Growing up, some kids are told, “Eat your vegetables! Put on sunscreen! Say please and thank you!” Of course, I was told those things too, but I was also instilled with an in-depth knowledge about finance, investing and stocks. This is because my father is a financial advisor, and since I was in 3rd grade, he made it his mission to pass on this kind of advice to me.
As I began blogging, I thought it would be special to highlight people close to me who are experts and have interesting perspectives to share. I am grateful to have grown up with a father who has taught me about how to manage money. However, I am always surprised at how little 20-somethings know when it comes to their own finances. My hope is that this blog post would provide helpful tips that, when put into practice, are extremely helpful.
1. Borrow as little money as possible. Money is too easy to borrow, and too difficult to pay back. Especially as a college student, it is easy to accumulate loads of debt trying to pay your way through your education. Credit card debt is especially dangerous, because after a while it can accumulate and sneak up on you. An interesting line my dad pulls out is, “Debt is like cancer, it may not kill you today, but could suffocate you in the future.”
2. Run your finances like a business. Businesses try to improve every single day. They try to make more profit, provide better customer service and do better work. As businesses invest in property and equipment, you should consider what investments you are making in yourself such as traveling, building connections and working on your education. A person, like a business, with some net worth can invest in themselves. Everyone is their own business, learn to run yours effectively.
3. Know how much you have in your bank account. Modern technology makes this chore very easy. Apps like Mint or Quicken, allow you to monitor and track where you are spending your money easily from your smart phone or computer. For example, maybe you notice you are spending too much on eating out at restaurants or entertainment. You can analyze your situation and adjust accordingly. It is also essential to know what upcoming bills you will have along with your approximate income for each month/quarter/year.
4. Assume things don’t always go right. When it comes to finances, it is important to plan for the worst, so when good things happen they are positive surprises. You cannot depend on positive surprises. A wise man (Who this wise man is? We do not know.) once said, “To go on a great journey, he who only assumes storms will never leave. He who only assumes good weather will never make it to the other side.” Storms are inevitable, plan for them.
5. Be aware of costs, even if you’re not paying them. Maybe your parents front the bill for your cell phone, car, rent or tuition. It is still important that you are aware of how much these things cost. In the not-so-distant future, you will begin paying for these things. Calculate how much you would have to work at your present wage to buy something. For example, let’s say you want to buy a $20,000 car. If you are working $10/hour you will have to work 2,000 hours to afford that car.
6. Look at every purchase as a lump sum. Often times when set-up on payment plans, it is easy to look at a purchase just as whatever payment is coming up next. Again, let’s use the car for an example. Don’t think of a car costing you $200 each month, look at its total price of $20,000. This will help you plan for the future and stay on track with your finances.
7. Find a financial mentor. Look for someone to give you insight into how they found financial success. Likely this would be someone in the job or industry you are pursuing, as they faced similar challenges and growth opportunities. If you cannot find a financial mentor, take matters into your own hands and research income opportunities in the career you are choosing. Analyze if that matches up with the lifestyle you want or the area of the country you plan to live in.
As a 20-something student or young professional, you are at a time of transition from being dependent to being an adult. Take control of your financial future by following these tips. And if you want more help on navigating your financial future, shoot my dad an email. Trust me, he lives for dishing out financial advice.
What are we missing? Comment to share what tools or advice you use to navigate your personal finances.