Hey, guys.
It's Chelsea from The Financial Diet.
And this week's video was brought to you
by Credit Repair.
And this week, I wanted to do something big,
both for the people who might be new to this channel
and for the people who know TFD very well, because we
can always use a refresher.
Many of you are just starting out in your adult lives
and are asking us constantly for big, comprehensive checklists
of what you really need to be doing on a daily, weekly,
or even yearly basis to get good with money.
And while it's impossible to condense everything
that you should be doing down into one video,
we've done our best to try and give
a really comprehensive overview that explains everything
in the rough order that you should be doing it.
Because frankly, when it comes to money,
millennials could use some help.
And if you feel like you're very behind when it comes to money,
you are not alone.
We're dealing with lower and stagnating incomes, higher
debt, lower net worth, lower rates of homeownership,
underemployment.
Compared with previous generations,
millennials are in a tough financial position,
in large part because we came of age during the Great Recession.
And while we can advocate for greater systemic change
so that more people do not have to put themselves
into hundreds of thousands of debt for a basic education,
we can do our best on the day-to-day
to get good with the money situation that we have.
And while it's great to do these 20 steps in your 20s,
keep in mind that nothing is too late.
And you could easily do them in your 30s or beyond.
But if you're just starting out into adulthood
and want to know how to get good with money,
this is a great place to start and fight back
against some of those big picture
factors we have working against us.
So without further ado, here is your 20 point checklist
for getting good with money in your 20s.
Number one, and this is the most important, crucial, first thing
everyone needs to do if you have not touched your money,
is go through all of your bank and card statements
and just analyze every purchase.
Get to understand your money on an intimate level.
You should know what's coming in and what's going out.
This will allow you to get a bird's-eye perspective
of your net worth, which is basically your assets
and your debts.
And the nitty gritty view of your accounts
will allow you to really see the daily flow of your money, which
will give you some context as to how you've gotten
to that current net worth.
Even if you don't decrease your spending,
increase your earnings, or change a thing,
just looking at your money situation in the face
and getting to know it intimately
is a crucial first step.
Use that analysis of your starting budget
to create a current budget.
Now, this does not mean it is where you want to be.
It is understanding where you are.
You should know roughly what percentage
of all of your income is going to what.
Particularly if you've never given yourself a budget before,
coming to the understanding that, yes, you
do have a budget whether or not you realize it,
you just maybe haven't had control over it,
is very important.
And even if you only have $10, you
should know where 2, 3, and 5 of those dollars are going.
Now, number three is to pick out a few key goals for your life.
Now, I want to be clear that everyone
is going to have different goals, and not all of them
are going to be the same cost-wise.
But you should have a rough picture
of the life that you want to live
and a few key components that you know you will need
to save in order to get to.
This could be anything from owning a home,
to quitting your job to go freelance,
to traveling the world, to starting a family.
The point is you want to have a rough sketch
in your mind of the goals you are working toward.
Because the more we understand money
as a means to getting to those goals rather than just
something you accumulate, the more
you will be able to stay on track,
stay motivated, and understand why you're making the choices
that you are.
So once you have those goals and a rough financial understanding
of what your life will need to look like in order
to reach those goals, you must create a goal budget.
This means roughly what do you want to be saving every month,
how much perhaps more will you need
to earn or less will you need to spend it in order to get there,
and where you are in terms of distance
from how you're living today from that ideal budget.
Now, obviously, as you live the course of a lifetime,
your goal budgets are going to change.
And we will talk about that later.
But the point is you should take time to separate yourself
from how you're handling money today to how
you should be handling money.
A common frame that a lot of people
use to making an ideal budget is something
like the 50-30-20 rule.
And this means that about 50% of your money
is going to needs, like bills; 30% is going to wants,
things like dining, traveling, et
cetera; and 20% is going to savings.
This may not be achievable for you today
or you may find that a different system works better for you.
But the point is you need to be basing your target
budget on meeting those goals that you've set for yourself.
Number five is get to know your credit score.
Now, I am someone who used to have decimated credit
and who as of yesterday was approved
for a very fancy credit card all by myself with no cosigner,
which was amazing.
