The following is a post that I submitted to Betterment for their New Years Series on Finances. They graciously agreed to host my article and am providing it here so that my regular readers can view it.
When anyone is starting out as a young adult, they are immediately faced with the new challenge of tackling their own finances. This often includes paying their bills for the first time, opening up a savings account (if they don’t already have one), renting an apartment, etc. All of the everyday things that may not seem all that important to experienced adults can be giant hurdles to someone fresh out of college. Having experienced this first hand and hearing from many other young adults, the biggest challenge is often not knowing what your focus should be – similar to not knowing what kinds of questions to ask. It’s hard to know what you don’t know. Even the most financially responsible individuals in their twenties may not be doing all that they can because they lack experience. So, what should a person fresh out of college be doing to successfully manage their finances?
Set Financial Goals
It is important to set financial goals at any stage in life. While a lot can be said about why they are important, the simple fact is that financial goals help you prioritize your finances. Even the most dedicated saver could be wasting money if they don’t know what they want to do with their money. For example, I would consider myself a saver more than a spender. Yet, it wasn’t until recently that I wrote down my financial goals. Prior to this, my wife and I were doing a decent job of saving, but we still splurged on some unnecessary items. Once I wrote down my goals, I realized what it would take to get there. I understood exactly how much we needed to be saving and investing to reach our goals. Writing them down and making them tangible was the extra motivation I needed to accomplish a lot more with my money. If you haven’t taken the time to write down your financial goals, this is the best time of the year to do it.
Things to Consider in Your Financial Goals
Talking about financial goals in the abstract is one thing. It is much more helpful to give you real examples. You can check out my financial goals on that I established a couple months ago, but here are some examples of financial goals that people in their twenties (and perhaps different age groups as well) should consider:
- Pay Off School Loans
- Build up an emergency fund equivalent to 6+ months of income
- Save money for a down payment on a house/condo
- Take out a life insurance plan (maybe even a high risk life insurance plan)
- Open a ROTH IRA and maximize your contributions (Be sure to understand the Solo 401k Rules)
These are just some of the things that every young person should consider for their financial goals. Be intentional about making them realistic and specific enough. You may even want to establish deadlines for each of these goals. When you are setting your resolutions for the new year, make sure to include financial goals and you won’t regret it.
What will you include in your financial goals?