1) Knowing where your money is going.
You’re part of a tech-savvy generation. If you aren’t tracking your spending online yet, you should be. Websites like Mint, You Need a Budget, or Manilla can serve as a starting point for not only tracking your spending, but setting parameters around it as well. Gone are the days of writing things down. Get synced in to receive automatic alerts when you’ve gone over in certain categories and watch your net worth grow as you begin saving money and paying down debts. Cash flow management (or mismanagement) can make or break your financial health. Once you know where your money is currently being spent, you’ll be able to make adjustments as needed.
2) Appropriately investing for your future.
This goes for anywhere from saving for retirement to furthering your education through an advanced degree or career training. As you’ve likely been told many times from Gen X & Boomers alike, “the earlier you start saving, the better” and “never stop learning.”
Both of these are true. While saving early is important, it’s the habit of doing so automatically and on an ongoing basis that is important here. By setting yourself up on automatic paycheck deductions or transfers to savings accounts and “forgetting about it” (except for the one or two times a year that you review and update it), you’re getting into the habit of putting money aside for your future. A habit that should likely continue until retirement. In addition, one of your most valuable assets right now is your human capital, or ability to earn an income. The more you learn and the further you advance yourself, it’s likely that you’ll also enhance your earnings capabilities and propensity to save as well.
3) Protecting Yourself.
As a young professional, this means ensuring you have adequate life, health, disability, and even auto and home or renters insurance in place. Considerations in these areas include your marital status, any children, income and asset levels, debt load and more. Check on deductibles and coverage amounts at least annually as this is a time when your life is likely frequently changing and you’ll want to make sure you’re properly covered throughout. Also, you may be young, but you still need an estate plan. Making sure you have a Will and Powers of Attorney in place is important should something happen to you. Ensure your wishes are communicated and documented and that the right people are making decisions on your behalf.
4) Asking questions.
This is a habit that applies to life in general, but since we’re talking about finances, it’s incredibly important that you understand what is happening with your money. Ask questions of your CPA, your attorney, and your financial planner. Read books on personal finance. Read the fine print on contracts, agreements and anything else you put your signature on and ask questions before signing. Knowledge is power when it comes to your money and there are no stupid questions.
5) Saying No (thank you).
There are about a million things (probably more) that could pop up and derail your financial plan and priorities. Emergency situations aside, it’s typically the vacations, dining out expenses, impulse big ticket purchases, and overall fear of missing out (FOMO) that causes a financial plan to go awry. Learning to be as protective of your money as you are of your time is key. You only have so much to allocate over a set period. Prioritize for those areas that matter most and make a commitment to say “no” to the rest, even if it does mean turning down lunch, happy hour, or a weekend getaway. Be nice about it though, the goal is for people to still want to hang out with you.
6) Having an accountability partner.
Personal coaches are fantastic for careers and overall life management. They encourage, provoke, and help to chart your path and goals along the way. Why shouldn’t you have someone who helps you do this with your finances? Whether it’s a significant other, friend, family member or professional – get in the habit of having someone hold you accountable for your spending, savings and goal progress. Having someone to help keep you on track over the years will only benefit your financial health.
Mary Beth Storjohann, CFP® is the founder of Workable Wealth, a fee-only financial planning firm for Gen Y, by Gen Y. She works with those in their 20s and 30s to help them plan, organize and gain confidence in their financial lives. You can find her on twitter at @marybstorj.
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