I believe everyone can live a fulfilling life and be rich.
Everyone, including you. 🙂
The problem is that not everyone learned how to do this growing up. I certainly didn’t.
I didn’t know about money blogs or books or podcasts. I didn’t know things like Budgeting For Budget Haters existed.
I grew up in a family that valued education and learning but didn’t talk about money. School didn’t help much either. I never learned anything about personal finance growing up – not at home and not at school. And in 2011 when I graduated law school with a whopping $206k in student loan debt, I was shocked to learn I would struggle financially because of my debt. I thought I would be well off as a lawyer. I was so wrong!
Fast forward to now, and life is much different. I’ve paid down my $206k to $106k (and counting!), I switched careers, and I started a business by making money blogging and freelance writing.
I love what I do. The best part is that you can have all this, too (minus the student loan debt, I hope)!
Below is a list of 10 invaluable money lessons that will help you make the change required to get on track financially.
1. Money Mindset
How you think about money matters tremendously to your financial success. T. Harv Eker calls it your money blueprint in Secrets of the Millionaire Mind. Your money mindset can be positive or it can be negative. It may be set up for financial success, or it may be set up for financial failure. If you don’t learn how to have a successful money mindset, then you are going to struggle building financial success.
For example, if you feel shameful, then you spend money to overcome pain. You think you’re not good enough. By feeling less than, you spend more than. If you want to overcome your feelings of shame, you need to create a new “life money story” for yourself. Creating a powerful money story will give you the self-esteem you need to overcome shame and create better spending habits.
2. Financial Goal-Setting
Setting goals is one of the best life hacks you can learn, in my opinion. Setting financial goals will help you achieve what you want most out of life. One popular goal-setting strategy is the SMART method.
I can teach you how to set goals in this post. But the gist is that you should use the SMART method, your goals should be Specific, Measurable, Attainable, Realistic, and Timely. You should also consider short-term and long-term goals, and always write down your goals. Finally, your financial goals should be in line with the vision you want for your life.
This is why I think it’s soo important to take a budgeting course, like Budgeting For Budget Haters or a money-planning course like The Real Life Money Plan. It’s not enough to read a blog post about it. You need to take massive action.
3. Net Worth
As a young professional, my net worth wasn’t always on my mind because I was so focused only on my budget.
The truth is that tracking your net worth is critical to your financial success because it shows you a snapshot of the big picture. To track your net worth, subtract your liabilities from your assets.
While your net worth gives you a picture of your total financial health, your budget is what helps you stay on track day-to-day. If you need to get your finances in better shape, learn how to create a budget.
A monthly budget will show you the money coming in and going out, so you can avoid overspending and meet your financial goals. It’s the best way to know what you’re spending your money on, and it will help you figure out where you can make changes.
To create a monthly budget, list all of your income at the top and subtract your expense (line by line), including your savings, from your income. Easier said than done, so use my recommended budgeting resources to help you make and save money.
- Budgeting For Budget Haters (budgeting course)
- 21 Days to a Better Budget (eBook)
- The Real Life Money Plan (money planning course)
- Personal Capital (online digital aggregator)
- Budget Spreadsheets (downloads to track your budget)
There’s no reason to wait! Get on a budget and start living a stress-free money life now.
5. Emergency Fund Saving
An emergency fund is a stash of cash set aside for when you need it. It’s for the unexpected times – like a layoff, car repair, house repair, illness, etc. When something goes wrong and you have money to pay for it, it will still stink, but you won’t be afraid, you won’t be scared. Instead, you’ll be able to pay for it and won’t feel so worried about how to do it. You can start saving an emergency fund by setting a financial goal and putting a little money aside every month. That, or you can start a side hustle to make extra money just for your emergency fund.
6. Paying Off Debt
Part of financial freedom is being debt free (at least in my opinion). If you have consumer debt or student loan debt, then this section is really important for you. This was something new to me a few years ago, and now it’s the center of my financial plan. No matter where you are financially, getting out of debt is a financial goal that should be a high priority to you if you want to have financial success.
- Related: How to pay off any kind of debt
Something that is often overlooked in the finance space is insurance. I have learned quickly in my job that insurance planning is a component of financial planning that deserves as much attention as anything else. So, consider your insurance – life, health, etc., and make sure you have the appropriate insurance for your personal situation. For example, if you have two kids and your husband dies without life insurance, how will you survive?
If you need life insurance, you can use an online brokerage search site, like Policy Genius, to help you get started. Do your research and make sure you’re getting the right protection for you and your family. You won’t ever regret that.
8. Estate Planning
I know so many young married couples with small kids that don’t have any estate plan in place whatsoever. This is terrifying, particularly if you have kids. It’s just as important as insurance or as getting out of debt – you really should learn the basics of estate planning and get your ducks in a row. Estate planning documents you may want to consider are a will, beneficiary designation, and a trust.
Saving for retirement is one of the first ways that I see young professionals invest. What you need to do first is budget and decide how much you can afford to save for retirement. Then, you’ll have to decide in which account you want to save – a 401k, IRA, or Roth IRA. One of the greatest advantages you have as a young person is the time you have left to invest (30+ years). Additionally, if you get an employer match to any of your retirement investing, you have the opportunity to get free money. If you start investing for retirement now, you will earn much more money on your investment over time because of compound interest. Time is money! 😉
Investing is where you can make the big bucks, in my opinion. But, I’m a believer that you should be debt free and have an emergency fund saved before you start investing. It’s tempting to want to invest before you’re in a financial position to do so, but I highly encourage you to think about prioritizing paying off debt first and building a solid savings before you invest.
When you’re ready, investing is where you can make a killing – especially if you’re in it for the long haul. I’m a believer that asset allocation is the most important part of your investment equation because over time you can build wealth with this method (something I learned in I Will Teach You to Be Rich by Ramit Sethi). Beyond that, there are countless investment theories that you can get into and learn about. It’s also helpful to hire a financial planner if you’re at this stage and you don’t want to learn how to do it yourself. Investing isn’t impossible to do alone, but it does require upkeep once you know what you’re doing.
A Final Note!
Let’s recap. Here are the 10 money lessons that you probably didn’t learn growing up that will help you achieve financial success:
- Money Mindset
- Financial Goal-Setting
- Net Worth
- Emergency Fund Saving
- Pay Off Debt
- Estate Planning
I believe that learning about money – whether you like it or not – is part of being a responsible adult (sometimes this sucks lol)! 🙂
Here’s a list of personal finance books you can also read if you want to keep learning.
These 10 money lessons have the potential to change your life. Start now. You won’t regret it!