Financial knowledge is not as complicated as you think. I recently ran across an article on Millennial Money about a 30 year old who had over 1.25 million in savings. As I devoured what he did to accomplish such an impressive feat at a relatively young age, I realized the author had more financial knowledge at 23 then I currently do at 30.
Last week I wrote about 16 ways to make extra money, aka side hustles, and after reading about Grant’s financial independence at 30, I wish I had known about some of this when I was just graduating from college.
At age 22, right after graduating from college, I had to learn some tough lessons about money. Mostly through my own stupidity, I was in desperate need of financial advice that would have saved me from myself… and most likely some money in the process.
Here are 6 tips to consider…..
#1 Student Loan Debt
Graduates from 2016 are facing an average of $37,000 in student loan debt.
In 2009, I had $40,000 in student loan debt and had no clue that:
- A) Student loans are a burden and should take precedent
- B) You need a strategy to pay off student loans
- C) You should attack your student loans prior to moving out on your own for the first time
With most of my undergraduate loans in deferment I only paid the minimums… and waited until 2016 to get rid of them all. Accelerate payments and get rid of your student loans as fast as possible!
#2 No New Car
Instead of paying down my college debt and being debt free at 23, I did what most first time professionals do.. I splurged on a car! Little did I know this would hurt me when I went to buy my first home because of my debt to income ratio (No clue what the meant).
The monthly payment wasn’t bad because I was able to “afford” it, but between my student loans and my car 45% of my income was already accounted for. By used, never new, and delay gratification (see #6) – don’t worry about trying to fit in!
Who needs a budget when you live at home? YOLO ended in 2012. Though teaching doesn’t pay some astronomical, high end salary, learning to budget your first professional income is vital to your future.
Typically, after landing your first adult job, you will start receiving some sizable checks. More than likely, it is the most money you have ever gotten in one check in your life. Landing your first salary position and receiving those first few bi-weekly checks without a budget is comparable to handing a 16 year old a yellow lamborghini for their first car.
Sure the 16 year old can legally drive a lamborghini, but will they use it appropriately? Life gets wildly more expensive the older you get. What might seem like a lot of money living at home or with friends can quickly evaporate once you gain true independence.
It’s best to start learning how to manage your money early rather than later. Check out: Money Life Wax How To Budget Sheet!
#4 Save & Invest
Sometimes I like to play the what if game… like what if I invested in Amazon in 2010 ($118 a share) or Facebook in 2013 ($32 a share). Similar to the movie Hot Tub Time Machine, I would probably be a happy man had I thought more long term and not in the moment.
Practice saving and investing in your early 20’s. Do not wait until retirement to start thinking about retirement. Some financial planners estimate that millennials will need 1.8 million to retire!
A general rule of thumb for saving is to pay yourself first. Your savings goal should be to have your annual salary in savings by age 30.
#5 Start Entrepreneurship at 23 not 28
Both good and bad, we are conditioned from kindergarten to be employees. Follow the rules, walkin in a line, complete tasks, and report to higher up’s. Entrepreneurial skills are often self-taught or inherited from our parents.
Conventional wisdom tells us the only way to have success is go to college and entrepreneurship is risky. Working for 40 years and hoping for social security seems riskier. When you are young you have more time, less family obligations and the ability to earn – take advantage!
#6 Learn how to delay the good
Time and time again, the millennial generation gets a bad wrap for perpetuating the instant gratification culture.
Known for living in the moment, all millennials will inevitably need to put pleasure on hold at some point. Start becoming fiscally responsible in your early 20’s. Pay your own bills and learn to say no rather then yes to every social gathering.
Stop settling for good when down the road you can have the great!!