9 financial tips for Generation Y

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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.

5. Get insured

You’re not invincible. Moreover, given that one illness or injury can bankrupt you, health insurance is a must. If you can get it through your employer, consider it. It’s usually a better deal than options available to individuals.

You’ll also want disability insurance in case an illness or injury keeps you out of work for some period of time. “The probability is low, but the impact is severe,” says Todd Katz, senior vice president with MetLife.

Homeowners or renters insurance is smart. Even if your furnishings are castoffs, replacing everything would add up.

Finally, if others depend on your income or if family members would need to hire someone to cover the work you do at home, life insurance is a must.

6. Consider housing options

Your living arrangements need to be safe, inexpensive enough that you can build your savings and flexible enough that you can move if your career demands it.

One option is to head back to your parents’ home for a year or two. “If you can grin and bear it, it’s a great way to get a financial buffer quickly,” Moss says. Of course, you need to be disciplined about stashing away the money you’re not spending on rent.

Renting an apartment with roommates helps you stretch your housing budget and learn to live with someone else. That’s good preparation for marriage, says Fisher.

7. Budget

While major outlays are hard to overlook, you also need to track smaller, ongoing expenses, like lunch money and gas for the car. These add up, and the totals can shock you.

Consider that a modest dinner out each week at $30 will leave you $1,560 poorer by next year. If you find number crunching tedious, check out online tools that can automate the process.

8. Have the money talk

Sure, discussing money with your significant other isn’t the most romantic of conversations. But it’s better to find out now if your future better half is hiding thousands in debt. “Ask the questions that might be uncomfortable,” says William Bailey, associate professor in the School of Human Environmental Sciences at the University of Arkansas at Fayetteville.

9. Prepare before starting a family

It sounds crass to consider finances when you’re thinking of starting a family, but you need to be realistic. Cut corners all you can, but kids are expensive. In addition to the gear you’ll need, a baby typically means some time away from work. Start putting some money away before you’re knee-deep in diapers and Onesies.

While the economy has been hard on almost everyone, you have a few things in your favor. First, you have time for the market to recover. Moreover, you should be able to halt any bad financial habits before they become ingrained.

Of course, the economy will change at some point. Even so, the key to financial security remains the same, according to Kamenetz: “Live within your means and put something away.”