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8 Essential Tips To Save More Money In Your 20's

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Written by Ryan Scribner
Updated on January 10, 2019

How To Save Money In Your 20's

Guest post from Ryan Reeves of Investing City.

Let’s face it. Saving money sucks. It’s not fun, it’s not cool, and it’s not easy. No one likes a cheap-skate right?

Regardless, saving money is important. It enables us to live the life we dream of and achieve the freedom we so desire.

But first, a story.

Delaying Gratification

Nearly 60 years ago, Walter Mischel and his team of Stanford psychologists, performed one of the most popular studies ever.

Here’s how it went.

Mischel tested hundreds of young children. The kids were told that they could either eat a marshmallow now or wait 15 minutes to receive two marshmallows. Then, the researcher would leave the fluffy dessert on the table and leave the room.

As you can imagine, the video footage of the kids is quite entertaining. Fidgeting, squirming, staring at the marshmallow.

The study seems innocent, but over a decade later, the results of the famed Marshmallow Experiment were eye-opening. The kids who delayed gratification and received two marshmallows went on to get better SAT scores, had lower levels of drug and alcohol abuse and were even healthier.

Further, the researchers followed up with the test subjects over 40 years later and the results were the same. The ones who delayed gratification as children were more likely to succeed in life.

Why do I tell this story?

Well, it’s the same way with money. By delaying gratification, we set ourselves up for success. At times, it is difficult to see this. But if we know “why” we need to save, it can helps us to actually do it.

As the philosopher Friedrich Nietzsche once said, “He who has a why to live can bear almost any how.”

I’d like to alter that a little, “He who has a why to save can bear almost any how.”

Here’s why you need to start saving now.

The Why Of Saving Money

The #1 investing secret is time. Not elaborate trading strategies or insane amounts of research. It’s time.

Let’s run through a scenario.

Picture this: Phil and Todd are new college graduates and best friends. They both end up getting great jobs at the same investment bank right out of school.

However, Phil knows about the power of compound interest so he saves as much as he can during the first year of work. Todd, on the other hand, doesn’t really care because it isn’t interest-ing (pun intended).

After expenses, Phil saves almost $11,000 during the first year, $10,733.80 to be exact. Todd doesn’t save anything because it is too difficult (he would’ve eaten the marshmallow immediately).

Phil puts $10,733.80 into the stock market. Todd, well, he just bought a new car.

Fast forward 30 years, both guys are 53 years old. Phil hasn’t put a penny more into the market since that first year after college. On the other hand, Todd wakes up one night in a sweat. He realizes he hasn’t thought about retirement at all. He was too busy trying to impress everyone with lavish vacations, European sports cars, and a ritzy zip code.

So he buckles down and decides he needs to start saving and investing as soon as possible. He makes quite a bit of money so he starts socking away $20,000 a year. And he does this for the next 20 years. In total, he saves $400,000.

Fast forward another 20 years, and both guys are 73.

Who do you think came out ahead?

Phil who put less than $11,000 dollars in the stock market? Or Todd, who saved and invested $20,000 a year for 20 years?

If both men received the same 10% returns over time, the results actually come out as a tie. Well, Phil will be 5 cents poorer.

Phil’s total at 73: $1,260,049.94
Todd’s total at 73: $1,260,049.99
Phil’s amount put into the market: $10,733.80
Todd’s amount put into the market: $400,000

There is so much financial advice circulating in the news and on blogs and on TV, but this lesson is really the only one you need to grasp. Be Phil, not Todd. In finance, rather than counseling, time heals. Let time do its thing.

But this can only happen if you start saving. NOW.

The more you save, the younger you are, the better off you will be. It’s that simple. The power of compound interest will take care of the rest. So now that we can see the “why” of saving money, let’s dive into the “how.”

The How Of Saving Money

Here is the part of the article where we zoom in and break the problem down into actionable steps so we can make daily progress.

Not to be Captain Obvious, but the key to saving money is not spending it. We’ll give some tips and tricks, but fundamentally, it’s that easy. Spending fewer dollars than you make is the only way money will accumulate.

