If you’ve done much financial reading, you’ve probably encountered a lifetime guide to your money. It’s a popular feature of many money magazines, writing about the career goals and types of investments you should have at various stages of your life, and showing how they change as you get older. It’s very helpful information to have, and arranging the information in time-line form makes it pretty easy to follow.
There’s just one problem: the youngest age usually given is typically in the thirties (sometimes even in the forties). While that might be understandable, given their prime demographics, it still leaves younger people in a lurch. How can you start handling money and career if most sources of advice assume that only your parents or people their age actually care about their finances?
Well, we’re going to rectify that a bit today. What follows is a stage by stage guide to help manage your personal finances and your career, focusing on the time frame from when you can first get a job to when most of those other guides take up the slack (in your thirties or so). These are not the only things you need to do financially and professionally in your teens and twenties, but doing them will definitely put you on the right track to solid personal finance. For each of the following age brackets you should:
In Your Teen Years (14-17)
-Expand your financial education: It’s an oft decried defect in the educational system (well, one of many), but young people in the US don’t get much exposure to money management concepts in school. You’re going to have to study outside of school to learn about personal finance. You don’t have to become Warren Buffett before you start investing, but you should know why he comes up so often in discussions of investing (among other financial topics).
-Keep Up Your Grades: I know it’s hard to see how doing well in chemistry or physics will help you if you want to go into journalism, or the importance of English Lit if you want to be a chemist. But doing well in your classes (ALL of your classes) can open lots of doors if you’re planning to go to college, letting you get into better schools or increasing your chances of financial aid once you’re in. Even if you don’t go on to higher education, potential employers are more likely to be impressed with a school record that’s got lots of As and Bs on it than one filled with Cs and Ds. Don’t listen to people who say grades don’t matter. They just want to keep you down because they didn’t do well themselves.
-Start to Save: I realize that when you’re working twenty hours a week on top of going to school full time and have only a small paycheck to show for it, the last thing you want to do is NOT spend that money enjoying yourself. But, saving now has advantages: you’ll get into a habit that will serve you well throughout your life and you’ll be prepared for any unexpected expenses you face. Plus, if you put some of the money you’re saving into a high returning investment like a stock mutual fund, it can end up as a pretty sizable amount of money by the time you’re ready to retire (even if you want to retire a decade, or two, or three, before the rest of your classmates).
In Your Late Teens and Early Twenties (18-23)
-Get the Education You Need For the Job You Want: Whether you go onto college to get a degree or a technical school to get a certification, knowing what you want to do and how to get the needed training is a vital first step to doing what you enjoy in life. Doing some research to find a job that sounds like something you’d love to do, and figuring out what degree or other training you need to get it, will help you figure out what you should do with your life. If you’ve done well in your studies to this point, you shouldn’t have a problem getting in; the bigger issue might be paying for your education, which brings us to…
-Keep Your Debt to a Minimum: If you’ve done much personal finance reading, you’ve probably gotten several different views on what is ‘good’ debt and what is ‘bad’ debt. The argument gets rather heated at times, but the short version is that you should keep your debts to the lowest level required to meet your needs (not wants, but needs, like education and housing). Also, do your best to pay off your debts as quickly as possible so as to maximize your personal wealth.
-Start Networking: Connecting with your colleagues is fundamental to your success in the professional world. While you are starting out in your training, you are in a good position to build a network; your educational process will enable you to meet a number of people, many of whom are likely to go off to diverse locations when they finish, taking memories of you with them. If you keep in touch, and help them with their careers whenever you can, you’ll build relationships that can help you when you need help yourself.
In Your Mid to Late Twenties (24-29)
-Consider Alternative Sources of Income: You could consider this earlier (and I certainly would, myself), but as you reach your mid to late twenties, things like a spouse, a house, and children can increase the need for money around this time of your life. There are many ways you can increase your income without getting another job (which is an option, as well), from blogging to freelancing, and considering some of them as an addition to your day job, or perhaps even a replacement, would be a good option.
-Keep on Learning: It’s tempting to think that when you’ve graduated from college or trade school that you don’t need to learn anything more. But that’s simply not the case; even if you don’t go for further formal education, you’ll still need to keep yourself abreast of the latest information in your field and any new developments. Progress doesn’t stop, and if you hope to keep up with the changes in your field, you’ll need to continue to educate yourself.
-Be Prepared to Change Jobs: Like it or not, there’s a high chance that you’ll change jobs at some point in your career. Even if you do everything properly in your position, you can find yourself out of a job due to your company’s missteps or a downturn in the broader economy. Keeping your skills sharp, your contacts fresh, and your resume up to date will prove to be a big help now, and throughout your career.
There you have it, nine tips to help you guide your finances (and your life) until you reach the point where the mainstream financial media starts to pay attention to your plight. I hope they helped you get a better idea of what to do next with your life. Good luck throughout your financial life!
Roger, early financial education and retirements savings are definitely overlooked far too often by the younger generation. Or more specifically overlooked by parents who should start the education process early!
My parents forced me to save a couple dollars back when I first started working at the age of 14! Developing good saving habits early on is critical to building wealth.
You’ve nailed it. One’s upbringing has the biggest impact on one’s future in my opinion. In your case, good for your parents for instilling the discipline early, and good for you.
Yes, more parents should try to teach their students financial lessons early on, and more children should make the effort to learn on their own if they aren’t taught. Here’s hoping more young people gain a more substantial financial education.
Roger, Very nice treatment of one of the MOST IMPORTANT FINANACIAL TOPICS. I like the emphasis on “keeping your grades up.” (it can’t hurt :) ) Multiple sources of income are also key in this uncertain world. (I’m linking to this in my next book).
