Do you know if you’re on track with your financial goals? Where are you in comparison to other young adults in their 20s and 30s? Take inventory of your career and finances with this quick checklist. Here’s a list of the top seven milestones that every young adult should strive towards.
1. Be Debt Free
An important milestone that every young adult should hit is to become debt free at least once.
Becoming debt free at least once gives you the perspective of how difficult it is to undo any bad financial decisions, and an understanding of living life without instant gratification.
2. Regularly Check Your Credit Report
In order to start your financial life off on the right foot, it’s smart to know how to check your credit report. Keeping track of any credit errors or reporting mistakes will ensure that the credit history you’re building is accurate. You don’t want to be caught off guard when you apply for a new job, or buy your first home.
Get into a routine of regularly checking your credit report, and keeping track of your credit score. If you find errors or mistakes, you can get them corrected so they won’t taint your credit.
3. Have a Working Emergency Fund
We all know the importance of having an emergency fund, but saving up a good cash reserve isn’t always easy. After setting parameters for what constitutes an emergency expense, there will no doubt be times when you’ll have to pull out the funds to cover these unexpected costs. Now you’re faced with having to put the money back into the account for later use.
4. Start Contributing to Retirement
No matter how small your contributions are, you must start saving for retirement now! Time is the most precious investment tool on your side, so the sooner you start saving for the future, the more time you’ll have to earn a decent return.
With the rise of robo advisors and other microsaving tools, you can start putting away little money per month into your Roth IRA or other investment account. The point is to open an account and start putting away something, and create a regular habit of saving money.
5. Track Your Spending
Budgeting. It’s not a word that many of us like to hear, but it’s nonetheless a vital milestone in becoming a young adult. Tracking your spending and creating a budget plan will allow you to spend money based on your priorities instead of frivolously spending it on stuff that you don’t really value.
A few of the responsibilities of being an adult include paying your bills on time and sticking to a budget. That’s the only way you’ll be able to reach all of your financial goals, like traveling, saving up for a big purchase, making a career transition, and putting away money for a comfortable retirement.
6. Establish a Side Income
The economy and workforce has changed, there’s no doubt about that. In order to adapt with that change, many young adults are learning new skills and figuring out how to build their careers. Having multiple streams of income will help you spread out the risk of lost income.
Do you have any hobbies that you can turn into a side businee? What skills do you possess that can help you earn more money? Outside of your day job, what other things can you pursue to establish profitable income streams? This is an important milestone for every 20 and 30 year old.
7. Know Your Net Worth
The definition of net worth is simply the combination of your total assets minus any debts you owe. This figure will be your total net worth value, which could either be positive or negative depending on whether or not you have a lot of debt (say, from student loans) or a good amount of assets (like, savings or investment accounts).
If you don’t know your current net worth, do a simple calculation today. Then keep updating this figure (using a spreadsheet or other net worth tracker) every quarter so you stay up-to-date on your overall financial situation.