If you’re like most people, you’re so caught up in life’s day-to-day hustle that you take everything 24 hours at a time. There’s rent to pay and debts to kick, and all the while you’re trying to survive in a city that feels like it’s burning a hole in both your soul and your savings account. So what does it take to stop living paycheck to paycheck, be debt-free, sock enough away to retire someday, and still chase what’s important to you? It won’t happen overnight, but by taking specific steps now, you can up your game and be a baller in your 40’s. Here are the major money bosses and how to beat them:
Money Boss: You Have More Month Than Money
How to Level Up: Home in on Your Money Pits
Figure out what’s killing your game by zeroing in on what’s draining your funds every month. Do you have a compulsive eBay habit? Are you paying more than you can afford for your car and monthly parking? Do you find yourself tight on cash all the time and have to resort to swiping plastic to get through the month? Ideally, you should have enough money to pay your bills, with some left over to put towards your money goals (e.g., paying off debt, building an emergency fund, saving for a nice bike or trip). Don’t feel obligated to cut your money pits out completely, but consider spending in moderation or downsizing. For instance, trading in a lux ride that costs $400 a month for a slightly less — but still decent — lux ride that costs $200 a month saves you $2,400 per year. Plus, you’ll probably be able to score a less expensive auto-insurance plan.
In Your Arsenal: Start by tracking your finances with a budgeting app such as Mint, LearnVest, or Level Money. You’ll be able to see where you’re overspending and tweak accordingly.
Money Boss: Crippling Debt
How to Level Up: Pay Off That Shit ASAP
Duh. But how? “Paying off debt does not have to be a stressful process,” says LaTisha Styles of Young Finances. She suggests you look at everything you own, figure out how much you can afford to pay off each month, and then earn side cash to make extra payments. When it comes to figuring out which debt to pay off first, according to Gen Y Planning founder Sophia Bera’s ebook What You Should Have Learned About Money, But Never Did, the general rule of thumb is that if the interest rate on a loan is more than five percent, you should really crack down on paying it off. For debt with an interest rate that’s under five percent, you can ease up and focus on other things.
In Your Arsenal: Read the fine print on student loan repayment options to find out which plan is best for you. You can also get a free online federal exit counseling session. If splurges on your credit card is your vice, setting alerts on your card to indicate when you’ve reached a limit — or canceling your card altogether — may keep you from overdoing it.
Money Boss: Working Until the Day You Die
How to Level Up: Start Saving for Retirement Now
The sad news is that the projected average age for Millennials to retire is 73, which is 12 years later than the current national average of 61. The good news is that the average life expectancy is longer than that of previous generations. Plus, you have a good 40 to 50 years to save up a sizeable nest egg — that is, if you start now. Why? Behold the power of compound interest, which will help you earn more money down the line. For example, as Carissa Uhlman, vice president of student success at Inceptia points out, if you make a one-time deposit of $5,000 into a Roth IRA when you’re 20 and let it grow at eight percent interest, you’ll have $160,000 at age 65.
It’s not like Rogaine — no amount you throw down can grow those dollars back, and there’s no magic elixir to make up for lost time. There are plenty of options to save for retirement: 401(k)s, 403(b)s, and Traditional and Roth IRAs. If you’re a freelancer or self-employed, check out SEP (Simplified Employee Pension) or the government-backed myRA. And as tempting as it may be to cash out your retirement when job-hopping, don’t. Roll over your funds into a new one instead. You’ll be glad you did.
In Your Arsenal: Check with your employers to see if they have a matching 401(k) program. Compare fees on retirement funds, and figure out how much you need to save with a retirement calculator through Bankrate.
Money Boss: A Dead-End Job
How to Level Up: Strike Out on Your Own
Let’s say you have a decent job, one that doesn’t make you want to drink yourself into a coma every night. If you’re lucky, you might get a three to five percent raise annually. But if you have a great idea for a business and strike out on your own, you’ll have the potential to earn much more. As cofounder of XY Planning Network Alan Moore says, “Jobs will always be there, but ultimately the true path to financial independence is entrepreneurship.” Sophia Bera of Gen Y Planning adds that owning your business will give you multiple revenue streams and create job security. As with any big, life-changing endeavor, there are risks associated with striking out on your own, so be sure to weigh the pros against the cons first. Try sticking to your day job first while building your business on the side. Another alternative is to start out freelancing part-time, which could potentially lead to self-employment. As for when to take the leap, Carrie Smith of Careful Cents says it’s ultimately a personal decision, and adds, “But if you’re developing a side hustle in addition to your day job, and are taking serious steps toward turning your side gig into a real business, then it’s probably time.”
Even if your initial idea doesn’t work out, it might lead to other opportunities, and you’ll have some great experience under your belt. By starting your own business early in your career, you also have less to risk. However, make sure you have your ducks in a row, as you’ll want to have an emergency fund to tide you over during any rough patches. Carrie Smith of Careful Cents suggests saving three to six months of your bare-bones budget (the absolute minimum to pay your bills) or $10,000 before you leave your job completely.
In Your Arsenal: If you’re itching to do freelance work, check out the Freelancers Union. And there’s Score, a nonprofit with offices in SF and LA that helps small-business owners and entrepreneurs get a jump on their ventures.
Money Boss: Your Credit Sucks
How to Level Up: Stop Incurring Debt
Easier said than done, right? LaTisha Styles of Young Finances recommends ideally saving half of your income. While that may seem impossible right now, you can start by trying to save five percent, then 10 percent, and then gradually level up. And if you land a better-paying job, keeping the same standard of living will help you stay in the green. Don’t spend more than you earn, steer clear from payday loan centers, and think twice before opening another credit card that you may not use responsibly. Those are all the devil’s work.
In Your Arsenal: You can get a free credit report once a year through annualcreditreport.com (the only actual free one). For a second free credit report, check out Credit Karma.
Money Boss: You’re a Hardcore YOLOer
How to Level Up: Embrace JOMO (Joy of Missing Out)
Take note of this adage: you can have anything (sorta) but not everything. It doesn’t mean you have to turn into an urban hermit; it just means being more selective about how you spend your money. It’s totally cool if you want to splurge on front-row tickets to the upcoming Flight of the Conchords tour (hell yes), but, dude, you don’t have to be a VIPer at every show you go to. Try checking out free shows or get discounted tickets via ScoreBig or Goldstar.
In Your Arsenal: If there’s a big-ticket item you really want, try saving for it in advance by setting up a separate savings account opened through SmartyPig. With SmartyPig, you can enlist the help of a posse to contribute to your fund, and once you hit your savings goal, you score a gift card, gratis.
Of course, it’s your money, and you can spend or save it however you like, but if you want to be a baller by your 40’s, you’ve got to keep your eyes on the prize. So mind these tips to beat out those money bosses and level up your financial game. By checking yourself before you wreck yourself, you’ll soon be on the high road to ballerhood.
