Financial Planning in your 20’s
Today, we’re talking about all you youngsters out there in your 20’s. And BTW, these are great tips for any age. Just sayin’. Congratulations! You made it. You’re here. YOU ARE AN ADULT. You’re probably just finishing college, or maybe you just graduated. Either way, you’re hopefully starting to think about your future. While planning for your retirement isn’t high on your list, there are some things you should do to start on the right foot. If you think about your finances like building a house, where’s the first place you begin?
THE FOUNDATION
To set yourself up for financial success, you’ll need to focus on 4 things:
1. An Emergency Fund
It is imperative that you establish your Oh S#!T fund ASAP! Or in Kelly’s house, we call it the “Fuck-you” Fund. The reason for this? In the event you ever find yourself in a relationship that turns unbearably toxic and/or abusive, be that with a boss, roommate, or romantic partner, it’s imperative to have enough money stocked away so you can bolt if necessary to ensure your safety. The rule of thumb is that you need to have 6 months of your total monthly expenses saved. Then if unforeseeable events happen in life, you have a buffer to find a new job, get out of a crappy relationship, and support yourself without having to panic. I can’t stress the importance of this piece of your foundation. Not only for the savings part, but creating a long lasting good savings habit.
2. A Will
Now hold on a hot minute. You’re probably saying, “Hold up, I’m in my 20’s. I’m not married, don’t have a family yet – it’s just me and my dog.” I totally get it! I was flying by the seat of my pants for most of my 20’s and yes, it was just me and my Boxer, Winston. However, I also had a ton of student loans and what would happen to Winston if I weren’t around? A simple will can be drawn up with little to no out-of-pocket cost. Just make sure to have it notarized, sis! Then boom! You’ve checked this one off your list.
Along with a will, I would stress the importance of an Advanced Healthcare Directive (can be combined). You may not have any assets to bequeath, but it’s important you to tell your loved ones what your wishes are if you become unable to speak for yourself – do you want to be kept alive on life support? Do you want to donate your organs? Do you want to be buried or cremated, etc? When something tragic happens to a young person they often haven’t had those kinds of conversations with their families and those decisions make an already devastating time feel even harder to manage. You want to honor their wishes but feel paralyzed with indecision. By obtaining an Advanced Healthcare Directive, you would be saving your loved ones some major heartache if anything were to ever happen.
3. Disability Insurance
Good news, you can most often obtain this insurance through your company benefits. If you’re an entrepreneur, then you’ll need to contact an insurance broker for DI. I know, I know…why would you need this insurance when you’re just barely making any money?? I’m so glad you asked! If you had a machine that made money (legally), and just churned away all day every day, you’d probably want to make sure that if something happened to that machine, then you could either fix it or get a new one, right? Well friend, you are that machine! Trust me on this one. Take your “medicine” and just get it done. Your parents would most likely be the ones to shoulder the burden of caring for you for the remainder of your lifetime if you became disabled. That could mean a real financial burden depending on the level of care needed. Being able to retain your independence and having a higher level of care like private nursing can be a game changer for your entire family.
4. Life Insurance
You’re in luck! You can probably get this one through work benefits too! And you should…for your “Winston!” That way, your people can pay off any debts you have and care for your pet if you aren’t around. Not to mention the average costs of funeral and burial services — most young people have no idea how much that can cost. By thinking ahead, you can avoid burdening your family with those costs. ALSO and very important, if your family has co-signed any student loans for you, (which is overwhelmingly common as students under 23) those loans as well as most private student loans could fall to your family after death. A little planning ahead of time can avoid leaving an already grieving family with crippling debt.
**Hot tip! If you really want to get ahead, then you should buy whole life insurance on your own (aka outside of work).
I don’t have enough space to discuss all the why’s here, but you can hop on over to my little corner at southernfriedbusiness.com and check out what I’ve got goin’ on.
Thanks for letting me chat with you today about one of the most uncomfortable topics around – MONEY. But, sis, you owe it to yourself to get yourself straightened out!
What did you think of Connor’s money tips for 20-somethings? Let us know in the comments!
About Connor:
Connor Morganti is a Southern gal with big ambitions. She’s a financial advisor, money educator, blogger and new podcaster known for her passions of: animal rescue, Keto, being an Old Lady with a Baby, and her endearing sense of humor. She helps {mostly} women Fund Their Lives and Own Their Destiny by using their business income to level up. She’s obsessed with abundance and loves to teach women about money through strategies. She coaches on asset basics and savings methods through in-person meetings and online courses. You can always find her on social, but feel free to sign up on the blog too! >> www.southernfriedbusiness.com.
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