Being a young professional is a pretty cool stage of life. You’re likely out of college, hopefully got a good degree, hopefully got a good job, and now you’re likely out on your own, perhaps with your own apartment or house, and maybe you’ve got roommates. A lot of us have a decent paying job and hopefully we’ve got money left over at the end of the month after our bills have been paid. It’s also a very busy time of life: social calendars that are filled with fun activities now that we have more disposable income, careers that we’re starting, debt to pay down, and a financial future that we’re told we should start thinking about. In the midst of all this, it might be difficult to get excited or get focused in on personal finance and why it’s important. I’m sure we would all agree that getting a grasp on our personal finances is important, but for many of us, it’s probably lower on the to-do list of our daily lives. So, in an effort to make it easy, I wanted to give you a few key items to laser focus on. If you read no other blogs, take no other advice, try to just focus on these ‘minimum financial requirements’.

Have a budget

A budget is not just something that tells you’ve when you’ve spent too much money, or something that limits your fun, a budget is a powerful tool that gives you a roadmap of where your finances currently stand, where you’re heading, and what’s possible in the future. A budget helps you understand what your assets are (i.e. paychecks) and what your liabilities are (i.e. debt payments, expenses), and what’s leftover (i.e. to live off of or to save). A budget doesn’t have to be fancy or even something you check all the time. I personally recommend devoting about one hour each week, perhaps on Sundays when you’re wrapping up the weekend and preparing for the coming week. Input your expenses, compare that to what you should be spending, see what you can put aside for savings, and decide what the next week will look like. If you’re a bit over budget for the month (remember there are 4 weeks…don’t spend the paycheck in one weekend), make a plan to cut back. Run to the grocery store, meal plan, cancel that dinner with friends, lay low for the next weekend – figure out what you need to do and do it!

There are lots of budgeting tools and methods out there, but the style that I recommend is called “zero-based budgeting”. That means that I start each month with my gross pay that I’ll earn that month, and then account for every dollar. I have a plan to spend some of it, save some of it, invest some of it, and finally give away some of it. Each month I don’t always meet my goal perfectly and some months I spend a little more and save a little less, and other months I’ll spend a little less and save a little more! The best budget is the one that’ll work for you. Here’s the official YMF budget spreadsheet that I personally use, Mint is a good free tool as well, and finally Dave Ramsey has a good app called Every Dollar. Figure out what works for you and stick to it!

How YMF does it: I personally find an Excel spreadsheet to work the best. Having to manually put the expenses in feels like it hurts a little more than just seeing it pop up on an app. I spend about an hour each week getting my expenses in and reviewing the progress. It’s certainly manual but it’s much more meaningful to me and keeps me accountable.

Have goals and a plan to get there

A budget is simply a tool to let your know how you’re spending/saving your income and if you’re above or over that number. The next requirement though is to actually set goals and have a plan to achieve the goals. Once you have goals, you can adjust your budget to reflect those goals. Depending on your stage of being a young professional, these goals may vary. Perhaps you’re currently trying to get out of debt. Then let your goal be to get out of debt and adjust your budget to pay down more of your debt each month. Maybe you’re saving for a house, a new car, or for grad school. Then let your budget reflect that. Without financial goals, you’re certainly not going to achieve them and you’ll find yourself spending money left and right on things that don’t add up in the long-term and will leave you feeling empty. Let yourself dream a little as you define your goals, think about what’s important to you, where you want to see yourself in 5, 10, 20, 50 years and name those goals. Once you know where you’re going (i.e. with goals), you can start making a plan to get there. To retire early, you’re definitely going to have to put away a lot for retirement when you’re young. To get out of debt soon, you’re absolutely going to have to pay more to your lenders now. Your goals may change over time and you’ll hopefully achieve some goals and move on to the next.

Figure out what’s important to you and come up with a plan to get there!

How YMF does it: Mrs. Money Finance and I graduated from college with student debt. Our cars were old and going to need replacing in the next few years, we knew that saving was important to us and that we wanted to become homeowners. We of course couldn’t achieve all of that at the same time, so we took it one goal at a time. Right out of college with our first jobs, we made it a priority to pay down debt aggressively and save for cars. I think it took us about 3 years but in that timeframe we were able to achieve both (paid cash for our cars). After those goals, we focused on saving for a house, which we bought a few years after that. Now we’re really focused on building our retirement account and are putting our extra money there.

Pay yourself first

If you don’t get aggressive with your money and tell it what to do, it’ll definitely find a way to spend itself. You must learn to be the master of your own money, as crazy as it sounds it’s true! Without a plan to save $250 this month and doing whatever it takes to get there, you’ll certainly fail at that goal. A surprise dinner will come up, a show you wanted to see will be in town, that store you’ve been wanting clothes from will have a sale – something will certainly pop up to demand your attention and your spending. One of the best ways to combat this and help you achieve your financial goals is to ‘pay yourself first’. Basically this means that when you get your paycheck, go ahead and make sure the first transaction you make is to move money into your savings or investing/retirement account. Savings/investing is crucial if you want to experience financial freedom and escape the paycheck to paycheck grind (spoiler alert – even ‘rich’ people can still live paycheck to paycheck).

One of the easiest ways to do this is through automatic transfers. With your savings account or 401(k) or IRA, make that transaction recurring, either payday itself or the day or two after payday. If you set it up in such a way that the money comes right out as soon as you get paid, it’s almost like you won’t see the money and won’t realize it’s gone and miss it!

How YMF does it: Although it’s taken me a few years, I do save 15% to my 401(k), which is easy to do through my work. It comes out automatically and I don’t see it in my paycheck. Although I don’t have automatic transfers, after each paycheck I do sit down (as I budget) and move about half of the allotted savings goal for the month into my savings account.

Remember that it’s a journey

Life is hard, life is tough, and life is full of unexpected surprises, both good and bad. One of the biggest pieces of advice that I can give is to not let yourself get dismayed when you have a bad month. There will certainly be months where you spend more than you make, have big expenses pop up or other financial hardships pop up. I have them myself and it’s important to remember to give yourself grace and remind yourself that you’ll try again next month. Definitely do not give up when it comes to achieving your financial goals – that would be the worst thing to do and a guarantee that you won’t meet your goals. Keep your head up and try again next month.

With all these ups and down, it’s important to have a safety net. Whether it’s an emergency fund (3-6 months worth of expenses) or a savings account that you could access, ensure that you’ll be able to pick yourself up when you inevitably fall down.

None of us know what life has in store for us, and certainly nothing is guaranteed. Learn to roll with the punches, have a safety net when you fall, and if life knocks you down 9 times, get up 10! The journey to financial freedom isn’t easy and won’t be obtained tomorrow. Develop your goals, set your plan, keep working to it, but don’t be afraid to adjust course!

How do you stack up with these requirements? Let us know in the comments!