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Money Tips for 20-Somethings: 24 Ways to Get Smart About Your Finances

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Post-college finances can be tough to manage. Here are two dozen pro-grade tips to help you feel less anxious about money.

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11. Open a Brokerage Account

Once you have a savings account, and if you have any money to spare, you may want to open a brokerage account and put some money in play on the stock market. There is a wide array of ways to grow your money in the market, from investing in conservative mutual funds to buying more aggressive stocks. It is vitally important to note here, however, that you should not confuse your savings account and your brokerage account. A savings account comes with a heck of a lot less risk than a brokerage account. When investing in the stock market, you should be very careful: While the hope is always that your stock will increase in value and make you money, your stock could also lose money, and at absolute worst, its price could go to 0 and you could lose everything. (See: 10 Questions About Investing in Stocks That Every Beginner Asks)

Of course, there are more conservative ways to put your money in play, and if you're not familiar with how markets work and how to research funds or stocks, it's best to play it safe. Sean McComber of Key Financial Group advises his clients to always start with a savings account and work on bringing the value of that account up to about six to 12 months' worth of living expenses, depending upon a client's specific needs. From there, McComber's advises his clients open a money market or certificate of deposit (CD) account, both of which offer slightly higher returns than a savings account, but less liquidity. Only following these two steps should someone go on to invest in a conservative investment allocation, says McComber. Any brokerage account can help you determine the optimal combination of stocks and bonds for conservatively increasing your yield and limiting your risk.

As McComber explains,"By the time a client has filled all three tiers, they have well a well-diversified foundation, with money they can access quickly (savings account), money they can get to in an emergency (money market or CD), and money for higher growth (investment)."

12. Invest In Dividend-Paying Stocks

If you do open a brokerage account and decide to invest in the stock market, consider investing in a stock that pays dividends. A dividend is a portion of a company's earnings that is distributed quarterly based upon how many shares of that company you own (for example, if you own 100 shares and the dividend is $0.44 per quarter, you'll make $44.00 per quarter).

Marc Lichtenfeld, the Chief Income Strategist at the Oxford Club, a private financial organization in Baltimore whose members control an estimated total of $18 billion in investment assets, says that for 20-somethings, his main advice is to invest in stocks that annually raise their dividends, and then reinvest those dividends. (Reinvesting dividends means that you receive your dividends from a company and immediately put them back into your holding of that company, increasing your stake.) By investing in stocks that increase their dividends, Licthenfeld explains that "there is no reason why an investor can't triple their money in 10 years and generate a nearly 10x return in 20 [years], and that's in conservative dividend payers with a one-time investment."

Some solid companies that continually increase their dividends include Procter & Gamble (NYSE:PG), 3M (NYSE:MMM), Johnson & Johnson (NYSE:JNJ), Target (NYSE:TGT), PepsiCo, (NYSE:PEP), Wal-Mart (NYSE:WMT), McDonald's (NYSE:MCD), and Exxon Mobil (NYSE:XOM), to name a few. To see a full list of the stocks that have annually increased their dividends for the last 25 years, click here.

13. Get Insured.

For McComber's clients, the next step is to establish appropriate strategies to make sure their lives are not thrown off kilter by accidents or events outside of their control. In other words, McComber suggests buying insurance.

"Renters insurance, homeowners insurance, vehicle insurance, and umbrella insurance protect us from liability and loss of property while health insurance, life insurance, and disability insurance protect us from unpredictable events and illnesses. Without disability insurance, how will you pay your bills if you're hurt and can't work? Where will you live if your apartment is flooded by your upstairs neighbor? These are the types of concerns we need to cover with a well-designed insurance plan," says McComber. He recommends talking to a financial planner about insurance, but you can also go straight through insurance companies by getting quotes and comparing prices online.

According to Lindsey Pollak, a bestselling author, keynote speaker, and career expert at The Hartford Financial Services Group, all 20-somethings should have disability insurance. "Younger workers may think their health isn't at risk, but disability insurance can cover more mundane reasons to be out of work," she says, adding that pregnancy is the most common reason millennials need to take time away from working, though accidental injuries, such as sprains and concussions, and diagnoses, such as depression and anxiety, are also frequent occurrences.

The Hartford Group compiled a study to find how many young workers know the value of disability insurance. The study found that if young workers were not able to work for over six weeks because of an accident or serious illness, 33% would dip into their savings, 21% would draw from the their 401(k) plan or use credit, and 22% would ask family or friends for a loan. With proper insurance, there would be no need to break into savings or rely on family.

Disability insurance can be arranged through your employer for less than a dollar day, so take advantage of it.

14. Use Technology to Your Advantage

According to Steve Kramer, Vice President of Electronic Payments at Western Union, "One of the strengths of Gen Y is that they're very tech-savvy people. They grew up with the Internet, mobile, and other technologies that can help them establish [budget] goals."

The aforementioned Mint.com comes to mind as a helpful tool, but there are several other valuable programs and apps that can help you keep track of your finances: Try Expensify to keep track of travel expenses, BillGuard to review your credit card statements and quickly report any questionable charges, and Check to help you keep track of and pay your bills, all from one place. Most banks and brokerage firms also have apps that allow you to track your expenses, savings, and investments on the go.
No positions in stocks mentioned.
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