smart spending

9 financial tips for Generation Y

$100 bills flying in the sky
  • Debt can be devastating if you don't get it under control.
  • It's not unusual to earn more than $1 million over a lifetime.
  • If you find number-crunching tedious, check out online tools.

If you're like many 20- and early 30-somethings -- aka Generation Y -- money concerns are probably hitting you in a way they haven't before. Your paycheck, assuming you have one, probably doesn't go as far as you'd like. Even if you're in tip-top shape, health insurance can be pricey. And fewer companies offer pension plans, even as prospects for Social Security remain unclear.

Perhaps not surprisingly, more than half of employees between 21 and 32 say that they're living paycheck to paycheck, according to a recent survey by insurer Metlife. Nearly three-fourths of respondents are concerned about making ends meet.

Fortunately, you can get off to a sound financial start with these nine tips.

1. Respect debt

Debt can be devastating if you don't get it under control, says Wes Moss, a Certified Financial Planner, or CFP, and director and chief investment adviser with Capital Investment Advisors in Atlanta. It limits your career choices, your chances of buying a house and often leads to tension in personal relationships.

Moss acknowledges the dilemma, as your 20s and 30s can be expensive decades. You're outfitting a place to live and may need to buy a car and work wardrobe. At the same time, you're at the low end of your earning potential. You need to closely track spending and cut waste to avoid running up credit card balances.

2. Save

To start, you need a cash cushion to cover any periods of unemployment, as well as unpredictable expenses. Then, begin saving for retirement as soon as possible, says Sarah Young Fisher, a CFP and owner of Fisher Advisers in Lancaster, Pa.

You'll need to learn to be a savvy investor, says Robert Manning, author of "Credit Card Nation: The Consequences of America's Addiction to Credit." That means understanding the tax implications and costs of different investments.


3. Assess your career

"You are your biggest asset," Moss says. Today, it's not unusual to earn more than $1 million over a lifetime. "Think long and hard about where and how you'll earn an income," he says. While you want a career you enjoy, you also want to consider how different paths will impact your financial security.

When you change jobs, roll over to a new retirement account any money you have in retirement savings with your old employer. Here's why: Spend the money and you'll pay penalty and taxes, which can top 25 percent.

4. Rethink education

In this economy, you need to take a hard-nosed assessment of your education plans. If you started college but didn't finish, go back, Moss says. "The rewards are huge to finishing school."

What about getting an additional degree? While learning more is always great, take a pragmatic approach. That may mean heading to a vocational school for a certification, even if you've earned a four-year degree. "It's more practical and cheaper than graduate school," says Anya Kamenetz, author of "Generation Debt" and a writer with Fast Company magazine.

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