They say hindsight is 20/20, but really hindsight is more like a big ole slap in the face if you ask me.
The things I’ve learned about personal finance in the past five years are really common sense and it makes me mad to a degree that these lessons weren’t something I learned early in life. That’s why when I see 20-year-olds making dumb money moves, I don’t judge or criticize. I know exactly what they are going through because I’ve been there — however, it’s not right if I commonly dismiss it and say, “they’ll learn.”
I know it’s hard to take advice from anyone, especially when it comes to your money. So even though I reserve judgment, I do ask questions in a way that will provoke said 20-year-old to think about their future goals and it doesn’t have to be obvious.
It could be something as simple as, “Hey, did you figure out how much you need to save to go on that trip this summer?” This often leads to some thoughtful conversation where I can drop a little knowledge without sounding like I’m trying to be their mama.
It certainly helps that I use my love of writing to pass along what I’ve learned about personal finance. I figure if someone actually seeks you out for advice, they are ready to receive it. Well, let me tell you, I have learned a lot that I can afford to pass along to those facing similar challenges. Since no one was around sounding off about my lack of financial wisdom or offering me sound advice when I needed it most, I want to make sure I’m providing the 411 .
Today I’m not going in on anyone about reasons their budget sucks and all that good stuff. I’m simply going to provide a helpful, yet real, financial checklist for millennials who want to get their finances in order.
Millennial Financial Checklist
1) Track your expenses and start a darn budget.
First up on this financial checklist is starting a budget. This is as basic as it gets! This is your foundation and without it, your money will be all jacked up. Don’t make it hard either. Just get a pen and piece of paper and write down what you spend. If you’re spending more than you make, cut something out. Simple as that! Seriously, reign in your spending or you will eventually end up in debt.
Some free tools that will help you as you get started budgeting are Personal Capital, which is a free tool I use to help track my expenses and keep up with my net worth. You can also use the free version of Every Dollar which is a software tool created by Dave Ramsey that helps you budget every last penny each month.
For further reading, check out How To Create a Budget That Won’t Fail.
2) Build an Emergency Fund.
The second thing on this financial checklist is an emergency fund. Don’t get all in your feelings about saving 3 to 6 months worth of income for emergencies.
If you’re in your early 20’s that amount might not be much, but you need enough in your emergency fund to take care of yourself if you become unemployed, face a medical emergency, or need car repairs. If you’re still staying at home with your parents and you aren’t frontin’ any of the bills, don’t sweat having a big emergency fund (although I’m sure your parents will appreciate your effort if you did).
Save enough to cover minor inconveniences that could catch you off guard. Flat tires, new car fund, emergency room bills, etc. If you’re on your own, beef up your fund to reflect your expenses, plain and simple. If you’re paying half of the rent with a roommate, make sure you have enough to cover your portion of the rent for an extended period.
Make sure you have enough so you can at least buy groceries and put gas in your car while you look for another job. Please note, your emergency fund is not for unexpected entertainment purposes such as purchasing Drake, Beyonce, Taylor, or Rihanna tickets. Please, just don’t.
For further reading, check out Emergency Fund: What You Need to Know.
3) Save separately to see Drake, Beyonce, Taylor, or Rihanna.
This leads me right into the third essential on this financial checklist. If you want to go see these folks in concert, there’s nothing wrong with it (I mean, there are 3 or 4 I would like to see myself). Just make sure you plan accordingly for these forms of entertainment.
What is important to you? Do you like to go to concerts or do you prefer a summer trip abroad? Whatever you decide, plan and save for it. There’s nothing wrong with a splurge now and then. These types of expenses become a problem when you reach for your Visa or Mastercard to pay for them with no idea how you’re going to pay it back.
For further reading check out How to Have a Life and a Budget.
4) Credit cards — use them if you can handle them.
Next up on this little financial checklist is credit cards.
If you decide to use credit, there’s nothing wrong with that either if you have a J-O-B. If you don’t have one of those, having a credit card is pointless. Credit cards are a loan. You are swiping that card with the intentions of paying back every single dime you charge. If you’re using it, please have money already set aside to pay back what you’ve borrowed in full each month. Otherwise, you’re just asking for trouble. I know because I’ve been there and done that.
For further reading, check out How to Responsibly Build Credit.
5) Let’s stay with the credit for a moment — keep tabs on your credit report and credit score.
“But I’m only twenty something, why do I need to know what my credit score is or what’s on my report?”
Ha! I laugh when I hear this, but it’s truly not funny at all. Do you know how many folks I know who have gotten cable, cell phones, and rent to own furniture in their kid’s name? ALOT (po’ children).
