Woman reading up about money concepts like the compounding effect

5 Things I Wish I Knew About Money In My Early 20s

When I was in my early 20s, I always found topics relating to money too complicated. So, I just chose to ignore them. It wasn’t until when I was in my mid-20s that I realised understanding money isn’t always about investments and stocks. I am not denying the fact that we need to educate ourselves in these matters. Yet, before we dive deep into the technical parts, we should first look at our own behaviour around money. Here are five of them I wish I knew early on.



1. Don’t underestimate the compounding effect.

Woman reading up about money concepts like the compounding effect

What is the compounding effect? This term is usually used when investing. Simply put, it’s not about how much you have invested but how long you have invested. Take sedikit-sedikit, lama-lama jadi bukit. The amount you save no matter how little it is will grow no matter what if you are consistent. What more if you save it in the form of gold or stocks. Believe me, 10 years is not that long a way to go as time moves fast. The key here is that the earlier you start, the better.



Start just by opening up a long-term savings account. Whether you choose to save in a savings account, gold or any investment accounts, go ahead and open up an account. Stash within the capacity you know you can commit to. Then, force yourself to forget about them. Don’t look at them and consider this as a gift for your future self.


2. Budgeting is cool!

There is no shame in budgeting. Aside from keeping your finances in check, it will also keep you disciplined. It will make it easier for you to ‘ditch the Joneses’. Remember, a trendy lifestyle does not mean a happy one. If you need more convincing, I highly recommend you to watch the movie The Joneses. It will show you how dangerous it is to lead a lifestyle that is more than your budget



List down your monthly bills and these should be settled before you indulge yourself. Keep track of all your expenses (even the small purchases). Live below or within your means. Another popular example is 30-30-30-10 Budget if the 50-30-20 rule does not work for you. This technique has been summarised simply on her.duit‘s Instagram: 30-30-30-10.


Most importantly, don’t fall into peer pressure. Just because people around you are capable of spending more than you, doesn’t mean you should. As Morgan Housel, the author of The Psychology of Money has stated, “Spending money to show people how much money you have is the fastest way to have less money.” 



3. An emergency fund is always useful.

Even when everything is going alright, start an emergency fund. Some people save in case they lose their job but if you don’t have a solid reason, that is even better. Saving without any commitments can create flexibility. In return, you are in control of how much you want to save, and again, you can save longer. You don’t need to have a lot of money to start saving, you just need discipline.



As taken from Psychology of Money by Morgan Housel, “Don’t increase your income, increase your humility”. The less you desire, the more you can save. When you have fewer things to desire, you will care less about what people think of you. This is all about mindset so once in a while, take the time to refocus your mindset and purpose. Remember: you don’t need a reason to start saving. Just start!


4. The money is not always worth it.

Working woman being happy at her job

Being in a job that compromises your health and values is not worth it. The money you get once in a month may seem nice. But, keep in mind that it only comes once a month and to get it, there are things you have to endure daily. I once took a job with high pay but the hours were long and it was affecting my mental health. Long story short, I decided to quit the job and took another job with lower pay. But guess what? I am happier. And that was the moment where I truly understood when people say, money is not everything.



Take the time to know what’s important to you. List down what you are willing to let go of and what you are not willing to let go of. Don’t give up on looking for jobs or ways that will both give you peace and security. In his book, You Need a Budget, Jesse Mecham introduces a technique called Gut Check by asking the question – What do I want my money to do for me?


This question is not about you listing your holiday wishes, it will help you decide what kind of life you want to have and how you would like to live. It will also help you realise what your priorities are and make plans on how to meet them. So take a breather and really dive deep into what truly matters for you.


5. Money can buy happiness and time.

Working mom hugging her children in front of a laptop

Money is not evil. It becomes evil when you let yourself be controlled by it. Being financially independent means you have the ability to do what you want and for as long as you want to. Having more money also means you can give more. Giving to those in need of helping a friend out can feel nice and that can be your source of happiness too.



Change your mindset that money is the root of all evil. Make it a goal to have enough money so you can “buy” more time. Give more and watch how much joy it brings you. Learn to look at the values you believe in life as well. As mentioned in Chapter 4: Rule Three—Roll with the Punches in the book You Need a Budget by Jesse Mecham, Mecham mentions that values are more resilient than priorities.


For example, if you value family above all else, you will not have any trouble whenever one of them needs help financially. Also, helping them will give you two benefits. One, helping another person out will make you feel good. Two, it will show you that there are more important things in life than money and it is neither evil nor good. At the end of the day, it’s not about money but the mindset you have nurtured around it.



As you can see, you will find out soon enough that being wealthy is the easy part and staying wealthy is the challenging part. How to stay wealthy all depends on your attitude and behaviour towards it. Knowing when enough is important in building our relationship with money too. So, embrace the lessons and obstacles you will face but know that it will all be worth it. One last note, it’s never too late to start!


If you want to start even earlier, check out this article on how to start managing your finances well in university.

An introvert by nature that can only be lured out when there is coffee. Chases deadline for a living while dreaming of her next getaway during her spare time or busy reading her to-be-read list that won’t stop growing.

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