And to some of you, that may seem like, whatever,
I've always had a great score.
But for those of us who had to work to get a credit score,
it's fucking amazing.
But it took a lot of hard work to get there.
And in fact, for a period of my life,
I had to use what is often referred to as rehab credit
card, where basically you prepay a credit card, which you then
pay back on time to show that you can make bill payments.
When it comes to rebuilding my credit, I've done it all.
And everyone's path to good credit
is going to be different.
So it is incredibly important to get to know your credit score--
what it is, why it got there, and how you can get
it to be the best it can be.
And that can be everything from having higher credit limits
but spending less-- so you're widening that credit
utilization ratio--
to making timely bill payments, to keeping
cards open for longer so you have that longer credit
history, to disputing dings on your credit report,
which I have done successfully as recently as this year.
The point is, as much as you should intimately
know the state of your accounts, you
should also know the state of your credit score.
Number six is find a financial buddy
to help you on your journey.
Now, we have done an entire video
about the financial buddy system,
which we will link you to.
But it boils down to this.
All of the hard decisions you are going to have to make,
and the savings journeys you're going to have to go on,
and the things you might have to say no to because they're
really expensive are infinitely easier
to do when you have someone who just gets it, who's also trying
to better themselves financially, who's not going
to judge you for being on a budget,
and to whom you can rant slash potentially even share good
ideas.
Get thee a financial buddy, and all of this list
will be infinitely easier.
Number seven is to start working on your emergency fund.
We have talked about this so many times.
And I will link you to the video on how to specifically save up
your emergency fund.
But the long and short of it is this,
before you work on your retirement
savings, aggressive debt repayment, investments,
et cetera, you need to have about three months of living
expenses set aside, so that if anything
were to happen from an unexpected injury,
to your car breaking down, to losing a job that is not
putting you in financial ruin.
Without an emergency fund, basically anything unexpected
happening could totally derail your financial progress
and potentially leave you on the street.
Obviously, if you're doing things like repaying debt,
you're going to want to not go into default on anything
in order to get your emergency fund together.
But everything else needs to be bare minimum,
including your spending, until you have that emergency
fund socked away.
Otherwise, you are living life on a razor's edge
and essentially playing Russian roulette
with your own financial future.
Number eight is do a one-month financial cleanse.
Now, when you're getting into the swing
of going toward your ideal budget
and learning how you can save more, one of the biggest
helps will be to go on a radical budget for a month,
whether that's a cash-only diet, or trying
to save 50% of your income, or reducing absolutely
every expense that's not essential,
in order to really get a better picture of your life.
So much of what we've come to expect and spend on in life
is a result of what we call lifestyle inflation.
Basically as you get more money, you
have a tendency to spend more money
and feel like you need to.
It becomes more and more normal to take a car,
to order takeout, to pay extra for things,
to not wait for things that go on sale,
basically to live a life that is more luxurious than you
need, even just to be happy.
So doing one month where you're really reducing all of those
"want" expenses as much as possible really
puts into sharp relief what is worth
it to spend that extra money on and what you really don't need.
Number nine is get more comfortable with understanding
your own professional industry and how you can advance in it.
An interesting fact is that despite our reputation for job
hopping, millennial workers are actually
just as likely to stick with their employers
as Gen Xers were.
And while it's not inherently wrong to stay
at the same employer-- although it can depress your earning
potential, because often you have
to move out of your company to get a big salary jump--
it does mean that you might not have
a very good understanding of what's going on
around you in your industry.
And one of the best ways to advocate for yourself
professionally is to have a view of not just your own company
but of the industry at large.
Perhaps you're making substantially less at your job
than you would be at other comparable companies.
And even if you never leave your company,
you may be able to use that for leverage.
Getting comfortable with sites like LinkedIn,
Glassdoor for salaries, or even private forums and groups
for specific industries can give you huge networking potential,
insights into what's fair or common,
and perhaps even next steps.
And even just a half hour of staying on top of this
every week can have huge, long term benefits.
