To be a normal 20-something is to have no idea what the heck is going on with finances or how to plan for the future. After all, you’re just lucky to still be alive after all the stupid stuff you’ve put your parents through.
While this time is often lovingly described as an awkward ascension into self-awareness, it’s important to be diligent in making choices that help ensure your future financial success. Some simple changes now can have huge impacts on the trajectory into your 40s or even 60s.
According to studies published this year, 75% of Millennials worry about their finances “often” or at least “sometimes.” More interesting yet was the nearly 40% who say they are “chronically stressed” about money.
Taking the following 10 steps will help to reduce current money worries and eliminate financial stress completely as you become a Drunk Millionaire.
(1) Change the Way You Look at Debt
Stop thinking that it’s okay to go into debt. Yeah, it sounds simple- that’s because it is! Debt is the single biggest obstacle keeping you from financial freedom and the ability to build wealth. Don’t accept a credit card balance that grows from month to month. Promise yourself you won’t go into debt again, and then get an accountability partner (i.e. spouse, sibling, parent, or friend).
(2) Pay off Debt
As debt payments can eat up all of your disposable income, it stands to reason that debt also causes a lot of stress for 20 year olds. Typical 20-somethings have to start paying off student loans, credit cards, and those big, fancy, totally ridiculous cars, purchased on debt. Make it a priority to pay off all debt as soon as possible, and at the very least pay off everything while still in your 20s. Here is a good strategy to pay off debt.
(3) Build up a Disaster Fund
Trust me, you tend to sleep a whole lot better when you have a wad of cash sitting in the bank when a rainy day comes along (which it inevitably will). Save up at least 6 months of your expenses and keep it in a separate savings account (we want it to stay safe), and not an investment fund. {This goal should occur after you have paid off all your debts.}
(4) Set Long Term Goals
You need to have something to aim for or else you’ll wander aimlessly through (and maybe beyond) your 20s. Set a retirement age and amount. Most Millennials believe they will never be able to retire. For example, say you would like to save $1 million by the age of 45. If you were to invest $500/month from age 25 to 50, you would most likely hit that $1 million goal!
(5) Build Wealth
So you set a goal to build wealth. Now what? Your 20s is the best time to start working on that goal because the money you invest now has much more time to grow, meaning you won’t have to set aside so much later in life (like when you’re trying to pay for kids college). The trick is to consistently save something every month regardless of how much you save. We go into more details on building wealth here.
(6) Build Your Brand
Your 20s are when you start to figure out who you are and what you can offer to the world. Develop the ability to sell value to your company or maybe other companies if you want to move up. Develop a robust network of colleagues and develop relationships with people who have been in your industry for a long time. They are often full of the best advice at the relatively small cost of a cup of coffee. Networking is very important with regards to increasing your earning potential.
(7) Learn, Learn, and Learn
You (hopefully) learned a lot in high school and probably even some in college. Now that you have a real job, you quickly realize it’s sink or swim, and you have a lot to learn that they didn’t teach you in college. Thus, you must hit the learning curve hard. Take advantage of any trainings your company offers, join a mentorship program, or even buy applicable books.
(8) Start Side Hustling
More money brings financial security, plus the ability to pay off debt quicker and build wealth faster. Having another income stream beyond your main job also brings diversification which is good in the current challenging job market. A side hustle is simply a side job or jig that earns extra income. When I was in college, I did landscaping work for old ladies during the evenings and weekends for $20/hour. This was in addition to my full time job and helped me graduate college nearly debt free. Find something you’re passionate about. If you have a skill, someone will pay you for it.
(9) Diversify your Skillset
Speaking of skills, you should learn some new ones while in your 20s. This can include skills like scuba diving, woodworking, drawing, computer graphic design, or anything else that looks enjoyable. Pick a few of the skills you have the most passion for and hone them in over a period of years. You can then use them as a form of side hustle, or to just gain a new hobby that increases your quality of life. I recently got into woodworking. I am by no means an expert at it, but I have picked up enough skills to make several Christmas presents this year!
(10) Insurance
I’ll admit, this one is kind of boring. However, it is very important! Insurance at its most basic level is protection against risk. Many forms of insurance are very cheap in your 20s and as such are a no-brainer. For instance, if you rent a house, you should have renter’s insurance. It costs us about $8.00/month for $25,000 in coverage. Some insurance policies you MUST have in place in your 20s are:
- Renter’s or Homeowner’s Insurance
- Health Insurance
- Term Life Insurance (No Whole Life Insurance)
- Disability Insurance (Usually through an employer)
- Vehicle Insurance
The moral of the story is: protect yourself, your new family, and your stuff.
Are there any other financial goals a 20-something should aim for? Share them with us in the comments section below!
Learn more about our Four-Step Program here.
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