Real Life Example: I wish I’d known about the most important things I could do in my twenties when I had no money and wasn’t likely to get some. What practical things could I have been doing?
I love this question because most of us (well, me anyway) just weren’t that smart in the early adult years. I might have spent more on compact discs than I did on rent for a couple years. I loved music and still do, but that choice didn’t help me start smoothly.
Here are three buckets you can start with:
Start Learning What it Costs to be You
You don’t need to torture yourself with budgeting. Rather, build your own awareness of what you’re spending and why. Just the awareness and the occasional review will have a powerful positive impact on your entire financial life.
- Write down what you spend, weekly or monthly
- Split it into three buckets: living expenses, savings, lifestyle expenses.
- it’s probably a lifestyle expense if you can put off the spend to next month
- Take a look at that list weekly or monthly and think about it. Make a paper chart of how much you spent each month and keep it visible.
Manage Your Debt
If you’re between 18 and 24, there’s a strong chance you have debt or are building some up. As of this writing, student loans in America are generally associated with the word, “crisis”. Consumer debt and student loan debt need attention as early as possible in your life. You want your money to grow, not your debt.
- Only use debit cards unless a credit card is required for the transaction. Graduate yourself to credit later.
- If you have credit card debt, make a plan to pay it down and stick to it. If you’re really stuck - it’s ok if you are - seek out a reputable credit counselor.
- If you have student loan debt, please talk with a pro for the best strategy. It’s complicated and confusing, you can make irreversible mistakes, and a pro can sort it out for you quickly. If you don’t have access to a financial planner or advisor, look for a specialist like the folks at studentloanplanner.com.
- If you need to borrow money for that first car, take some time to learn about how loans work and how you can shop for them without feeling pressured.
Your First Jobs and Saving
Saving at this age can be tough and sometimes impossible. Here’s why you should make it possible: the more you can save, the more options you’ll have when your life presents choices. In the early years, that might mean enough savings to cover a $400 emergency (12% of Americans can’t). In your late twenties or thirties, that might mean enough money to comfortably change jobs or buy your own place to live. The more you save, the more you build circumstantial freedom of choice.
- If you’re idle and able, get a job. Find someplace to put your creative and competitive energy. You can learn a lot from even the worst jobs and supervisors.
- If your job has benefits, especially savings benefits like a 401(k) plan, take the time to learn about those benefits and enroll in those savings plans and contribute what you can. And if they provide a match, do everything you can to get that match.
- Now that you have earned income, start learning about tax-deferred savings options like 401(k)s, IRAs, Roth IRAs. The combination of saving early - even a little - and tax deferral adds up over time.
If you can get those three things started in a good direction, your momentum will build steadily. If those three feel like too much, just do the first one. That single thing – the awareness of what it costs to be you – produces great results.
