One of the most common financial complaints I hear from 20-somethings is “I have nothing to show for myself.”
It’s no secret that your 20s are the most defining decade in your life. During our 20s, we are going through periods of self-discovery, exploration and creating the expectation for our future.
No pressure, right?
While many Millennials are focusing on scholastic accomplishments, finding “the one” and learning how to be self-aware, others are doing something that will propel them forward into a future of financial success.
I’m told the line between success and mediocrity is marginal; crossing that line requires only a few extra steps every day.
Here are five money goals that, if you commit to conquering in your 20s, will help you cross the line from mediocrity to success:
1. Get a six-month “Oh Sh*t Fund.”
There are only three certainties in life: death, taxes and crappy things happening.
Oh Sh*t Funds will save your bacon. Imagine getting called into your boss’s office on Monday morning and being told the company you have spent the last two years at can no longer keep you employed.
Ouch! As if the emotional hurt of losing your job isn’t enough, you now have to worry about paying your bills.
No matter how bad your situation is, your landlord, student loan, car loan or credit card bill collectors don’t care.
They will get paid regardless of what is going on in your life. The last thing you want to be worried about is how to pay rent when life is uppercutting you.
Six months of living expenses in an Oh Sh*t Fund will help ease the blows.
Six months may seem like a lot of money, but you will sleep better at night knowing that if you lose your job, you can survive for six months before you land another one.
Tip: Keep your fund in a savings account or money market account. These accounts will allow you to have access to the money when you need it. Do not keep your Oh Sh*t Fund in your checking account; you will be more likely to spend it.
2. Learn to live on a budget.
The dreaded “B” word. Budgeting is not something you can do once and call it a day. Every month, you should create a new budget because every month is different.
When done correctly, living on a budget can feel like you are giving yourself a raise. It allows you to tell your money where to go instead of getting to the end of the month and wondering where it went. If you know you spend $50 a month on coffee, put that in your budget.
There’s no shame in spending money on what you love if, and only if, it is in your budget.
Begin by writing down your income and listing all of your expenses with due dates and amounts. Then, subtract your expenses from your income, and voila, you have created your first budget. Check off each bill as you pay it.
Tip: Don’t forget to incorporate a line item for your Oh Sh*t Fund and your next money goal PYF (pay yourself first).
3. Create the habit of PYF.
If you learn anything about your finances, it should be the importance of PYF, pay yourself first. Start building this habit by setting a goal of saving a minimum of 10 percent of your gross (before tax) income.
For example, if you make $3,000 a month before taxes, put a minimum of $300 into savings for your future.
A good rule of thumb is to put your PYF amount into a savings account to build up your Oh Sh*t Fund.
Once that is built up, the PYF amount can go to whatever you feel is most important for your future; maybe it’s paying off credit cards, saving up to pay cash for a car, putting extra into retirement or saving up for a vacation.
Tip: Talk to your bank if you have a hard time saving. They can set up an automatic transfer from your checking account to a savings account.
4. Stop comparing your financial life to people a decade-plus your senior.
Look, it took your mom and dad years to acquire enough money to buy a nice house, travel frequently and keep the pantry stocked 90 percent of the time. Most people in their 20s, myself included, compare their current situation to people 10-plus years older.
If you want to further increase your dependency on wine, then by all means compare away. Otherwise, take a few steps back, recognize that we all start at the bottom, and the only person you should be comparing yourself to is the person you were yesterday.
Tip: Buy a cup of coffee for someone who has a life you admire. Ask this person about his or her humble beginnings.
Not only will you be inspired, you will also recognize that your dream financial life will come in time.
5. Don’t treat Sallie Mae like she’s your BFF.
So, you are among the millions of Millennials with student loan debt? I get it. I graduated from college in 2010 and had close to $30,000 in student loans. I remember holding that bill and thinking, “Holy crap! That’s a lot of money.”
I found that debt makes decisions for you, while owning your paycheck. I worked two jobs, 70 to 80 hours per week and paid off the $30K in 10 months.
Student loans are not your BFF. Pay them off as quickly as you can. The more debt you have, the harder it is to make decisions based on what you truly want without making decisions because you have to “pay the bills.”
Getting out of debt is no easy task. It requires extreme sacrifice, discipline and hard work. But, think of how well you will sleep when it is all paid off.
Tip: If you are still a student, start paying off student loans now. Your future self will be glad you did. Trying to get out of debt? Start selling extra stuff around the house, pick up a part-time job and cut out frivolous spending.
Much like brushing your teeth, taking a shower or eating, view managing money as something you have to do. When done correctly, it is a skill that allows you to live your dream life.
Don’t waste your 20s blowing through money with nothing to show for it. Start taking back control your life.
Conquer these five money goals while you are in your 20s, and you will be able to worry less about money and more about living the life you deserve.