Now, number 10 is outside of your main industry,
where you're obviously going to be making your longer
term moves, you want to set up at least one stream
of additional income outside your normal job.
And this could be something as small as babysitting or dog
walking once a week.
And as life goes on, this could go all the way
up to creating tons of passive income streams
through things like investments or real estate.
But the point is not just adding additional cash flow,
which is in itself very helpful when
doing things like meeting savings goals
or building an emergency fund, it's also very important
to diversify your skill set and to create a situation where
your entire livelihood is not completely dependent on one
job.
Even if you do everything perfectly,
you could get laid off or the company could go under.
You never want to feel as though one employer holds
your entire financial future in their hands.
Even if you just use that extra income for your fund money,
it's still worth it.
Number 11 is get over your fear of credit cards
and start using them to your advantage.
Now, if you are someone who really doesn't trust themselves
quite yet with a credit card, starting very
small with low limit cards and leaving them at home
slash using them only to pay for specific bills can just
be a good, fairly low impact way to build your credit history.
As you get more trustworthy with your ability
to use credit cards, making sure you're
getting the most point advantages,
churning bills through them so you can build up that cash back
rewards, and raising the limit so you
can get that good credit utilization
ratio are all awesome ways to use credit cards.
Once you start little by little by using credit cards in pretty
low risk ways, they can open up a whole new world
of financial extras to you that you
can get just by spending the money you were already
spending.
A good golden rule of credit cards
though is to never ever use them to buy something
that you wouldn't have bought otherwise
with the cash in your bank account.
Number 12 is go in and make all of your bank accounts
as smart as possible.
Now, we have a whole video on the different ways
to utilize multiple savings accounts, which
we will link you to.
But a brief overview is you want to separate your checking
and savings accounts to two different banks,
so you are never tempted to transfer over
some quick savings money.
You also want to make multiple savings accounts
for different goals and label them
by the goals rather than just random account numbers.
You want to set up automatic transfers to savings,
so that you never have to worry about manually going
in and moving that money over, a.k.a.
taking it and using it to spend on something stupid.
And you want to be using high yield savings
accounts when possible.
Number 13 is learn to speak the language of money.
Now, once you've mastered kind of your day-to-day use
of things like credit cards, savings accounts, budgets,
et cetera, you want to get a little bit more
advanced in your understanding of the money world around you.
This is actually a topic that dear TFD friend Erin
Lowry, a.k.a.
Broke Millennial, goes into deeply in her new book,
which is all about investing.
And we'll link you to that in the description.
But you want to learn to become very familiar with the meanings
of concepts, so that when you read something,
you're able to understand it quickly.
You want to learn about things like compound
versus simple interest-- simple interest, of course,
being when the interest only builds
on your initial principle investment.
Whereas compound interest is when your interest gets
calculated based on the principal plus the interest
that's already grown on it, the money compounding on itself
as it grows.
And while there are so many terms
like this it can feel a little overwhelming,
you start to realize that once you
learn a few of the basic concepts,
it's a lot easier to think about money long term,
and not everything feels quite as confusing.
With a few key concepts in mind, it's
easy to contextualize new information
and make better decisions.
So if you want to learn more about speaking
the language of long term money, grab Erin's book.
Number 14, and once you've learned
a few of those basic long term money terms,
you want to set up at least one retirement account,
but ideally more than that.
And for those who don't know, a retirement account is a special
kind of investing account, where you put money into this account
that you cannot touch until retirement.
And if you take the money out before retirement,
you get lots of penalties and fees for doing so.
But if you leave the money in your retirement account
like you're supposed to, these accounts
have a lot of tax benefits that your average investment account
doesn't have.
For most people the first stop will
be a 401(k), which is an employer-provided retirement
account.
And in some cases, your employer even
provides a match, which means for every dollar you put in,
they also put in a certain amount.
And if your employer offers a match,
you better freaking be taking advantage of it.
It's free money.
And for those of us who don't have access to a 401(k),
there are plenty of different kinds
of IRAs, or Individual Retirement Accounts,
which provide many of the same benefits
without being part of an employer.
And to answer the question, yes, you
can have both a 401(k) and an IRA.
