Honestly, it’s never that simple.
Some people will make a ton of money but their spending is out of control, and others will focus so much on saving that they forget what they’re saving for. So where do you want to be? In the middle 😛.
Yes it’s true that ‘There’s always a limit to how much you can save, but not on how much you make’ and therefore you want to be focusing on the making money part. But I disagree with this, because as we’ll see later, you don’t want your twenties to be about making as much money as you can…
Your twenties are for exploring, not committing, and for building essential money making skills. Your focus should be figuring what you like, what fulfils you, what you want to dedicate your next few years on. If you focus too much on the money making side doing something you don’t enjoy, you’ll get burnt out at the age of 25 – not fun. If you focus too much on living cheaply and saving as much as you can, you won’t be enjoying life itself – not fun either. 🙄
So how do you find that perfect point where you’re making enough that you can save for the future, but also you have in turn enough time and flexibility to keep exploring? Well, well… read on 😉.
The Saving Part
You don’t want saving to be your sole focus, but you still want to have it under control. This is especially important if you’re not making much; ever single pound/euro/dollar is doing a job for your future. In order to have the saving part of the equation under control, you want to have certain systems in place. Here they are:
- Reduction of mandatory expenses
This is a one time thing – you make sure the bills, rent and mobile plan you’re paying are as cheap as possible. And then you’re done! If not you’re literally throwing money out the window, and that ain’t very efficient.
- A budget
If you download Revolut, managing your budget could not be easier. As my FM’s budgeting in 10 minutes post says, it takes less than 10 minutes and all it does is guide you. You don’t have to budget every single penny, but having a rough idea of where your money is going can only be a good thing. Check once a month and voila, another pretty much automated system 👌.
- Pay Yourself First
Every time you get an income, take 15% and send it off to savings/investments. This system is key to getting out of the rat race, of building up Cash Cushion and for investing for the future. And if your broker/platform allows direct debits, then it’s all automatic, and you don’t have to check anything!
(not always the best idea 👀)
With these three systems in place, you’re doing more than enough to take care of the saving part. And as you see, most of them take a few minutes to set up and bam! When you’re starting out, this is all you need to focus on for the saving side.
It is true that it also comes down to knowing thyself. If you are someone who frequently overspends and doesn’t quite control the money aspect, then you may need to have a tighter budget or simply increase the percentage you’re saving. You can also work on your mentality by practicing the Essentialist perspective, meaning identifying what is truly important to you and going big on them.
The Making Money Part
Ah! Those two beautiful words that we all think are the keys to being financially stable. But the truth is, as a young adult we don’t need that much money. We have few responsibilities (normally) and we only have ourselves to take care of (in most cases). So why not take advantage of this and use this time to try different vocations? To, as I said before, ‘explore’? This could be an internship in another country, this could be travelling to the other side of the world, this could be spending your days reading non stop.
If you go straight into the whole job-40h-work-week-average-pay cycle, you’ll stick to it and might not even enjoy it. And next thing you know you have a mortgage, a car payment and eventually, kids. Then it’s a bit more complicated to spend days reading or travelling to the other side of the world (from what friends tell me 😛).
(it certainly doesn’t feel like a piece of paper)
All you need during your exploration phase is a Cash Cushion – it could be 6 months or 1 year of expenses. With that, you have the flexibility to quit an internship if it sucks, to pay for upfront expenses, to help you out in case of emergencies.
So really, what part of ‘making money’ part should I focus on? Ideally you want to be making enough so you can put 15% of your income aside and not be struggling too much. So if you’re making 1,000€/month, you’ll be setting aside 150€ for investments and savings. That means you would have 850€ left to live on. Is that enough? Will you be struggling with that amount? If so, then you need to up your income to 1,100€ or 1,200€. How? Working on your money making skills and hustling. Find more clients, more online gigs, figure out a way to make enough to not be living on rice and beans.
A lil’ summary
You want to be finding a balance between saving and making money through systems, because right now your actual focus is exploration and skill building.
For the save $$ side, you want to have systems in place so you don’t have to worry too much about ‘saving more money’ or cutting every expense possible:
- Reduce mandatory expenses
- Have a rough budget
- Always Pay Yourself First
For the make $$ side, you want to be making enough that 15% of saving isn’t much of a stretch. If you’re not sure where your career is heading or what you want to do, build money making skills such as marketing, translating, teaching etc and practicing these to build an online portfolio. Focus on making big money once you’ve figured out a way to do so which fulfils you at the same time.
So there you go, finding a balance is key, as usual. Don’t overspend but don’t overobsess. Don’t overly focus on one or the other. Don’t make money the centre of everything – remember that it is simply a tool, a tool to get to where you want to be. And for most of us, we want to have a happy and fulfilling life. So focus on exploring and enjoy your twenties 😉.