Its the start of a new year. Motivation is high and people want to make the most of the year. We have 8 ways for you to crush 2018, achieve financial success, and make the most of the year.
Half the country may be frozen, but spring is fast approaching. Senioritis could for college seniors as graduation quickly approaches and finding a job becomes a reality.
Or perhaps you graduated a few years ago and already on your way to crushing it.
Either way life after college and your 20s are a time to ‘crush it’ and set yourself up for a lifetime of success and happiness.
1. You need a budget.
First and foremost, you need a budget. Adulting is more than just going to work and eating avocado toast. Part of being a grown-up is paying your bills and managing your money – but you won’t see that on Instagram.
Building wealth is easy as 1, 2, 3 –
1. Earn money
2. Spend less than you make
3. Save and invest the rest
And this all starts with a budget. Many have never used a budget which is partially why so many Americans struggle financially. Budgeting in your 20s and beyond is important. Thankfully there are tons of great resources out there.
Using a free tracking tool like Personal Capital is a great way to track your spending and grow your net worth.
I also recommend the budgets are sexy site for tips on creating a budget. This site is run by the legendary J$ (J Money – yes that’s his actual name and he has a bad ass mohawk).
2. You need an emergency fund
‘Oh, shit’ happens in the real world. Unexpected medical bills, a flat tire or losing your job can quickly set you back. When an emergency happens you’ll want something to fall back on. Hint, don’t rely on a credit card charging you 15-25% interest.
This is where your emergency fund comes in. Aim to save 3 to 6 months of expenses. Creating a budget and tracking your spending will help you reach this goal. I use the Personal Capital app to track my spending and it works great.
3. You need to avoid lifestyle inflation and bank your raises
Many increase their spending over time. They get their first job and run off to get a new car. A year or two later they earn a promotion and decide to buy a fancy condo. This pattern continues on repeat. Eventually, many will find their lifestyle costs more than their paycheck supports.
This is commonly known as lifestyle inflation. Avoiding lifestyle inflation will set you up for financial success. Instead of spending raises on stuff, consider banking at least half of your extra income. Better yet, invest the extra income.
Keeping your cost of living in check is important. Avoid consumer debt from credit cards. Don’t buy things you don’t need to impress people you don’t like. Avoid that car payment. Live in a modest place. Better yet, live with roommates to keep the cost of living low.
4. You need to pay attention to your student loans
Let’s face it, most of us have student loans. The average student now graduates with over $30,000 in student loans. Some student loans are manageable while other situations need more attention.
High-interest rate student loans should be paid off quickly. Lower interest rate student loans should be paid off gradually over time. Visit Travis at Student Loan Planner to see if it makes sense for you to refinance your student loans. You may even get up to $500 cash back for refinancing.
5. You need a side hustle
You may have heard diversification is a good thing. Well, that is absolutely true. You should apply this concept to your income as well. Focus on having multiple sources of income. The average millionaire has 7 income streams. Do not depend on a single job for a paycheck.
It’s never been easier to earn extra money. The share/gig-economy is real and is not leaving anytime soon. You can drive for a ride share service like Uber or Lyft; there are apps to house sit or dog walk, and there are more traditional side hustles like teaching swim lessons, tutoring, and bartending.
Extra income from a side hustle can help pay off student loans, build an emergency fund, or go towards investing.
6. You need to improve your skill sets
Improving your skill sets makes you more marketable to employers. It also makes you more valuable. This leads to earning more. Consider earning a certificate or two, taking a night class or learning a new skill, or going for a masters degree.
7. You need to take advantage of employee benefits
Most of us will not work at Google but many employers offer awesome benefits.
401k – The average employer offers a 3% matching contribution. This means your employer matches your contribution dollar for dollar up to 3% of your income. Take advantage of this – it’s FREE money. Contributing to your 401k will also lower your tax bill.
Health Savings Account (HSA) – HSA popularity is increasing. This is another great way to save and reduce your tax burden. Health Savings Accounts allow you to save for future medical expenses with pre-tax income. Many employers will also contribute to n HSA account. The funds in an HSA can be invested and grow over time.
Tuition reimbursement – many employers offer tuition reimbursement for undergraduate and graduate courses. This is a great way to pick up a degree for little or no cost.
8. You need to earn more
Increasing your income will allow you to pay off more debt, save more, and invest more. Always negotiate your starting salary. The first offer is never the best offer.
Fight for a raise by proving your value to your boss. This should be done both qualitatively and quantitatively.
Job hopping is another great way to increase your salary. Switching jobs every few years in your 20s and early 30s is a great way to boost your income. Some employers may offer large signing bonuses as well.
9. You need to buy a house and house hack.
Owning real estate is one of best ways to build wealth. Better yet, why not own real estate and have someone pay for it? House hacking also eliminates your housing expense, lowers your cost of living and increases your ability to save. Do this for a few years and your future self will thank you.
Are you willing to put in the extra work? Budgeting and investing early and often will go a long way. These steps allowed me to go from being in debt to building a net worth of over $500k in 4 years.