1. Introduction

“Your 20’s form the foundation of your financial life. You better make sure to navigate through these years wisely in order to enjoy financial stability later on in life.”

Let’s look at how you can effectively handle your money life in your 20’s. This will allow you to enjoy financial freedom in your 30’s and 40’s.


Engaging in debt at a young age is dangerous.


Because it obligates you to your past. Among Peter Dunn, there is no such thing as “good” debt. Debt will always be debt and can best be avoided at any time.


Some debts are relatively better to hold than others. Peter Dunn ranks debts on the Good Debt/Bad Debt scale. Let’s have a quick look at the various existing debts and how they rank on that scale.

Score ‘1’ : Relatively poor ranking: it makes no sense at all to hold this debt.

Score ‘5’ : Relatively good ranking: it makes sense to hold this debt since it aims at improving your overall financial standing in the future.

Student Loans: 4 /Bank Credit Card Debt: 1 /Store Credit Card Debt: 1 / Car Loan: 3 / Home Loan (Mortgage): 5 / Medical Debt: 4 / Lines Of Credit: 2 / Payday Loans: 1 / Personal Loans (Bank): 2 / Personal Loans (Family/Friends): 1 / Tax Debt: 1 / Collection Debt: 1 /Judgments: 2


Peter Dunn provides 3 steps to get out of debt:

  • MAP OUT YOUR DEBT: list ALL your debts from the smallest to the largest. Whom do you owe? What is the amount owed? What is the minimum payment? The new monthly payment? Take your time to answer these questions.
  • BUILD MOMENTUM WITH SMALL DEBT VICTORIES: Begin with paying off all your smallest debts first and getting the balance back to zero. In this way, you free up money that was going towards the monthly minimum payments and you can put it toward the next debt.
  • COMMIT TO A DEBT PAYMENT SCHEDULE: Keep chipping away the debt. Every time you free up money in your budget, apply it to your next lowest debt balance.



Once you handled your debts, it is time you learn how to CONTROL your spending.



As Peter Dunn argues: “You’ll never know for sure what’s going on with your money unless you track it. Controlling your cashflow is the single most financially responsible thing you can do.”

But what makes tracking your spendings so difficult?

Right, our credit cards. The “charge everything and pay it off at the end of the month – mindset”. Among Peter Dunn, this is a bad idea. Over-using your credit card will often lead to overspending.

Besides tracking it, HOW do you actually REDUCE spending?

Among Peter Dunn, there are 4 areas in which you can reduce spending:

  • Groceries: TIP: be aware of impulse buying and catchy – but often meaningless grocery store marketing tactics.
  • Dining out: TIP: Give yourself a weekly dining-out budget and keep track of it.
  • Utilities: TIP:  Don’t label utilities as ‘fixed’ costs. Explore the various money-saving programs utility providers offer.
  • The ‘new necessities’: Do you really need the fastest internet connexion? The most expensive cell phone plan? The newest gadgets? Don’t waste all your money on things you don’t really need.



This is the one of the key chapters of the book. Budgeting means anticipating your spendings in all possible areas: housing, transportation, groceries, utilities, etc.

Budgeting is THE KEY to a financially stable life.

The circle diagram shows how an ideal household budget could look like. The percentages refer to the the amount of your NET INCOME that is spent on a specific category.

Here are all spending items to take into consideration:

  • Housing: usually the largest expense: mortgage, rent, etc.
  • Transportation: can include car payments (leases or loans), gas, insurance, and maintenance. TIP: settle down close to your employment to avoid high transportation costs.
  • Groceries & Dining out: Among studies, ideally not more than 12%
  • Savings: “Pay yourself first”. Always keep 10-15% of your income and save it for your future life.
  • Utilities: electricity, gas, etc.
  • Charity
  • Clothing
  • Medical: Co-pays, prescription-drug costs, fitness memberships, etc.
  • Entertainment: Travel, hobbies, or any other expense that is pleasure-driven
  • Holidays & Gifts
  • Miscellaneous: Category for life-insurance premiums, disability-insurance premiums, pet expenses, and household items.

You can CRAFT your budget in accordance to YOUR LIFESTYLE. The percentages can therefore vary from person to person. The important thing is that you MAKE the budgeting plan at least every month and DO NOT spend more than 100% of your net income.



1. Housing

The purchase of a house will probably be one of the single most important purchases you make in your life.

However, be aware of the MYTH that renting is “throwing away your money”. In fact, Peter Dunn highly supports the idea of renting a house / an apartment until you can truly afford one.

Follow the 10% rule when considering to buy a house: If you can’t afford to get together 10% of the value of the house, then you can’t (truly) afford to own it.

