Kate Anania was “super broke” and living in a trailer in Alabama when she first started researching how best to manage the money she was finally earning with her first steady job.
“I wanted to make sure I wasn’t wasting all my time working without knowing what to do with the money I was earning,” she said. “I started reading about personal finance, but found it pretty dry and also targeted at people who actually had money.”
She found that the best personal finance tips don’t always come from wealth managers who spend their days trading other people’s nest eggs.
So she started creating her own version of money management with what she had to work with from her job in a fisheries lab, and started writing about it on her blog Twenties in Your Pocket. The blog — written with a bit of humor — is for other people who were in her same situation without a ton of money to start with. She then wrote a book, also called Twenties in Your Pocket, to continue sharing what she figured out in her 20s.
“I started reading about how to structure my finances,” she said. “I made some great choices early on, like opening a Roth IRA at 25, even though I only put in $50 a month.”
Growing your bank account and reducing your debt is something everyone can do no matter how big (or small) your salary. Here are five smart money management tips you can start today:
Be guided by your own unique financial values
Figure out the priorities that work for you and your life, not what society or traditional money managers say your priorities should be. And let that be your guide to saving and spending.
“You have to look at what you really enjoy and value,” said Veneta Lusk, the family finance expert behind BecomingLifeSmart.com. “This is where you should put your money.”
It may sound simple, but it will mean a lot of soul searching to figure out what you want and how to get it.
“Whether you love travel or you really would love to have a nice big house, or you would like to pay or your kid’s college in full, or maybe you want to put them in private school,” she said. “What are your values.”
Then set your budget to make those dreams a reality.
Don’t deprive yourself of fun — but don’t go crazy either
“Don’t think about what you cannot spend money on, but think about how you can spend your money and improve your life,” Lusk said.
Focusing too much on what they can’t have makes people miserable, Lusk said, and a constant state of deprivation is not sustainable way to grow your financial portfolio.
People focus too much on what they can’t have or can’t spend or can’t do when it comes to money management.
People think “they can’t have a coffee every morning or they can’t go out to eat or they cannot have fun. It’s not about that,” she said. “It is about balance… It’s important to set some money aside and still enjoy yourself, maybe in smaller ways.”
Lusk, her husband, and their two kids use travel hacking to vacation all over the world, using credit card rewards and travel points. They also put $200 per month into a savings account earmarked for travel and use that cash to pay for food and activities not covered by rewards points.
Their next trip to Los Cabos in July was paid for almost entirely with points, leaving just about $200 in flight taxes and resort fees, or one month of savings.
“We love to travel and we didn’t want to spend thousands of dollars on it,” she said.
Automate your savings
Anania learned quickly that having money taken out of her checking account and put into a savings account before she even had time to miss it was the most effective way to save.
She creates specific accounts and automates savings into each one. This not only allows her to reach her financial goals, but also be able to handle any unexpected expenses.
“If you don’t put money aside, you’ll only suddenly have the money if you get lucky,” she said. “Most of the time, setting a goal, automating savings and then letting it grow is the best way to reach your goals.”
Tackle your debt right away
There is no one right away to pay down your debt, Lusk said.
“I think paying down debt is personal,” she said, noting that some people prefer to eliminate smaller debts first so they can see their progress, while others tackle the biggest debts that are weighing heavily on them.
“Whatever fires you up,” she said, adding that she and her husband chose to pay off their 30-year mortgage in just five years, but they are still carrying student loan debt. “The right way to do it financially would be to go after the one with the highest interest rate. But humans are not logical and that is the point of all the different ways to pay down debt.”
Anania steadily worked her way up from that first job in the fisheries lab and put herself through graduate school, but her masters degree in coastal management came with a brutally high student loan debt of more than $50,000.
Student loan debt is a huge stressor for so many people, she said, and getting out from underneath it frees you up for everything else you want from your life.
“It’s hard to feel weighted down for 10 years by choices you made when you were 18,” she said. “I think people nowadays have much less ‘tracked’ careers— which is exciting because you can try all sorts of things and have new experiences, but it can also come with financial instability, no benefits and falling behind on saving for retirement.”
While she admits now that she should have more carefully considered whether or not she could pay for the loans before she began school, Anania budgeted carefully.
“My loans from graduate school were entirely paid off within four years of graduating.”
Invest early and often, and automate your portfolio
Investing money doesn’t have to be risky or scary, and you don’t need to have thousands of dollars to get started.
Automating your investments with a reliable company is a great way to watch your money grow without having to keep a constant eye on the stock market, according to Yoni Dayan, chief editor of Money Under 30.
There’s a lot people that people think they have to know,” he said, from following the market’s trends to the geopolitical affairs that can affect trading. “I think in this day and age we don’t need to get into that.”
Instead, Dayan recommends using a Robo Advisor that can rebalance your portfolio with the swings in the market, and ensure you are investing optimally.
“There’s so many ways to put your money on autopilot,” he said. “These are major companies that have a long history with investing and are going to make sure you are properly diversified so if one part of the market drops it’s not like you have all your money in that segment. They automatically ensure that you are properly diversified”
The bottom line
There is no longer one right way to smart money management. While you still want to have more money coming in than going out, technology, a changing job market and a younger generation of workers with different values than their parents and grandparents mean the options for budget and saving are ever-evolving.
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Sarah Netter is a freelance writer living in New Orleans.