By Patti Conner
For people in their 20s who are just starting to gain experience with professional lifestyles, one of the biggest surprises can be just how much work is required for budgeting and financial planning. A strategic financial plan means much more than simply working and gathering as much income as you can!
Fortunately, if you’ve had a bit of a shock advancing in your 20s and experiencing some financial complications, you’re not alone. Pretty much every young professional who hasn’t studied economics runs into at least a few speed bumps along the way—I know I did, and my whole education was focused on business! The truth is, financial planning and effective budgeting are pretty difficult, but once you get the hang of them, you’ll find that the hours you’re working are paying off a great deal more.
A lot of getting the hang of this stuff simply means experiencing it for yourself and learning from your mistakes. But to help any young professional struggling on the financial front, here are five of my best tips for starting out strategically.
1. Track Expenses Thoroughly
This is absolutely the #1 tip I would impress upon any 20-something or young professional still getting used to financial independence. Having a good memory and reliable discipline is a good start for recognizing and recalling what you’ve spent. However, a detailed tracking system can do wonders for allowing you to make sound decisions on where to cut back and how to budget more effectively. And here’s the best news: Now there are programs that do it for you. I prefer the old-school method of keeping a detailed spreadsheet of expenses, but I have to admit the popular app Mint pretty much does all you need in a simpler, automated fashion.
2. Learn How To Invest
A lot of young people imagine stock market investments as being simple in nature. You might even expect that you can go to a certain web address, make an account, and simply start trading. Unfortunately, it’s not quite that easy. I’d refer anyone curious about the stock market to FXCM’s outline of the NY Stock Exchange’s history and functionality, in which some of the details for starting up are described. Specifically, the outline explains that new traders will need to choose brokers, who in turn help you to make trades. Getting started isn’t free (and isn’t always cheap), but a lot of adults will say they wish they’d started investing sooner. Taking the time to learn a bit about the stock exchange and get trading is a very good idea.
3. Consider A Mutual Fund
If investing sounds like a little bit of a headache, or if you’re not quite ready to trust your own understanding of the markets with your money, there is still another way to make money on stocks—basically, by putting the job in someone else’s hands. Investing in a mutual fund basically means putting your money alongside other investors’ money in lump packages of stock investments to be traded together by a money manager. Translation: You invest and someone with an expert understanding does the work, using a lump package of stocks designed for overall gain. A mutual fund is sometimes viewed almost as a sort of savings account geared toward growth rather than a market investment. (See LD’s comparison guide here)
4. Pick Up A Side Job
I realize this one sounds a little bit daunting, but hear me out: a part-time freelance job that takes up only a few hours of your time every week can significantly reduce your expenses and help you with budgeting. If you have a skill that you can market from home or in your spare time—something artistic and creative, a talent for writing or web design, or simply an ability to work hard—try using it to make a bit of side cash. Even $50/week, if you apply it strategically, can offset a lot of your day-to-day expenses. For example, it can pay for all your morning lattes! A lot of people look to sites like Elance, a platform dedicated to helping users find freelance work in various categories and skill sets. Depending on your goals and talents, though, you may find other ways of establishing side work as well.
5. Never Stop Learning
Call it cliché if you will, but my last piece of advice, and possibly the most valuable, is to keep absorbing information about financial management and budgeting. There are always new articles and pieces of advice, and sometimes even new tools (like those mentioned in this article!) that can help you be a more effective personal financial manager. Take advantage of them!
Patti Conner is a freelance writer and business entrepreneur. She lives in Seattle, Washington, with her husband and their two children. When she’s not working or spending time with her family, she enjoys kayaking and exploring her culinary side.