The Most Important Financial Tool for 20-Somethings: Skepticism

What are the most important financial decisions to make if the Big 3-0 is still ahead of you? The Work Wife put that question to Linda Bessette, the chief administrative officer for Aptus Financial of Little Rock, who has spent decades helping people create personal financial plans, and her answer was a little bit of a surprise:

Beyond saving at least 10% for retirement — which she recommends from the first paycheck — the most important thing for 20-somethings is to avoid making common mistakes that will eventually have to be undone. 

“You’re talking about a decade when people are extremely vulnerable and don’t really know a lot. I really want to arm people with skepticism.”


1. First on her list of financial decisions to approach with skepticism is insurance. 

“We all need insurance, but that’s one of the things that 20-somethings get clobbered with. They get oversold insurance. You think you are working with an agent who will tell you what you need, but you’re actually working with a salesperson who is trying to get as much as possible out of you.”

One product that sends Bessette through the roof: life insurance on babies. But she also wants you to avoid buying too much life insurance, especially if you don’t have dependents, or complicated policies that are not suitable. For young adults with dependents, shop around for a simple term life insurance policy.


2. Next to avoid: Buying expensive cars that are then very expensive to insure. 

“The problem with that first decade of adult life is every salesman is out there and, male or female, you are ripe for the picking.”


3. Learn to shop around for the best price on money like you would anything else. If you are going to borrow money — for a car or house or anything else — shop for the best interest rate. Do not assume that the friendly car dealership or real estate agent will recommend the best deal. 

Similarly, shop for the best credit card for your needs — and don’t get too many. 

“One or two cards would be maximum,” Bessette says. She recommends checking to help evaluate credit card features, and she wants young adults to stop stressing about their credit scores. “Just keep paying the bill on time.” 


4. Don’t assume you need to buy a house. 

“The notion that if I’m renting, I’m just throwing away money, that’s really not the case,” she says. Buying a more expensive house than you can comfortably afford is very easy, and first-time homebuyers often underestimate the associated costs of insurance and maintenance.

“A lot of people own houses that would be better off paying rent,” Bessette says. 


5. Periodically check on your financial situation to see if what you have is what you want. 

“If you’ve got that queasy feeling [about where money is going], then get rid of it,” she says. Subscriptions, memberships and streaming services are great if you get value out of them, but it’s easy to forget that you are automatically paying for things that you no longer use or forgot to cancel. 

“Literally hundreds of dollars can be going out every month,” Bessette says. 

Keep an eye on necessary expenses, too, like homeowners’, renters and auto insurance. Some inflation is inevitable, but it never hurts to shop around if the prices seem to be getting too high, just to make sure what you are paying is appropriate. Loyalty to one insurance company or agent can be an expensive luxury.


6. Focus on what you really want. When your goals are front-and-center, salespeople will have less influence, and you will be more motivated to get the best deal on what you do want. And one thing everyone wants is financial security, so saving for retirement must be a top priority from the beginning of your adult life.

“Someone in their 20s can’t even imagine being 70,” Bessette says. “I may not know what I will be like 50 years from now, but I know that whatever I’m like, I’ll need money.”


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