It’s never too young to think about your financial future. Knowing where you want your money to go from the minute you start earning it is vital.
Check out this YouTube channel where Graham Stephan’s runs through some pertinent tips for 18 to 24 year olds in regard to managing their finances. A millennial money guide, the most common financial mistakes and how to avoid them. And most importantly how to build up your net worth.
How to manage your money (18 to 25 year olds)
Summary on tips:
- Spend less money than you make. Seems obvious right? Well we’re not taught at schools about budging, spending, investing. Starting turning this into a habit, have extra money left over at the end of each month. These are your prime savings years.
- Don’t get into debt. Never carry over unpaid money on a credit card and pay interest. Always pay off, in full, your credit card. if the debt isnt helping yo make more money, don’t do it. Make it a priority to pay off any loans.
- Lifestyle Inflation. The more you earn the more your lifestyle will change, no matter what you do. Always pay yourself first before spendiing on your upgraded lifestyle. This means set aside 15-20% of your paycheck every month to savings.
- Emergency fund. You should have the equivalent of 3-6 months of your living expenses saved for emergency situations. This is emergency fund only – at your disposal in case of exactly that – an emergency! Keep this in a high-interest account.
- Credit History. Important to have a credit card to get a credit score, so long as it’s controlled spending on your credit card. Learning how to handle it responsibility. A credit card gives you purchase protection, rewards and cash back on spending and with this you also get the best and lowest rates for mortgages, financing for your car and other items. The lengh of your credit history helps with improving your score.
- Retirement Planning. Best time to contribute to a ROTH RIA is when you’re young and in a lower tax bracket, giving you more time to grow your money into something bigger. with a ROTH RIA all the profit within this account is completely tax free after the age of 59+. Or you could use a 401k which could help reduce your taxable inccome now and postpone to retirement.
In summary, work you hardest in your twenties, save and invest as much as you can. Stay disciplined!