For many Millennials, personal finance is a complicated area. There was never a class in high school, college or even business school that taught everything you need to know about personal finance. And there are people on TV yelling at you with recommendations for what to buy or sell, but that’s not what it’s really about for most Millennials. That’s why I’m here. I try to make personal finance easy to understand. I want you to succeed! In order to do that, you need to have an education and understand your personal financial situation. In this blog post, I want to share with you my top 5 personal finance concepts that I think you should understand and begin tackling by the time you turn 30.
- Goal Setting – Think about what your short and long-term goals are. For some Millennials experiences may be more important than saving for things such a home or retirement. Your goals can be whatever you would like them to be, but you must identify, quantify and prioritize them. Think about weighing your short-term goals more heavily than long term. You have more time than your parents do to achieve your goals.
- Mastering Cash Flow – Spend some time with your cash flow to get a handle on monthly expenses including student loan bills, credit card bills and other obligations. You will need to have a plan for these before you can move on. Create your budget and see if you can stick to it for 3-6 months. By understanding your cash flow, you can re-examine your lifestyle and build discipline so that when extra income comes in, you can afford to save it towards your goals.
- Building Emergency Savings – Having an emergency fund that can cover 3-6 months of living expenses is essential. Life happens. If you quit or lose your job or a medical need arises that emergency fund will come in handy. You don’t want to be caught off guard and not be able to come up with needed funds.
- Saving for Goals – If you have mastered those steps, you can move on to saving for your goals. Some short-term goals may require money to be kept on hand in cash if you can’t afford to take a risk on that money. But, long term goals such as retirement require taking some risk. Even if you can’t save much into a retirement account, something is better than nothing. And if your employer provides a match, try to contribute enough to get that free money. You have lots of time before retirement so by starting to save now, you can take advantage of compounding to grow your assets. If your employer doesn’t offer a plan, there are ways to save on your own through Individual Retirement Accounts (IRA) or Roth IRAs.
- Finding Consistency – It’s up to you to determine what your goals are and how you are going to save for them, but you must be in control of your money. Build good money habits now that will grow with you as life gets more complicated, and it will. Marriage, a home and kids can all make managing your personal finances more complicated but if you established good habits in your 20s, then it will be easier to maintain them. As you advance in your career or work a side hustle, you will also be able to put aside more money towards those big goals.
I hope you find these tips helpful and if you want to educate yourself more check out our book, The Millennial Money Fix, which comes out this August. You can pre-order yourself a copy today.