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  • 00:00:00,000 --> 00:00:00,000 Hey, guys.

  • It's Chelsea from The Financial Diet.

  • And this week's video was brought to you

  • by Credit Repair.

  • And this week, I wanted to do something big,

  • both for the people who might be new to this channel

  • and for the people who know TFD very well, because we

  • can always use a refresher.

  • Many of you are just starting out in your adult lives

  • and are asking us constantly for big, comprehensive checklists

  • of what you really need to be doing on a daily, weekly,

  • or even yearly basis to get good with money.

  • And while it's impossible to condense everything

  • that you should be doing down into one video,

  • we've done our best to try and give

  • a really comprehensive overview that explains everything

  • in the rough order that you should be doing it.

  • Because frankly, when it comes to money,

  • millennials could use some help.

  • And if you feel like you're very behind when it comes to money,

  • you are not alone.

  • We're dealing with lower and stagnating incomes, higher

  • debt, lower net worth, lower rates of homeownership,

  • underemployment.

  • Compared with previous generations,

  • millennials are in a tough financial position,

  • in large part because we came of age during the Great Recession.

  • And while we can advocate for greater systemic change

  • so that more people do not have to put themselves

  • into hundreds of thousands of debt for a basic education,

  • we can do our best on the day-to-day

  • to get good with the money situation that we have.

  • And while it's great to do these 20 steps in your 20s,

  • keep in mind that nothing is too late.

  • And you could easily do them in your 30s or beyond.

  • But if you're just starting out into adulthood

  • and want to know how to get good with money,

  • this is a great place to start and fight back

  • against some of those big picture

  • factors we have working against us.

  • So without further ado, here is your 20 point checklist

  • for getting good with money in your 20s.

  • Number one, and this is the most important, crucial, first thing

  • everyone needs to do if you have not touched your money,

  • is go through all of your bank and card statements

  • and just analyze every purchase.

  • Get to understand your money on an intimate level.

  • You should know what's coming in and what's going out.

  • This will allow you to get a bird's-eye perspective

  • of your net worth, which is basically your assets

  • and your debts.

  • And the nitty gritty view of your accounts

  • will allow you to really see the daily flow of your money, which

  • will give you some context as to how you've gotten

  • to that current net worth.

  • Even if you don't decrease your spending,

  • increase your earnings, or change a thing,

  • just looking at your money situation in the face

  • and getting to know it intimately

  • is a crucial first step.

  • Use that analysis of your starting budget

  • to create a current budget.

  • Now, this does not mean it is where you want to be.

  • It is understanding where you are.

  • You should know roughly what percentage

  • of all of your income is going to what.

  • Particularly if you've never given yourself a budget before,

  • coming to the understanding that, yes, you

  • do have a budget whether or not you realize it,

  • you just maybe haven't had control over it,

  • is very important.

  • And even if you only have $10, you

  • should know where 2, 3, and 5 of those dollars are going.

  • Now, number three is to pick out a few key goals for your life.

  • Now, I want to be clear that everyone

  • is going to have different goals, and not all of them

  • are going to be the same cost-wise.

  • But you should have a rough picture

  • of the life that you want to live

  • and a few key components that you know you will need

  • to save in order to get to.

  • This could be anything from owning a home,

  • to quitting your job to go freelance,

  • to traveling the world, to starting a family.

  • The point is you want to have a rough sketch

  • in your mind of the goals you are working toward.

  • Because the more we understand money

  • as a means to getting to those goals rather than just

  • something you accumulate, the more

  • you will be able to stay on track,

  • stay motivated, and understand why you're making the choices

  • that you are.

  • So once you have those goals and a rough financial understanding

  • of what your life will need to look like in order

  • to reach those goals, you must create a goal budget.

  • This means roughly what do you want to be saving every month,

  • how much perhaps more will you need

  • to earn or less will you need to spend it in order to get there,

  • and where you are in terms of distance

  • from how you're living today from that ideal budget.

  • Now, obviously, as you live the course of a lifetime,

  • your goal budgets are going to change.

  • And we will talk about that later.

  • But the point is you should take time to separate yourself

  • from how you're handling money today to how

  • you should be handling money.

  • A common frame that a lot of people

  • use to making an ideal budget is something

  • like the 50-30-20 rule.

  • And this means that about 50% of your money

  • is going to needs, like bills; 30% is going to wants,

  • things like dining, traveling, et

  • cetera; and 20% is going to savings.

  • This may not be achievable for you today

  • or you may find that a different system works better for you.

  • But the point is you need to be basing your target

  • budget on meeting those goals that you've set for yourself.

  • Number five is get to know your credit score.

  • Now, I am someone who used to have decimated credit

  • and who as of yesterday was approved

  • for a very fancy credit card all by myself with no cosigner,

  • which was amazing.