Let me preface this with something important. There is more to life than money, so if you find yourself extremely miserable with no friends because you are doing so well at saving money, maybe you need to tone it down.

Ok, got that off my chest…

Let’s skip the chit-chat and dive right in. Here are eight underrated ways to save money.

1. Don’t eat out.

Eating out is fun and it is enticing. But it adds up. Eating 3 times a week at Chipotle could put you back about $30. Over a year, that’s $360. Nothing to sneeze at. As an added bonus, if you learn to cook, you can save money and have exactly the food you want.

2. Make your own fun.

A lot of times, we spend money on experiences; going out to the movies, bowling and whatever else sounds fun. But there are so many ways to have a good time without spending money. We can play sports, games, or explore. Creativity wins you extra points!

3. Care less about what people think.

If you need to have the latest gadgets and the coolest shoes, you might not be cut out to save a lot of money. The good news is you can change. At the root of buying stuff for ourselves is caring too much what people think of us. We try to impress them by buying nice things. You know what is more impressive? Being kind and caring about people, not what they think.

4. Look for deals.

If you must spend money, make sure to do a little research to get the best deal you can. Some people take this really far and become professional coupon clippers (I kid you not). One about buying cheap stuff is that it can actually be a worse deal in the long term if it doesn’t last. Keep that in mind.

5. Walk or ride a bike more places.

Gas is a big expense, especially if you live in a city. While it may be impractical to ride your bike everywhere, try to do it whenever possible. You’ll get in great shape and save money in the process.

6. Be single.

I’m joking... partly. If your significant other guilts you into spending inordinate amounts of money on them, it might not be the healthiest relationship. While it’s unlikely you’re looking for relationship advice here, this can be a tell-tale sign. Your significant other should like you for you, not your money.

7. Don’t carry around cash.

Cash is dangerous because it is so easy to spend. Since you don’t see your bank account number go down, it feels like Monopoly money. Instead, deposit all cash into your bank as soon as possible. By doing this, you will increase the friction it takes to spend money lowering the odds you will actually do it.

Some will find that it is actually BETTER to spend cash! By seeing the money leaving you hand, it gives you a better idea of how much money you are spending. Try them both and see which strategy works for you.

8. Increase your income.

Often, most financial blogs get into the nitty-gritty of saving money like we’ve done here. An underrates way to save more money is to keep your spending habits the same but make more money. You can do this by hustling (washing cars, cleaning, helping out), learning and implementing new skills, or investing smarter. By starting your own little business, you can make a nice chunk of change. You can walk dogs, do website design, cater, sell products online and so much more. It doesn’t have to be elaborate, just start something and learn as you go.

Conclusion: Final Thoughts

Though saving money isn’t fun, it will change your life. If you can wait for two marshmallows, you will increase your odds of living the life of your dreams exponentially.

One other tip that has worked well for myself and others is coming up with a monthly budget. Simply writing your expenses out on paper can help you to realize exactly where it is going!

Delay gratification. Remember “the why.” Be Phil, not Todd. And try out these eight tips for saving money.

You’ll be on your way to becoming a millionaire before you know it. If you’ve read all the way up until this part, it shows you really care about this. So I’d put my money on you!

Happy Saving,

Ryan Reeves

Ryan Reeves is CEO and founder of Investing City, a blog to help people invest better. 

  • Great post Ryan. I just want to add the following tips, which back up a lot of what you're saying and might be helpful to some people:

    1. Create a budget and track your spending
    2. Live with a roommate; this can help you cut down many of your bills
    3. Automate your savings; this way you don't even have to think about it
    4. Use coupouns; there are many great apps for this nowadays
    5. Build an emergency fund; make sure it's fairly easy to access

  • Regarding Savings, I do a lot but I do not have knowledge about investing in trades and I have been advised for managed accounts but don't know how to choose one that doesn't scam. Can you please help with finding one perfect investment platform?

  • Hi there just wanhted to give you a quicck heads up.
    The text in your poost seem to be running off the screen in Chrome.

    I'm not sure if this is a format issue or something to do with
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    The layout look great though! Hope you get
    the problem solved soon. Cheers

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