Easy Money Management In Your 20s: Let’s Not All Go Broke
Our 20s are insane. Poet laureate SZA put it best: “Prayin’ the 20-somethings don’t kill me.” Nothing is a constant. Not your roommates, not your apartment, not your job. Sleep is a figment of our imagination. It’s super fun having endless possibilities in front of you, except when you’d really just like a steady salary and half a clue what’s going on. When you’re trying to balance your need to go to see the world and keep up your manicure routine with a *strong* desire to eat something other than ramen, the thought of money management beyond living paycheck-to-paycheck and trying to pay off student loans seems like a problem for Older You. The problem is that if you don’t start thinking about this stuff now, Older You will also be Super-Poor-With-No-Savings Older You. If you want to stunt on all of your friends one day, figuring out how to plan for the future while not going broke in the now (and having some room for, you know, enjoying life) is essential. And there’s an app for that! Actually, there are many apps, bullet journal techniques, websites, and just general “Things To Know” that can make not being broke in the imminent future as easy as ordering Postmates to your apartment at 4 AM on a Saturday — thoughtless, automatic, and always a good idea.
The first thing you need to do is follow the advice your parents have been giving you since you were sixteen and spending *their* money: make a budget. Seriously. And no, keeping track of your available credit in your Notes is not the same thing as planning out a budget and sticking to it. NerdWallet uses an easy rule of thumb called 50/30/20. Fifty percent of your money goes to necessities like rent and food, thirty percent goes to “wants,” and twenty percent goes to savings. Necessities are defined differently for everyone. My friend Fran decided that getting her nails done was, in fact, a necessity for her well-being and general state of mind, so she put it in her monthly budget. Maybe a necessity for you is having Netflix, Hulu, HBOGo, Amazon Video, and Hallmark Movies Now because, like me, you have no social life. That’s your prerogative, just make sure it fits in with your fifty percent. If the latest Candace Cameron Bure holiday movie is more important to you than not eating Instant Noodles for half of your meals, you have amazing priorities. The thirty percent for wants is your fun money. Have a blast! Go to Bali! But if you’re serious about Not Being Poor, make smart purchases with your monthly fun money. You don’t have to stop spending to save. That’s dumb, life would be boring if you never bought anything cool and just sat at home with your Netflix, Hulu, HBOGo, Amazon Video, and Hallmark Movies Now. But if you spend your thirty on a brand new car that’s just going to depreciate in value every day in perpetuity until it’s a lame clunker you sell for $500, buy a really dope coat that you’ll love for five years or a fitness pass that will add ten years to your life. Get a yoga teacher training certification or enroll in a Latin class to make yourself a better you. Even buying that trip to Bali or Bonnaroo is a smart purchase because those memories will stay with you way longer than the same shirt in three colors from Urban Outfitters. And if that concert is out of your monthly thirty percent, save up those thirties until you’ve got enough.
The twenty percent that goes to savings is its own monster to conquer. Sure, you could just leave it sitting in your savings account forever and slowly save up, but that’s a missed opportunity to less-slowly save for bigger payouts down the road. Your first chunk of savings should go towards an emergency fund with three to six months of living expenses, which is like a lot. With that, just set small goals and build your way there. Once that’s been taken care of, invest a little, it’ll be fun. The earlier you invest, the more money you get out of it and the less you have to put into it because of weird stuff like interest. I don’t need to fully understand it to benefit from it, okay? The easiest place to invest is if you have a job that’ll match your retirement fund, but let’s be honest, none of us have real jobs. If you don’t have access to a 401k, Business Insider says that a Roth IRA is the way to go. That’s right, pronounced “Roth Eye-ra,” she’s not some elderly cousin your parents always talk about, it’s a retirement planning plan for individuals where contributions are taxed but the money you take out of it in retirement isn’t, which is dope. If you donate $5 a year for like fifty years, you’ll end up with the same amount you’d have if you donated $30 a month starting in your thirties (or something like that, don’t check the math because it’s for sure wrong), but I can guarantee the sooner you start (even if it’s smaller), the better. As far as saving for the short-term, try a non-retirement brokerage account (which is just a Roth IRA that lets you take money out before you’re old). There are apps for that and things called “robo advisors” — that I found through U.S. News — like Wealthfront or Ellevest that will hold your hand through the process and basically just tell you what to do so you can also know nothing about investing and be able to do it anyway. 50/30/20 can be a lot when you try to look at it all at once but it’s basically just a great excuse to bullet journal and spend thirty percent of your paycheck on fun stuff without feeling guilty about it. And as an added bonus, you might be the only millennial or Gen Z-er who actually gets to retire.
Once you’ve got it all on paper, let’s talk about apps. Apps are a fun, constant reminder that you’re poor everytime you open your phone to go on Snapchat. They’re also an easy way to use the technology we’ve been blessed with to get your bread. One of the culty-est of these is You Need A Budget or “YNAB” which is free for a little and then you have to pay an unreasonable amount of money, but apparently the budgeting app helps you save a sh*t ton of money easily and has a bunch of stans, so I’ll let them take my money. Mint is another budget tracker and planner (but it’s free), and it shows you your real-time credit score. Pennies is also free ‘n fun for budgets. Wally will help you track your expenses just by taking photos of your receipts, and Goodbudget is a take on the “envelope budgeting” system where you can compartmentalize your cash into “envelopes” like for home, fun, or food, and move the money between envelopes based on your personal needs. Then there’s Acorns, another fun investing app that actually isn’t about budgeting but invests your money in a way you’ll never even notice it’s missing. That sounds creepy, but it’s an unobtrusive way to save by rounding up your expenses and investing that change into a portfolio of low-cost exchange-traded funds. That sh*t adds up (and probably should be the one called ‘Pennies’ but whatevs).
The last thing you need to think about is your credit score because hopefully, you were already building it during college. Otherwise, listen up, suckers. You need good credit. Like, over 650 as a nice start type of credit, or Older You won’t be able to spend any of that money you’re saving because people will think you’re a flighty scam artist. Credit Karma says the most important thing with building good credit is longevity, which means you need to open up a credit card ASAP. If you’re twenty-four and still largely bankrolled by your parents, consider becoming an authorized spender on one of their accounts like a teenager and build your credit via piggybacking like a cheater. If it works, it works. And if you’ve been using your debit card for all your expenses, honey, you’ve been missing out on free money in credit card points. Just make sure you can pay it off in full every month, my dudes. Don’t use the credit limit, I’m telling you. Make sure you get the right card (yes, they’re different) with a lower interest rate, no annual fees, and reasonable credit limits. (Also bonus if you get the first 12-18 months with 0% APR, just make sure you can pay back everything when that time period is up.) You don’t need a black AmEx if you’re making $20k per year, promise. Next, make sure you’re using your card well. These should be small, recurring charges that you pay off in full each month. Pay all your other bills on time because that affects your score, too, and make sure you’ve only got one card at a time when you’re first building your credit. A big issue in our generation is going to be paying off student loan debt, but if you’re juggling multiple debts, focus on the debts with the highest interest rates. Like, pay them all, obvi, but put a little more into the ones you’re trying to get rid of the fastest. And above all else, dear God, do not make a payment late. You’re welcome.
If you use these apps, make an actual budget, and develop your credit, our thirties will be a breeze and we’ll all finally be able to get eight hours of sleep and stop lying about having our parents pay our rent.