It is absolutely important you check your credit score and report to make sure you haven’t been financing the dreams of other folks! And let’s pray that those folks aren’t your peoples, okay? Moving along…
For further reading, check out Credit 101 and How to Build a Good Credit Score+Credit Sesame Review
6) Debt. If you have it, work on getting rid of it.
Next up on this financial checklist is debt!
If you’ve financed anything, including your education, now is the perfect time to work on getting rid of it. The longer you keep it, the more it’s going to cost you.
Think about those payments you’re making. Regardless if it’s $50 a month or $300 a month, it’s a payment you could be using to save up for something you really want or actually need.
It’s also the money you can be investing now while compound interest is able to work greatly in your favor. The earlier you can start investing money, the better. Knock out those debts and put that money to better use.
If you’re interested in refinancing your student loans to a lower, single interest rate – I recommend checking out LendEdu.
This 3 question survey will only take a few minutes and there’s no commitment necessary. Fill out the questionnaire to see if you qualify for a lower rate and compare up to 12 different lenders.
For further reading, check out How to Tackle Student Loan Debt.
7) Start investing for retirement now!
I know it seems like everyone encourages you to invest in your twenties, but there is a good reason for it. For one, you can afford the risk. Your investment strategy can afford a little more risk than someone in their late forties.
For instance, when I started investing for retirement, my portfolio consisted mostly of stocks and very little bonds. As I crept towards thirty, my portfolio started becoming a bit more conservative. Every year as you get older, your investment strategy should adjust to reflect the amount of risk your investment strategy is capable of handling.
Second, you have more time for compound interest to do its thing. Someone who invests $1,000 from age 25 to 35 will have more money than someone who invests $1,000 from age 35 to 60 because of compound interest.
You can get a handle on your retirement by using something like Personal Capital’s Wealth Management Tool (non-affiliate).
8) Get life insurance.
Sadly, it’s becoming the new normal to see folks creating Go-Fund-Me accounts to bury their loved ones. No one likes to think about dying, especially if you’re young, but this is something everyone has to plan for regardless of their age. You don’t need much either.
Find a simple policy with a payout of around $25,000 to $30,000 to handle your burial expenses. Of course, if you have children or others who rely solely on your care, you would need an amount reflective of your situation.
To find the best policy that meets your needs, I recommend comparing rates and policies using this free tool, Policy Genius.
For further reading, check out Life Insurance: You Need Some, Here’s Why
9) Start a side hustle.
The next thing on this financial checklist involves making more money!
Side hustling is something I wish I knew about earlier because it can change the game for many. If you’re in debt, you can get out of debt faster. If you want to save for a down payment on a house, you can accelerate your savings. If you’re sick of your job, you can hustle your way into entrepreneurship. Most importantly, with side hustling you can diversify your income. It’s important to never depend on one source of income because if the gig falls through, you can find yourself up the creek without a paddle. Create multiple streams of income now while you’re young. You’ll thank yourself later.
Most importantly, with side hustling you can diversify your income. It’s important to never depend on one source of income because if the gig falls through, you can find yourself up the creek without a paddle. Create multiple streams of income now while you’re young. You’ll thank yourself later.
My preferred side hustle is blogging because I can work freelance and build passive income at the same time. Do you want to start a blog of your own? If so, I’ve created a DETAILED tutorial to help you start a blog for cheap. Rates begin at $3.49 per month if you use this link.
You will also receive a free website domain (your very own web address), a $15.00 value, for FREE if you purchase using my Bluehost link and purchase at least 12 months of web hosting. Being self-hosted is the business if you’re thinking of taking your blog and/or business to the next level. My freelance business is doing alright if I say so myself;)
10) Last, don’t focus on what others have, focus on what you want.
This last one is important and it’s based on the principle of not keeping up with the Joneses. The lifestyle they are living is probably financed and they can barely afford to keep up with it.
You never truly know looking in from the outside what’s going on with someone’s money.
My advice: focus on doing you and figuring out what you want in life. Once you’ve figured that out, create your own plan to get what you want without trying to appease everyone else.
Wrapping Things Up
Personal finance does not have to be difficult. However, things will get difficult if you write off your finances as some unimportant thing that doesn’t require your attention. Know how much money you make and know where you are spending it.
Make sure your spending is aligned with what you value and focus on what works for you. If you keep this financial checklist handy, I have no doubt that you will be fine and will be on your way to financial freedom. This is the checklist I wish someone would have handed me at graduation. Luckily for you, I’ve got your back.
Does anyone else have anything you think should be added to this financial checklist? If so, sound off in the comments below!
Join the LAAB Email List
Subscribe to get updates on all things money, saving and debt related.