Money Tips for 20-Somethings: 24 Ways to Get Smart About Your Finances
Post-college finances can be tough to manage. Here are two dozen pro-grade tips to help you feel less anxious about money.
Ideally, you will know exactly how much money you spend every week, as this is the only way to stay true to your budget. Alan Moore, Founder of Wisconsin-based Serenity Financial Consulting, says, "There is one thing that most wealthy individuals have in common -- they know how much they are spending. While 'spend less that you earn' is good advice, you can't follow it without tracking your spending so you know exactly how much is going out every week."
This means tracking everything, down to every single Starbucks (NYSE:SBUX) coffee, every single quarter spent on laundry. Write it all down.
7. Put Saving Ahead of 'Wish List' Spending
To help with your budgeting, it is important that you assign relative value to certain expenses and savings so that you can prioritize your financial health.
As Gene Natali, author of the personal finance book The Missing Semester, tells me via email, "It's as simple as sorting obligations, needs, and wants. Obligations must be taken care of first. Needs vs. wants allow for more flexibility. This allows us as individuals to list (in order of importance) the places our money will be going (also called budgeting)."
Natali believes that one of the major problems with our country's economic well-being, and with that of 20-somethings specifically, is that we allow our spending to dictate how much we save. He argues that we should assign more value to saving than spending, and that our saving goals should dictate our spending. In other words, we should only spend on unnecessary purchases after we've saved a certain amount. That, of course, requires self-discipline.
8. Open a Savings Account
If you do not have a savings account, you should open one immediately. Then, make a point of not withdrawing from it -- only make deposits. Sean McComber, CFP at the Maryland-based Key Financial Group advises, "Make a regular and recurring transfer from your checking account into a savings account every month as part of the bills you pay."
Saving should be a regular thing, just like playing for your rent or electricity. In this way you will accumulate money for when you need it later in life.
9. Open a 401(k)
If your employer offers a 401(k) program, enroll right now. (Leave this tab open, go do it, and come back to finish reading my story.) A 401(k) will allow you to put away a certain percentage of every paycheck automatically. Moreover, the money in your plan will be invested in funds of your choosing, and therefore increase in value over time (decades) with those particular funds.
Most every one of the professionals I spoke to for this story agreed that a 401(k) is a great way for young people to start saving and accumulating wealth. As personal finance advisor Ross Lawrence says, "With student loans, car loans, and run-down one-bedroom studio apartments, your IRA or 401(k) will quickly become your biggest asset. Don't just 'set it and forget it.' Take time to understand what you are investing in and what you can expect going forward."
10. Take Advantage of "Free" Money
One of the best examples of "free" money is when your employer matches contributions to your 401(k) retirement account. If you know your employer matches contributions, there is no reason in the world why you shouldn't open up an account and start putting money away while earning "free" money in the process. Other examples of "free" money might include lunch or travel paid for by your employer.
As San Diego-based financial planner Sean Nisil puts it, "Missing out on free money is stupid. Don't be stupid."
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