  • And to some of you, that may seem like, whatever,

  • I've always had a great score.

  • But for those of us who had to work to get a credit score,

  • it's fucking amazing.

  • But it took a lot of hard work to get there.

  • And in fact, for a period of my life,

  • I had to use what is often referred to as rehab credit

  • card, where basically you prepay a credit card, which you then

  • pay back on time to show that you can make bill payments.

  • When it comes to rebuilding my credit, I've done it all.

  • And everyone's path to good credit

  • is going to be different.

  • So it is incredibly important to get to know your credit score--

  • what it is, why it got there, and how you can get

  • it to be the best it can be.

  • And that can be everything from having higher credit limits

  • but spending less-- so you're widening that credit

  • utilization ratio--

  • to making timely bill payments, to keeping

  • cards open for longer so you have that longer credit

  • history, to disputing dings on your credit report,

  • which I have done successfully as recently as this year.

  • The point is, as much as you should intimately

  • know the state of your accounts, you

  • should also know the state of your credit score.

  • Number six is find a financial buddy

  • to help you on your journey.

  • Now, we have done an entire video

  • about the financial buddy system,

  • which we will link you to.

  • But it boils down to this.

  • All of the hard decisions you are going to have to make,

  • and the savings journeys you're going to have to go on,

  • and the things you might have to say no to because they're

  • really expensive are infinitely easier

  • to do when you have someone who just gets it, who's also trying

  • to better themselves financially, who's not going

  • to judge you for being on a budget,

  • and to whom you can rant slash potentially even share good

  • ideas.

  • Get thee a financial buddy, and all of this list

  • will be infinitely easier.

  • Number seven is to start working on your emergency fund.

  • We have talked about this so many times.

  • And I will link you to the video on how to specifically save up

  • your emergency fund.

  • But the long and short of it is this,

  • before you work on your retirement

  • savings, aggressive debt repayment, investments,

  • et cetera, you need to have about three months of living

  • expenses set aside, so that if anything

  • were to happen from an unexpected injury,

  • to your car breaking down, to losing a job that is not

  • putting you in financial ruin.

  • Without an emergency fund, basically anything unexpected

  • happening could totally derail your financial progress

  • and potentially leave you on the street.

  • Obviously, if you're doing things like repaying debt,

  • you're going to want to not go into default on anything

  • in order to get your emergency fund together.

  • But everything else needs to be bare minimum,

  • including your spending, until you have that emergency

  • fund socked away.

  • Otherwise, you are living life on a razor's edge

  • and essentially playing Russian roulette

  • with your own financial future.

  • Number eight is do a one-month financial cleanse.

  • Now, when you're getting into the swing

  • of going toward your ideal budget

  • and learning how you can save more, one of the biggest

  • helps will be to go on a radical budget for a month,

  • whether that's a cash-only diet, or trying

  • to save 50% of your income, or reducing absolutely

  • every expense that's not essential,

  • in order to really get a better picture of your life.

  • So much of what we've come to expect and spend on in life

  • is a result of what we call lifestyle inflation.

  • Basically as you get more money, you

  • have a tendency to spend more money

  • and feel like you need to.

  • It becomes more and more normal to take a car,

  • to order takeout, to pay extra for things,

  • to not wait for things that go on sale,

  • basically to live a life that is more luxurious than you

  • need, even just to be happy.

  • So doing one month where you're really reducing all of those

  • "want" expenses as much as possible really

  • puts into sharp relief what is worth

  • it to spend that extra money on and what you really don't need.

  • Number nine is get more comfortable with understanding

  • your own professional industry and how you can advance in it.

  • An interesting fact is that despite our reputation for job

  • hopping, millennial workers are actually

  • just as likely to stick with their employers

  • as Gen Xers were.

  • And while it's not inherently wrong to stay

  • at the same employer-- although it can depress your earning

  • potential, because often you have

  • to move out of your company to get a big salary jump--

  • it does mean that you might not have

  • a very good understanding of what's going on

  • around you in your industry.

  • And one of the best ways to advocate for yourself

  • professionally is to have a view of not just your own company

  • but of the industry at large.

  • Perhaps you're making substantially less at your job

  • than you would be at other comparable companies.

  • And even if you never leave your company,

  • you may be able to use that for leverage.

  • Getting comfortable with sites like LinkedIn,

  • Glassdoor for salaries, or even private forums and groups

  • for specific industries can give you huge networking potential,

  • insights into what's fair or common,

  • and perhaps even next steps.

  • And even just a half hour of staying on top of this

  • every week can have huge, long term benefits.

  • Now, number 10 is outside of your main industry,

  • where you're obviously going to be making your longer

  • term moves, you want to set up at least one stream

  • of additional income outside your normal job.

  • And this could be something as small