The key to housing success is – again – your budget. If your anticipated mortgage payments will hurt you financially, then don’t buy it!

 2. Car

As Peter Dunn quotes: “In a perfect world, you’d have no car payments”

As seen before, a car loan is not the best investment, since it will depreciate in value from the moment you buy it.

If a car is a real necessity in your life you have 2 options:

1) Buy the car: Buying is a better choice if you drive a high amount of miles/km’s per year, and if you want to avoid having car payments eventually.

2) Lease the car: Leasing is better if you drive relatively few miles/km per year and if you prefer a short-term affordable solution.

Again, ask yourself: “Is there room for a car purchase / lease in my budgeting plan?” If the answer is no, than don’t purchase/lease a car!



“Credit scores are NOT a measure of financial health. I repeat fort he 10 millionth time, your credit score, good or bad, doens’t tell your financial story. It simply tells your borrowing story.”

Anyone can “earn” a good credit score by constantly borrowing and engaging in debt. But does this help you get financially healthy? As we’ve seen, not really.

In order to lend money from an institution, you need a good credit report. A good credit report proves healthy financial habits. Peter Dunn recommends NOT to measure your credit score, but your habits. If your financial habits are healthy, your credit score will follow.


Dunn lays out 6 steps to improve bad credits:

  • Look for any disputable items on your credit report
  • Dispute any inaccuracies
  • Only carry and use one credit card
  • Maintain an availability-to-utilization ratio of 2:1: Your balance should not be more than 50% of your available credit.
  • Don’t cancel a credit card with a long credit history
  • Pay your bills on time


This is tricky, since you haven’t any borrowed money reflecting on your credit report. This can lead to credit denials, increased rental costs and the need for a co-signer. In addition to that, your auto and homeowner’s insurance costs can be higher.

How do you get over this?

Simple: BY GETTING A CREDIT CARD. Does this sounds contradictory with what we’ve seen before? Not really. Peter Dunn believes that people with established credit should not necessarily use a credit card. However, if you have NO credit at all, then you should get a credit card to establish credit.

With that credit card, you can then buy items of which you are SURE that you can re-pay the debts on schedule. In this way, you prove your good financial habits to the creditor.



Ok, so we talked about debts, spending, credit. But what about saving?

As we’ve seen in the budgeting plan, you should always want to save 10-15% of your net income.

Saving money is a necessity. Not only does it allow you to handle short-term, unexpected expenses, it also makes you less dependent on your current income.

In saving money, Peter Dunn proposes to work with the “3 bucket model”.

There are 3 buckets in which your savings can be deposited.  Bucket 3 ALWAYS gets your saved money first, then bucket 1 and at last bucket 2.


This bucket includes your savings for retirement. Always think long-term: your future life will depend on the savings in this bucket.


This is your emergency fund. Life is full of unexpected and involuntary events: you may lose your job, get injured, etc. You should be prepared for this. Peter Dunn recommends to have an amount of three times your monthly expenses into your emergency fund. So – for example – if your monthly expenses are 3.000 USD, then you need at least 9.000 USD in your emergency fund.


Once the first two buckets are filled, the fun is about to begin: INVESTING.

This bucket can be used for anything you want: your wedding, your vacation, your business, etc. If you can fill this bucket successfully, this is the key to never worry about money any more.

If you are new to investing money, Dunn recommends to reach out to a financial advisor.

Your Money Life, Your 20’s

You can invest in:

  • Stock
  • Bond
  • Mutual fund
  • Exchange traded fund
  • Index fund
  • IRA (Individual Retirement Account)
  • 401(k)

Again, if you are unfamiliar with these terms, research them thoroughly or reach out to a financial advisor.

THE KEY here is that you CANNOT WAIT TO INVEST. This is because of the power of compound interest. Time is a very important variable in your investment decisions. It allows your money to grow exponentially.



Last but not least. Insurance plays a critical role in your financial life. The 6 types of insurances you need to think about are:

  • Health insurance
  • Car insurance
  • Renters insurance
  • Homeowners insurance
  • Life insurance
  • Disability insurance

Insurances are tricky, since they require you to be pro-active and think for the future. However, Peter Dunn argues that considering your insurance needs is highly important to create a financially stable life.



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Anthony Perez
My name is Anthony Perez. I'm the creator of Book Success. I always believed in self-education. By absorbing the thoughts and ideas of the smartest individuals on this planet, you can truly move forward in life. My mission is to deliver these key insights to you. In that way, you can grow and prosper in all life areas.Besides my passion for reading, I help individuals build their brand online. Feel free to say hi on social!