Barb, thanks for the compliments. Good grades can have many benefits, not all of them completely obvious. Thanks for the link back, it’s very much appreciated.
Roger, it is so true that you need to start early! I remember I started selling stuff on eBay when I was about 14, and it really taught me about running a business. The earlier you become financially self-aware, the better!
Very, very true; the earlier you get started, the better off you will be. If I had had my financial awakening a decade earlier, I’m pretty sure I’d be much better off. Good for you getting such experience.
Roger, nice points. I would only suggest encouraging savings as young as kindergarten. As soon as kids can recognize coins they should be saving and learning the benefits of saving.
A fair point; perhaps I’ll have to write a follow-up about the ways to educate kindergarten and elementary students about money management. You have to get started when they’re young, after all.
We are trying to do this with my son who is 6. He has to save some of his allowance, donate some, and spend some. We don’t tell him what to do with his donate money; last year he chose to donate all of it to Haiti. He sure does like to blow through his spend money! As soon as he has some it is gone.
I had friends in high school whose parents had them save part of their money, and I thought it was just terrible. Now I wish my mom had made me do that too! :)
It does sound like you are teaching your son right; hopefully, by the time he is old enough to make his own money and money decisions, the habits of saving and giving to charity will be well ingrained in him.
Roger, I agree. Too many young people feel left out and they are really left fending for themselves in the financial world. We’re trying to get more financial literacy into the local high schools so they don’t have to learn by trial and error like the generations before them. Thanks for writing this article.
You’re quite welcome; personally, I don’t understand why there is a complete lack of financial education in the school system. Even if they waited until high school (which is still rather late, in my book), the nation could be much better off with a guide to handling money explained to most people before they enter the real world.
Roger, I like how you broke up the stages of life. I personally missed a lot of those stages, namely the ‘keep debt to a minimum’ and ‘start to save’ when I was in my early twenties. So right now I’m playing catch up but having fun doing it! :)
LaTisha, I hear you; there’s a lot I wish I had learned about money and money management before I was out on my own, and now I’m trying to get a better handle on it. Here’s hoping we both learn all we need to learn.
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This is an excellent break down combining life stages and finances. I also agree that our educational system is lacking a basic understanding of money and budgeting. I hope to do something about that in the near future. Great article!
Thanks very much. If I find myself in a position to dictate curriculum to a school district or two, adding a great deal of financial courses will be at the top of my list.
I agree that starting early is important and so many people aren’t aware of what a difference it makes.
Very true; it’s amazing how much of a difference even a few years can make, to say nothing of several decades.
This is a great breakdown. I wish I had learned these steps when I was younger! One thing I would like to emphasize is networking. Most young people overlook it, but even something as simple as maintaining a positive relationship with former employers and coworkers (even the ones who can’t stand you) can bring more opportunity than most people think.
Networking is definitely quite important; it’s often the difference between getting a good job and struggling to find anything that pays. Being able to stay connected with people, even those you don’t really care about, is a great skill to have.
Thanks, everyone, for kind comments. One of my biggest pet peeves is the fact that even amongst those people who give out personal finance information as a profession, there doesn’t seem to be much of an effort to reach out to people in their twenties (and almost none at all towards those in their teens or younger). Hopefully, the rise of so many young personal finance bloggers reminds magazine and book publishers that there is a market out there for financial advice for people who aren’t (yet) pushing middle age.
To those of you who suggested teaching even younger people about money, I whole-heartedly agree; I only limited my list to the teen years and up because that’s when you start to bring in your own money, rather than depend on your parents for an allowance (or gifts on your birthday/holidays). When your children are younger, I’d strongly encourage parents to share proper money-management techniques, to help them build a good foundation for when they do have their own money coming in. Teaching your children how to save money, spend wisely, start to invest and pursue their financial goals seems to fit right in with lessons on reading, writing, and arithmetic.
There’s a huge gap in our education of younger people, in that there’s very little to none in terms of personal finance taught. I recall back in junior high (eons ago for me) we had to take “Home Economics”, which was really woodshop, sewing, and cooking. Instead, how about learning about money – how it’s earned, why it’s important to save, etc. Thankfully, I was lucky to have some sense and thought to save. But I could have done better and been more wise with money when younger, and I think a big part of that is that the resources weren’t there to teach us – in high school OR in undergrad either.
Fortunately being an unergrad business major, I connected the dots and figured things out. But those that don’t get exposed to financial concepts are at risk for making ill-informed choices.
Very, very true. I never understood why ‘home ec’ had so little ‘economics’ involved. A course on how to save, invest, and otherwise manage your money seems like it would be much more useful. I’m glad you figured everything out; here’s hoping that most current young people can figure things out, themselves.
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absolutely lovely post and one that resonates with me 101%. good collection of advice. rock on buddy –
Thanks much for the compliments. The kind thoughts are much appreciated, as well.
Roger, great summary. I think it hits all the important points. I think getting into the saving and giving habit early on will serve young people well!
Thanks very much. Yes, the habits of saving and giving (as well as limiting your spending and only buying what you can afford) are great ones for young people to develop.
Great points. I was ready to read the next portion 30 and on!
Heh, I’ll have to work on something like that. Although, as I said in my introduction, that’s the age when mainstream financial magazines start to pick up the slack.
Thanks again to everyone who read and commented. I appreciate everything you said; it’s always nice to be appreciated.
Very well said, Roger! Most of the youth do not know how to handle their finances, and how to succeed later on in life. I really hope they get to read this one, a very helpful article indeed.
Thanks very much. It is a shame that with all the things we hope to teach our children in school, personal finance often seems forgotten. Here’s hoping that, having seen what happened to their parents and older adults in general in the last few years, more young people take it upon themselves to develop a solid personal finance education.