Managing your money doesn’t have to be a task that makes you want to curl up in a corner and hide from the world.
It’s actually pretty simple to be a money whiz once you’ve got these must-do items on tap for 2015. Here are the 7 money rules for millennials for the New Year.
1. Credit Score in Check
This is the easiest of the steps. All it takes is one click of a button and you can get your credit score. There are lots of great sites to check your credit score, but some of my favorites are Annual Credit Report, Credit Sesame and Credit Karma. For a few dollars you can get a tri-merge credit score, that’s a score from all three credit bureaus, and check #1 off the list.
Remember to actually read the credit report once you have it. Pay close attention to anything that shouldn’t be there or doesn’t belong to you. Those things you can get removed. It takes 7 years for delinquent debt that is yours to fall off your credit report. Aim for a score of 720+.
2. Get Some Goals
Grab a piece of paper and start tackling the 3 W’s and 1 H – what, when, where and how.
Having goals for the new year is simply not enough. Putting them down on paper with an action plan is a sure-fire way to success. When you are creating your goals feel free to add some stretch goals – those are goals that would need a minor miracle for them to happen, but hey, you never know.
The sky is the limit here, so have fun with this task.
3. Breakup with Your Budget
If your old budget is a tattered piece of paper lying somewhere in the bottom of your desk, then it is time to breakup. A new year is a great time to start a new budget from scratch.
The best way to have success with your budget is to a. be honest, b. make sure you list ALL of your expenses and c. follow a 2-column system.
The 2 columns are “What I think I will spend” and “What I spent”. It’s not enough to track what you think you will spend. That is how you got in trouble in the first place. You’ve got to know what you actually spent so you can figure out where the budget broke down. Then you can put on your financial planner hat and begin to make some changes.
4. Challenge Your Savings
If you haven’t started a savings account, do it now. If you have one, let’s grow it in 2015.
Honestly, bank savings accounts aren’t cutting it anymore. You are paying them to hold your money. The interest they are giving you is pennies on your dollars.
A high-yield savings account at an online bank like Ally Bank or Capital One 360 is a great option. Instead of receiving .02% interest at a standard bank, you might get as high as .90-1% interest at one of these online banks. Think it doesn’t matter? I ask you, if someone wants to give you a penny or a dollar, which one would you rather take? I thought so.
Challenge yourself to save more this year. Start out with 3-5% of your income and push yourself to 10% or more by the end of the year. Having an Emergency Fund is one of the smartest money moves you can make for yourself. When your car breaks down and you need new tires, better to borrow from yourself than a credit card and pay double the cost in interest.
5. Credit Card Smarts
You can just have any credit card, but then you are seriously missing out.
There are tons of strategies out there for credit cards. You need to find one that works for you based on your lifestyle. If you like to travel, then consider cards that give you travel points for every dollar you spend. If you like to shop, then consider cards that give you cash back and other online rewards.
Whatever you decide, make sure that your credit cards offer rewards that you can use at multiple places, unless you like to travel with one airline exclusively, like American Airlines or Southwest.
The biggest rule with credit cards is that you never want to pay interest to someone else. Period.
If you are responsible, the best way to rack up points is to use your credit card for everyday expenses and then pay it off each month. You aren’t protected for online purchases with a debit card the same way you are with a regular credit card, so better to use a credit card if you are a serious online shopper.
If you are spending money but not getting anything for that spending, then it’s time to re-evaluate your strategy.
6. Free Money, My Money, Watch it Grow
It’s always a good idea; no scratch that, great idea to start contributing to an IRA, ROTH IRA or 401(k).
Yes, retirement is a looooonnnggg way away for you, but that is the wrong way to think about it. If you only knew how much saving $50.00 a month starting now for 30-40 years would grow to, you would be amazed.
I’m talking hundreds of thousands of dollars, if not millions. The stock market will go up and down many times before you get to retirement, but you have time on your side. Set your contribution on auto-debit each month and you won’t even miss it.
Now, if you have access to a 401(k) through your job, you hit the jackpot. Many employers will offer a match. That is FREE money to you. You can contribute up to a certain percentage, and your employer will match your contributions. There aren’t many things in life that are free, so make sure you grab this one as quick as possible.
7. I’ve Got Skills
You’ve graduated from college, check. You’ve got your first job, check. Now what?
There are only two things you need to understand about money. You either have to make more or it, or you have to spend less of it. Simple, right?
Learning a new skill will not only add to your résumé, but it might actually open up a new career path or lead to a great side-hustle.
Side-hustles are a super secret way to increase your earnings each year. Let’s say you are a whiz at creating blogs. Why not offer your services to friends outside of work for a fee. You can offer them a discounted rate while you supercharge your savings. It’s a win-win.
Alright, millennials. Time to get your money in check for 2015.