If you had told me 15 years ago that my main love would be finance, I would have laughed. I grew up with a CFO mother, so finance was always a part of the conversation, but I had zero interest in it. It wasn’t until I had graduated with my BA, was working full-time and was trying to figure out what to do for my master’s degree that I even considered it. But I love it and I’m so glad I did. I’m not talking about accounting, which I don’t mind. No, I’m talking about the really nerdy stuff like the capital structure of corporations, forecasting and trends, and everything else that it entails.
One big misconception when people hear I have my master’s degree in finance is that I’m really good at managing personal finances. But, corporate finance and personal money management are two totally different animals. I’ve always hated personal finance. In fact, I’ve always insisted my husband handle the majority of ours. I guess it’s that whole concept of, if you work in a bakery the last thing you want to do is come home and bake bread, right? But there are so many things I wish I had learned about managing finances before I was an adult. If I could go back and teach my younger self what I know now about healthy finances, I’d have a lot to share.
Start a “rainy day” fund sooner
When you’re younger, the last thing you want to do is save money. Most likely because it’s so hard to come by. But I wish I could tell myself how much easier it would be to start saving sooner rather than later. The biggest difference that starting younger makes is the fact that you don’t have as many “real-life” expenses yet. The older you get, the more you start paying for things like rent, utilities, childcare, etc. Take advantage of getting an early start on your rainy day fund and you’ll be so grateful later when real life kicks in or you’re ready to buy a house.
Avoid lifestyle inflation
I know when I was in high school and my undergrad, I worked at Starbucks and made something like $9.50/hour. But after I graduated and entered into the workforce I was suddenly “flushed with cash”…not really, but it felt like it to a 22-year-old. “Lifestyle inflation” is something that I think a lot of people fall into. When your earnings go up, so does your spending. It’s tempting to receive that first hefty paycheck and suddenly want to upgrade your life. But just because you’re making more money doesn’t mean you immediately need a bigger apartment. Or just because you got a big bonus doesn’t mean you need to immediately start planning a lavish vacation. Instead, try to focus on the bigger picture as opposed to instant gratification. It doesn’t mean you need to pinch your pennies and live frugally, but you’ll be in a much healthier spot if you don’t fall into that trap.
You’re not too young to think about retirement
Listen, I know when you’re in your 20s and you haven’t even begun your real career yet, it’s hard to think about retirement. I felt the same way. But all of a sudden you blink and you’re in your mid-30s. If it helps, start budgeting these contributions into your monthly and yearly budget (also, if you haven’t yet, start a budget). You should have at least 15 percent of your yearly gross income into a retirement savings account. Even when you’re young and don’t make that much money, you can still pitch $20 a week or so into a retirement account. Again, look at the big picture from early on.
Start building credit sooner
You would think that having bad credit would make it harder for you to finance big ticket items like a new car or a home, but having no credit is even worse. It’s what financers refer to as “a ghost,” and they won’t touch you without a co-signer. A lot of young people avoid credit cards and debt, which makes sense in theory, but doesn’t really help you in the long run. Start small. Get a credit card and use it only to pay for something recurring like utilities or gas expenses and then pay the card off each month. This shows financiers that you have the ability to incur and pay off debts in good faith.
Finance isn’t easy and for some it isn’t intuitive, so meeting with a financial advisor is always a good idea to get yourself back on track and set up for success. You can also check out 4 Easy Ways To Train Yourself To Save More Money and Our Favorite Money Podcasts For A Financially Healthy 2020.