#1 - Saving Today is more Powerful than Saving Tomorrow
If you could receive $10 today or $10 tomorrow, which is worth more? (It's not a trick question!)
Even a single dollar saved today has incredible value when invested over a period of time. When you think of all the ways you spend in your 20s - the morning latte, the $12 green juice, the extra round of drinks at the bar another night ordering from Seamless - these small purchases can quickly add up to $20 a day, $100 a week, $400 a month and so on. At $400 a month, that's a monthly car payment for a really nice car! Whatever we can save in our 20s will be worth 4x the amount over 20 years than if we save that same amount in our late 30s.
The average 25 year old who invests $5,000 a year and earns 10% will have $2,430,366 by retirement.
What if you started at 20 instead of 25? You would now be looking at $3,947,653, almost $4 million dollars! That's $1.5 million more just by saving an extra $25,000 (5 extra years of saving $5,000). How is that possible you ask? The answer isn't new and you've probably heard of it before: Compounding! It has an exponential growth effect on your money.
$5,000 may sound scary, but break it down and it amount to about $13 a day through the course of a year...baby steps.
#2 Your Credit Score Matters
That little number follows us through life. Your credit score is incredibly important in the future when it comes to buying your first home, being approved for a rental property, getting a car or even a loan to start your small business some day. It's easy to blow it off because it doesn't affect us day to day, but when it matters, you'll be wishing you had the highest score possible. So start early. As soon as possible, get a credit card in your name, even if you only buy a packet of gum on it each month, but PAY IT OFF IN FULL. This simple but repetitious act proves you are reliable and accountable for the credit you borrow. It will help you build a solid credit score at a very young age.
#3 Cook at Home
Dining out is expensive and not much better for our waistline. Cooking at home 2-3 night a week can save thousands a year on food costs. You don't need to be a gourmet chef, even a homemade pizza, pasta or salad can be simple and delicious. To make it more fun, take a walk through your local farmer's market and get inspired by fresh ingredients. Leftovers make a great lunch for the office - that saves you another $8-12 (there's your $5,000 for tip #1 above).
Even better, invite your friends over for a cocktail-making party. A basic cocktail in the city will run you $15 on average!!! That hurts your wallet and your future financial stability. You're smarter than that.
#4 Switch to Frugal Mode ON DEMAND
When needed, the ability to switch to a higher savings mode for a short period of time is key. While we would all like to think we can stick to our budget, in a perfect world, stuff happens! Perhaps, you'll need to fly home unexpectedly to take care of a sick parent. We can't plan perfectly and the more we can adapt to the curve balls life throws, the more likely we are to be able to course-correct along the way.
Knowing where you can cut back quickly - taking subways instead of cabs, bringing lunch to work, saying no to going out a night or two with friends - can be the difference between barely making it and comfortably coasting when unforeseen expenses arise.
Whoever said "life isn't a compromise"....was probably a trust-fund kid. Just saying...