Learn the Basics

Unfortunately, and until every student is required to take a personal finance course in high school, most adults first learn about personal money management via life’s version of on-the-job training.  As a result, we often learn the hard way through our mistakes and then we hope — hope that the mistake occurs early in adulthood, is easy to recover from, and that we learn not to touch the hot stove again.  Equally important is what we tell ourselves when we make the inevitable mistake with our personal finances.  Negative self-talk in any manner is unproductive, unwarranted, and unnecessary.  Instead, focus on learning from your mistake and invest in you by taking the time to educate yourself.  And regardless of your age when you get to this point, learn the basics by starting here: 

Keep Score 

Keep score of your income and expenses on a monthly basis. You spend much of your awake time working and you work hard for your money, so make the time to understand where your money goes. This could be as simple as tracking your account balance each month by comparing the ending balance to the opening balance to determine if your account balance has increased or decreased in that month. While you might need to make adjustments to the ending balance to ensure the increase or decrease is legit, and there are other preferred ways to keep score, doing something to track your money is 100% better than doing nothing.  The other preferred ways include mobile and desktop apps, a spreadsheet, or the old school paper and pen.  Most important, keeping score is not about depriving, it is about knowing and controlling where your hard-earned money goes.

Keeping Score enables you to: Pay Your Way; Enjoy Today; Add to Your Life Happens Bucket; and Invest in Your Future Self.

Understand Debt & How to Manage Your Debt (before you acquire it)

The mismanagement of personal debt is the #1 issue discussed in our 1-2-1 coaching sessions and the greatest obstacle to building personal wealth.  We rightly focus on earning and increasing our income, but we do that effort a disservice when we ignore the impact of acquiring debt.  We tend to think of acquiring “stuff” but if we are unable to pay for that stuff in-full, we are really acquiring debt and borrowing the stuff until that stuff is paid for.  “A mortgage is good debt” is furthest from the truth if you struggle with the monthly payment because you focused on “what you qualify for” vs. what you can truly afford.  In reality, a mortgage can become “bad debt” very fast and an anchor to your financial well-being if you commit before understanding what you are really committing to.  Conversely, credit card debt, when managed effectively is good debt and is a necessary (evil) component of your credit score.  The #1 and only rule of managing credit card debt is to pay your balance on time and in-full every month.  That means not charging what you cannot afford to pay for in-full by the credit card’s payment due date, period, end of story.  Keeping score and setting aside money for when life happens, is critical to not having to put unexpected expenses on your credit card and carrying that balance over multiple months, thereby turning a $1,000 roof repair into a $1,200 to $1,300 roof repair one year later because you were forced to put it on your credit card and carry the balance instead of paying it off by the payment due date. 

Define & Understand Your “Haves”

Take the time to define your “must” haves, “need” to haves, and “nice” to haves.  This is a personal process and relative to only you.  Once defined, use that thought process when deciding whether not to buy or subscribe to anything and everything.  If you are uncertain at the point of purchase where the item falls within your “haves,” remove yourself from the situation for a period of time, which could be an hour, a day, whatever works for you.  Also ask yourself can I afford this?”  “Is it helping me with my goal of (a vacation, purchasing a home, buying a car, going back to school, etc.)?”  Going through this process of pausing either leads to a decision not to commit to the purchase, or you have removed, or at least minimized the emotional aspect from your decision.

Have Fun & Set Goals

Successful personal money management is about balance — figuring out how to enjoy the moment, protecting yourself for when life happens, saving for a purpose, and investing in your future self.  While this balancing process is continuous and evolves over time as your needs, wants, values, and life situation changes.  However, one element remains constant throughout: The importance of knowing where your money goes and you being in control of it.  The more you know + the more you are in control = the more life choices you will have today and in the future.  Having options, having choices — to go on a trip and not stress about the costs, to quit a job you dread because you removed any financial obstacles, to be able invest in yourself through additional education or training, etc. — sets you on the path to financial freedom.  Enjoy the process, enjoy the path you are making for yourself to achieve whatever short, medium, or long-term goals you are setting for yourself and/or your family.  Know that if you do the right thing, make good money decisions (more often than not), be honest with yourself about your relationship with money, and take the time to educate yourself about how to improve your personal money management knowledge and skills, significantly increases the odds that you will live your life on your terms.

And Learn as You Go

your life circumstances change, so should your financial goals. Regularly review your budget, investments, and long-term objectives to ensure they align with your current situation and aspirations.
Your 20s present a unique window of opportunity to lay the groundwork for a financially secure future. By implementing these financial moves early on, you’re setting yourself up for success in the years to come. Remember, even small steps taken now can lead to significant financial growth down the line. Embrace the journey towards financial prosperity and enjoy the peace of mind that comes with knowing you’re on the right track.

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