10 Financial Rules for 20-Somethings

Sure, your twenties are a time for experimentation and growth, but they’re also essential for your financial future. Our friends at Kiplinger.com outline 10 financial commandments for 20-somethings. We think they’re good rules Millenials should pay heed to:

Develop a marketable skill—before you can start worrying about what to do with your money, you need to earn some. Think in terms of your career, not just a job. Because let’s face it: you’re probably not going to love your first job, and it won’t be your last job. But you should try to make the best of it. Don’t be afraid to experiment—you need to take risks when you’re younger.

Establish a budget—once you’re bringing home the bacon, you’ll have to figure out how to slice it up. Without a budget, you risk overspending on discretionary items and undersaving for important big-ticket purchases. Lay out all your daily expenses and then factor in your short- and long-term goals, such as an emergency fund and retirement savings. Sites such as Mint.com can be a big help if you want to digitize your budget.

Get insured—mayhem truly is everywhere, and as an adult, you are responsible for protecting yourself and all your stuff from it. When horrible things happen to you—say, a trip to the emergency room or a fire in your apartment—  insurance may save you from shelling out thousands of dollars at once.

Make a debt repayment plan—debt is a reality for most young adults. But letting it linger—or, worse, grow—can set you back for years to come in the form of greater interest payments and lower credit scores. For your student loans, be sure you have a good repayment plan in place and consider some plans that can help reduce the burden. Also work out a plan to tackle your credit card debt by establishing a budget and reining in your spending.

Build an emergency fund—insurance alone won’t cover all of your problems. You still need to have liquid savings on hand as an added precaution. Kiplinger’s recommends stashing enough to pay three to six months’ worth of expenses in a safe and easy-to-access savings account. Contributing to your fund should be a top priority in your budget.

Start saving for retirement—the sooner you start saving, the better. Because of the magic of compounding, time will fatten up your retirement kitty. Don’t think of saving for retirement as subtracting money from your paycheck or checking account. Rather, consider them automatic payments to your future self.

Build up your credit history—you’ll need to take on some debt and show that you know how to manage it well in order to build up your credit history and earn a good credit score. This number, along with the credit report on which it’s based, is the key to many milestones in your financial life. A good score means lower rates on credit cards and loans. Landlords may consider your score before offering you a lease, and employers might take a look at your credit report during the hiring process.

Quit the Bank of Mom and Dad—obviously, financial independence starts with a job. You also ought to cut the cord by getting your own insurance, car, cell-phone plan, home, everything. Slightly less obvious, you don’t want to resort to getting help from Mom and Dad even in a pinch—hence, the need for an emergency fund.

Clean up your online presence—time to put down the red cups – or at least scrub them from your public image. Like it or not, your social media activity is viewable by the entire Web-surfing world, including all your current or potential employers. Search yourself online to see what’s already out there, and double-check your privacy settings on Facebook, Instagram and other networks to make sure you’re not adding to the mix unintentionally.

Get your key financial documents in order—you—not your parents—should have your birth certificate, Social Security card and other official IDs in your possession. Also keep a list of all your banking and investment accounts, household bills and insurance policies, along with any online usernames and passwords. Store all this important information in a secure place, such as an actual safe, and make sure someone you trust knows where it’s located.