If you are under the age of 30 and don’t want to live hand-to-mouth for the rest of your life, there have got to be some ways that you spend and save your money different than most of your peers.
The way most people use their money results in, if not poverty, an inefficient waste of resources. Don’t let this happen to you.
The younger you start applying the following techniques, the more likely you are end up with a life where money isn’t a constant nagging concern. If you don’t follow these financial plans and use your money haphazardly, money will be a bigger problem than you want, probably for the rest of your life.
I’ve dealt with this personally over the over the last few years myself and now I’m working on a plan to change our financial situation for the better. To help out I’m going to share 3 of my most invaluable tips so you don’t make the same mistakes I did.
Tip #1: Avoid Student Loans, or Pay Off the Ones You Have
If you have never gotten student loans for education, don’t start. Pay for high-efficiency education, like local colleges or online learning options. If you have already gotten an education that caused you to take on a lot of student debt, don’t fret.
Some people advocate paying the minimum payment for your student loans for life, allowing you to use the rest of your money for other purposes like investment. But this isn’t the best rule for everyone. Paying off student loans early can be a tremendous psychological boost, even if it’s not the very most effective way to use your money.
Work hard, save every dollar you can, and you’ll see your loans disappear at an impressive rate, eventually freeing you to use your money for much better purposes. If you have graduated college and obtained a well-paying job, refinancing your student loans could save you thousands of dollars.
Resource: I also have a 3 step plan to help you get on track with your debt. Click here to check it out.
Tip #2: Save and Invest Early
If remotely possible (and this is for almost everybody), save at least 30% of your income for the long term.
The first place you need to put these dollars is into a savings account built to cover your life expenses in the event that you lose your job or have some other personal catastrophe.
Once you have gotten to the point where you have an emergency fund which will cover you for 6 months or more, start saving for other purposes, like the down payment of your first home. You should also invest 10 or 15% of your income in long-term index funds, which can make your retirement much better.
Resource: If you’re not sure how to pick good investments I put together this great quiz to help you out. Click here to check it out.
Tip #3: Live Simply
Cook for yourself, don’t spend lots of money on entertainment, be very restrictive about what you spend on drinking or drugs, and basically don’t spend money just because you have it. I know this isn’t the way most millennials are but it can be life changing to have control of your money.
Definitely live beneath your means; credit is your enemy. If you live like this every day, you’ll find it’s actually pretty easy to have extra money, which you can then apply to more beneficial purposes than the kinds of things we spend on when we’re feeling bored.
If you manage to apply these three simple strategies to your life, you will be in a better place than most people your age, and you will be setting a foundation for long term success in many ways. You don’t have to have a great job to be financially stable; you just have to have a plan and some discipline.
So what strategies are you living by to manage your finances? Share your thoughts in the comments below.