We'll link you guys to more information
on the different types of retirement accounts available
and how to most use them to your advantage.
But the point is, after your emergency fund,
your next first stop on the savings train
should be a retirement account, because, yes, you
will be old one day and, yes, you will want money to live on.
Actually write out your five year strategy
for getting what you are worth at work.
This means things like how you're
going to negotiate for a raise when the time comes.
It means, are there any particular promotions
you're angling for?
Are you perhaps going to have to move
to a new company in your field in order to get that big pay
raise, or are you going to have to switch
to a different industry entirely?
The point is making these big moves
in terms of how you're compensated
at your job are never just going to magically happen.
They have to be things that you plan for strategically
and figure out how they fit into your broader life.
Thinking about your career and how
you are going to get what you are most worth in the most
proactive way possible will enable
you to have the most control in a situation
where things can often be unpredictable.
For example, if you know there's a specific promotion
you really want to go for, planning
to get there should ideally start at least a year
in advance.
Number 16 is work on at least one money hang-up
that is holding you back emotionally.
About 72% of Americans identify as stressed
because of money with 22% identifying as extremely
stressed.
And people who struggle with debt
are more than twice as likely to suffer from depression.
And when you consider how many 20-somethings
are in serious debt, you do the math.
And some of this is going to be out of our control, right?
Obviously if we are at a point where every month is a struggle
to just pay the bills, it's going
to be very, very hard to disconnect from that stress.
But there are elements of this which are under our control.
And in my opinion, one of the biggest and most important
things to do that is under our control
is to get rid of that shame.
I am someone who did not have much money growing up.
I used to feel really ashamed about that.
And it used to impact my day-to-day money choices
in ways I couldn't even describe because I wasn't even
fully aware of them.
Learning to let go and talk openly about that
has been incredibly liberating.
Same thing with my previously terrible credit score,
the fact that I don't have a real education, all
of the terrible money mistakes I made growing up,
the list goes on.
For example, if you are someone who is in serious debt
because you've got a degree that every adult around you
told you was a good idea to get, you so
should not be ashamed of that.
You did what you were told was the right thing.
And you're part of a system that makes
people go into massive debt for a public university education.
This is not your fault. And even if you were,
shame does literally nothing to repay debt.
It only makes your life worse.
Same thing with envy.
There are going to be people around you who get things
unfairly, whose parents help pay for their rent
when they're 32 [COUGHS] half the population of Manhattan
[COUGHS].
And you can choose to be terribly angry about that
and let it eat you up from inside.
Or you can choose to accept that the world is not fair,
America is particularly not fair in that regard,
and the best that you can do is work
to make your own situation better, and then advocate in
the ways you can to change some of these fundamental issues--
like, for example, in the city of New York,
creating more and more regulations around rent prices,
so that people can afford to live where they work.
And even if you are struggling to get ahead financially
and feel like maybe you've taken too long to get there,
the point is starting at any time
is already a huge step in the right direction and more
than most people will make.
Life is simply too short to feel shame around money.
Money is not your character.
It's not who you are.
And it's certainly not what you're
worth in any kind of human sense.
Number 17 is set up daily, weekly, and monthly check-ins
with your money that can just become part of your routine.
For example, every day, you take a quick look
at all of your balances to make sure nothing looks weird.
Every week, you quickly go through all of your statements
to make sure that there's nothing fraudulent or weird
or that you don't remember buying,
that all your bills are being paid on time,
and that you have enough money to cover
what you need to cover.
And every month, you can do a quick net worth checkup
to see where you are.
Basically, the more these ongoing routines can just
become part of your life and something
that you don't even have to think about,
the less of a chance they will ever
become scary or build up in your mind
or become something that you avoid.
Number 18 is going through once a year
and doing a total budget refresh.
As I said at the beginning of the video, as life goes on you
are very likely to need to adjust your budget
on an ongoing basis.
Maybe you're earning more money, maybe you're spending less,
or you're spending needs have changed, or you've had a child,
or who knows what.
Point is, budgets need to be flexible.
