I recently had a financial planner come to work to give a presentation on retirement planning. Having just switched jobs from a large financial firm, I was interested to hear what he had to say, especially because the audience he was presenting to was a room full of mostly 20-somethings. He had the opportunity to really hit home a few key principles and I was very interested to hear how he would do it.

However, I left an hour later immensely disappointed. He had been vague, unenthusiastic, and had missed several key points. It made me wonder how many people my age have access to sound financial advice. It’s definitely not rocket science, although financial planners may want you to think that. Below are a few things I think are absolutely necessary:

1. Get all the free money you can get. This starts with employer matched 401K plans. If your employer matches any amount at all, you should be taking advantage of the plan. Many employers will match 3-5% of an employee’s contributions. However, don’t feel like you need to stop at that contribution level. In fact, many experts say that a minimum of 10% of your paycheck should go towards a retirement fund. In addition to retirement fund matches, take advantage of things like health insurance reimbursements for gym memberships, pre-tax contributions for transportation expenses and flexible spending accounts, and take your paid time off. Yes, this is free money too! Use it! Even though some of these things may seem trivial, it’s important to look for additions to your budget in $5 and $10 increments. You’re not ever going to find a $100 extra in your budget, but you’ll sure find a bunch of $5 and $10 that can add up fast.
2. Set up a savings account and contribute to it regularly. The first thing you should be saving for is an “emergency fund”. Life happens and oftentimes it’s expensive. Having an emergency fund can take the stress out of those situations when life catches up to you. How much should it be? A minimum of 3-6 months of expenses. If you’re looking for a bank to set up your account with, make sure you find one that’s offering a competitive rate (at least 1% as of June 2017) and doesn’t charge you monthly fees. Once you have your emergency fund fully funded, it’s time to start contributing to another retirement account. We’ll talk more about this in later posts.
3. Set a financial spending goal for yourself and work towards it. Many people will start a new savings account with a bunch of commitment to saving every last penny. And that usually lasts for a few weeks, but then they realize they like going out on Friday nights, or a shopping spree, or a big yearly vacation. Those things are important and we need to spend on them! If we deny ourselves the ability to spend money on enjoyable things so we can save, we will get burned out really quickly. However, we need to decide the things that are really worth spending on. For me it comes down to this question: Do I get the most enjoyment out of this spending, or are there things I would rather spend on? If there are things I get more enjoyment out of, I’ll usually forego that activity. So I set a financial goal for myself to spend a certain amount on activities that I truly enjoy.
4. Pay down debt. My grandmother used to tell me, “Those who understand interest earn it. Those who don’t pay it.” There are definitely good things to go into debt for, but ultimately, you don’t want to be a slave to monthly payments. This is so important I’ll dedicate an entire post to talking about the breakdown of payments including the interest portion and principal portion and how to make your dollar go farther when you’re paying off debt.
5. Look for other income streams. This is one that is stressed heavily by many bloggers I follow. I’ve been mildly successful at it through AirBnB and other rental endavors, but I am definitely always looking for other income streams. The ones that really appeal to me are those that don’t require me to be there 100% of the time I’m earning the extra money, but those opportunities are few and far between.
6. Give. Whether you do this with time or money, being charitable will help you in more ways than you can imagine. Find a cause that you really believe in and commit a contribution on a regular basis.

Do you have other things you think are imperative for creating a sound financial foundation? Leave a comment!