept >$10,000 for ourselves. It’s a huge chunk of money that could be keeping us comfort in our Ally savings account.

Missed Years of Roth IRA Contributions

In the first 11 years of my Roth IRA’s existence (my dad opened it for me when I was 16) I contributed a grand total of $5,800.  From 2011-2016 my income grew 285% and I contributed $0.00 to my Roth IRA in those 6 years.  Those six years could be worth almost $70,000 today if I had maximized them.  25 years from now, not maximizing during those 6 years will cost us almost $400,000.  I had all of the tools to be way ahead in my retirement, but didn’t have the drive or motivation to do it when I could have. I have contributed more in my Roth IRA in the last 750 days than I did in the first 4,748 days.

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After Paying off PMI, We Didn’t Save More

It wasn’t long after our PMI was paid off that we took out a Home Equity Loan and renovated our house for $85,000.  Like the vacation, I have a lot of emotion tied to this decision which clouds sound financial thinking. Pushing the emotion to the side, not saving/investing the $725/month extra cash has put us further behind where we could be today. If we had waited a year, we could have an extra $8,700 and earned a better rate on our home equity loan.

Didn’t Have a Plan For My Annual Bonuses

I started receiving annual bonuses in 2012. They started out modest – $3,600 in 2012. But with each promotion, they have grown at an insane rate (more on that in a future post). For the first 5 years, we didn’t have a plan to spend that money. Because we lacked a plan, that money just flitted away. If, for example, we decided that we would invest every bonus I received in Amazon stock, we would have an extra $283,000 (we’d have half of that if we invested in VTI instead).

What’s Next?

Looking forward, I’m hoping my 30s bring me a lot of great financial decisions that put me in a great place by the time I’m really old (like in my 40s). We’ve managed to build a solid financial foundation in the twilight of our 20s. If we keep it up and continue building on where we are, we will be in great shape when it comes time to retire.

Hopefully in 9 years I can create a post about the best and worst money decisions we made in our 30s, and the good out number the bad 3-1. It will take that kind of commitment to reach a $1,000,000 retirement portfolio in 4,126 days, but I know we’re up to it.

What about you?

Are there any money decisions you made when you were younger that you wish you hadn’t? What about some of the good ones you made? Comment below and let me know!

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