So at least once a year, there should be a total overhaul
in how you spend your money.
And I highly recommend doing a zero-based budget once a year.
It's something that, honestly, I never really
did until I owned a business, where each year
we do a zero-based budget, which essentially means
that the budget starts from this and every single spending
decision has to be justified.
And even if you're going through things
that you can't necessarily change-- for example,
your mortgage costs a certain amount-- you could look at it
and say, hey, maybe I could be renting out a room
once a month, or maybe it's possibly time to sell.
Or I don't know, just take time to think about how much
you're spending on that mortgage and what it is worth to you.
The point is the less we can take every purchase
for granted, the better.
And obviously, for zero-based budgeting,
you're going to have more influence over,
for example, how much you spend on dining out every month.
But the point is taking time to really justify
every expense from your car to your clothes
to everything in between, the more
you will be sure that you are getting real value out
of that spend.
Number 19, once you've got this stuff rolling
is to rotate out monthly spending challenges
on top of your budget.
That means every month you're focusing on a different thing
that you want to spend a little bit less on.
Because even though, yes, a budget is a budget,
the goal should always be to come in under budget,
not to just be scraping up against it every single month.
So one month perhaps you spend a bit less on food
than you usually do.
One month you don't go shopping as much.
One month you don't go out with your friends as much,
and you do stuff in the house.
Whatever it is, you want to make sure that each month you're
focusing on a different category,
so it doesn't become repetitive.
And you also want to make sure that you're really continuously
challenging yourself as the year goes on
to not just meet the budget but exceed it
and put some more towards savings.
And lastly, once you are ready to do a little leveling up,
you should consider working with a professional
or at least consulting with one.
Now, there are many different types
of financial professionals, but two
of the most common that you'll come across in life
are CFPs and accountants--
CFPs being Certified Financial Planners,
who are people who can help you really
plan out the holistic view of your money life.
We've had CFPs is on the channel before.
And I know many of them personally who work one on one
with clients to help them reach all
of their goals, both short and long term.
Especially if you've gotten to a place where you're really
kind of mastering the day-to-day of your financial life
but want to kind of level up, they can often
really help you do that.
The second, of course, is accountants,
who are for the average person primarily useful for things
like taxes.
I've worked with an accountant basically my entire adult
life to do my taxes.
Because since I've been 21 years old,
I've either had multiple streams of income,
I've been self-employed, or I've owned my own business.
And frankly, for all of those situations,
taxes can be a bit complicated.
And also, it's easy to miss the things
that you could be doing better or getting more money out of.
And although it has always cost me
at least a few dollars for my personal taxes every year,
the amount that I have saved and having someone
be able to walk me through the best way
to do my taxes and the amounts that I deserve
to be deducting from it has always saved me vastly more
than that in what I paid.
And if you followed this list and added
a few streams of income, it could definitely
be worth it to have a tax professional look over how
you're doing your taxes to make sure you're
getting the most out of what you're entitled to.
But in either case, when you're ready to level up your money
or do things like your taxes more intelligently,
it could be time to consider speaking to a professional.
And as I mentioned earlier in the video,
if you are someone who has been looking to improve your credit
score and feel like you don't know where to start
or could use some help, one of the best things to check out
is Credit Repair.
CreditRepair.com can help you work
to repair, build, and maintain your credit score
by working directly with the credit bureaus
to challenge any items on your credit report and teaching you
how to understand both your own score and the rating system.
To help show how it works, they gave three members
of our audience a free trial to work on improving their scores
over the next six months.
Each of the participants currently
have scores below 600.
And each have gone through extremely difficult life
circumstances that contributed to their financial struggles--
from divorce, to loss of a loved one, to betrayal from a parent.
Their stories serve as a reminder
that there are so many unexpected reasons we might
find ourselves needing help and there is no shame
in seeking out support.
You can read about their experiences
and learn how CreditRepair.com can
help you work to build or rebuild
good credit by checking out the links in our description.
As always, guys, thank you so much for watching.
And don't forget to hit the Subscribe button
and to comeback every Tuesday, Thursday, and Friday
for new and awesome videos.
Bye.