5 Essential Adulting Tips for Your 20s

https://www.littlerocksoiree.com/post/128754/5-essential-adulting-tips-for-your-20s

I get it. You’re still on your parents’ health insurance and cell phone plans. Maybe you’re even living at home while you get a jump on student loans. No judgment here. But don’t let that keep you in a teenage mindset. 

Yes, it’s time to adult, or in the words of Lizzo, to “boss up and change your life.” And here are five essential steps to do just that.

1. Sign up for the 401(k) plan and choose to save 10%.

This is the No. 1 most important thing you can ever do. I know — blah, ick, least glamorous adulting. The reason you should? It will only be easy once in your life to lower your paycheck by 10%, and that’s right now.

Wait until your 30s and you'll need to reduce your paycheck by 12-15% to catch up while trying to juggle the cost of two kids in daycare (a cool $1,600 per month). Wait until your 40s and you'll need to reduce your paycheck by 20-25% while staring down the barrel of sending your kids to college to the tune of $100,000 per kid (and, yes, this includes scholarships). Or wait until so many do, until you're in your 50s and the ability to retire would require a 30%-plus savings rate. 

Don’t have a 401(k)? Open an IRA! Vanguard, Fidelity, Schwab, to name a few, have easy online IRAs you can open and fund on a monthly basis.

2. Offer to pay your parents back for current lifestyle subsidies.

Remember that "surprise" breakfast in bed you made your parents when you were 7 and the clanging bowls clued them in an hour before you walked in with the tray? This would be the real deal, surprise of a lifetime for them. Let’s assume you're still living with the units and are on their health insurance and cell phone plan. Here is the ultimate adulting move: I want you to sit down with them and calculate your pro rata share of those costs and then figure out a plan to reimburse them. 

First of all, this is majorly symbolic. You are signaling to your folks that, while you're certainly grateful for the help, you are an adult and making your own decisions. This is more for you than for them. Start throwing yourself into life and living it on your terms. 

Secondly, chances are your parents aren’t as loaded as you think. I've sat down with couples still supporting adult children who are terrified, even mortified, about their own futures. They don’t know how to have the conversation that they really don’t have enough money to retire one day, but if they want to have any hope of doing it, they really can’t support you. 

But hey, maybe your parents really are loaded. If so, be grateful and invest any support you receive for future generations.

3. Become a CEO of every dollar you make.

I recently heard this pitch from Naseema McElroy. She wants you to take charge of where every dollar goes. Trust me, if you saw this fashionable labor and delivery nurse from California, you would realize that, indeed, budgeting is the new black, and it is all the rage. 

Budgeting is not a diet. It is not deprivation. It's simply creating a construct for your money. Even for folks who don’t make much, money flies lightning speed in and out of bank accounts and credit cards. It’s nearly impossible to keep the bills straight in your mind, including the timing of when they hit. A budget is just having better control over those things. 

So how do you budget? I recommend a "pay yourself first" budgeting process. Assuming you are saving 10% for retirement, you are most of the way there. Next, set up a few savings accounts for big-ticket things that could come up in the year. Think: property taxes, insurance payments, Amazon Prime annual fee, vacations, etc. Don’t forget an account for emergency funds. (I recommend something cool like "walk away fund" or "boss fund.") 

Next, account for all recurring expenses, aka bills. Your goal here is not to account for them but to lower them or avoid them. Still driving the car you got at 16? Gosh, keep driving it. Car payments are the opposite of cool. And let’s be honest, it’s way cooler to Uber anywhere worth going, right?

Finally, spend the rest. I recommend calculating what's left, then splitting it into a weekly amount. Open a second checking account and fund it every Monday with your weekly budget. (Ok, it’s technically an allowance, but we're adulting so don't use that word).

For a more in-depth description, you can read more about that here. 

4. Adult the debt.

If only it were that easy. Look, I get it. You're the only person with $50,000 in student loan debt for your work as the piccolo performance music major. And now you're making $35,000 working for a marketing firm. I’ve got news for you: You are silently suffering among thousands of people in your Facebook feed who are in the same boat. One option is to ignore it and hand it off to your 30s and 40s (see above why that is a really bad idea). Option two is to adult the debt.

The problem is that not all debt is created equal. We have to deal with different types of debt differently.

Credit card debt: Slay it. List out how much you owe. Use the debt snowball method. Again, quoting Naseema McElroy on why to use the debt snowball versus a more advantageous finance method of paying off high interest first: “Math didn’t get you into this mess. It’s not gonna get you out of it.” Set a goal of being debt-free within two years, and do your best not to drag that stuff into a marriage.

Student loan debt: The best decision you can make is to face it. How many women in public service have my team met who, time and again, could have been paying into the Public Student Loan Forgiveness Program, but who went into expensive forbearance deals that instead kicked the can way down the road and added on lots of fees? Bypassing forbearance and paying a potentially small amount of your monthly payment to the forgiveness program leaves whatever is left over after 10 years forgiven. Or, look into other options for loans that include income-driven repayment programs (IBR, PAYE, REPAYE) or refinancing loans into a lower interest rate and then paying them off more quickly. 

You already know this, but the worst option is to ignore them. Contact the federal student loan servicer about consolidating all your loans and picking the right repayment program, or look into refinancing your loans. To refinance, check out this best-of list from NerdWallet.

Arkansas also has a call center through the Student Loan Authority to counsel graduates on what to do with student loan debt, especially those who are in danger of, or have already defaulted on their loans. 

5. If you throw a party, pay for the whole thing. Only attend parties that are fully paid for.

What am I not-so-subtly referencing here? Weddings. 

Brides, if you truly love your friends, here's how you can show your true love. Buy her the bridesmaid dress and shoes you insist on. Pay for her hotel room and flight if it is a destination wedding. If you want a destination bachelorette party, foot the bill. 

Here’s why: Assuming you do the status quo, she's looking at a dress at $250, shoes at $75, gift at $100, flight at $400, room at $150 and destination bachelorette party at $400. That’s a $1,375 price tag. If your friend is making $40,000 per year, her take-home pay after savings, taxes and student loan payments is $2,183 a month. That’s before she's paid a dime in rent, cell phone usage, gym membership, charitable giving or groceries. I promise you she is quietly freaking out because she ends up in my office wondering what the heck to do.

Bridesmaids, as soon as your friend is engaged, be part of the conversation. Open up about your budget. Everyone is in the same boat. Be brave and say just what that boat looks like. See if there are alternative ways to truly celebrate your friend on her big day without breaking your own budget. If nothing can be done, then you will have to make a CEO-level decision on the most financially prudent decision for your own budget. That might include forgoing the Cancun trip. 

Bottom line, adulting is hard, but so worth it. Boss up and make it happen.

Sarah Catherine Gutierrez is the founder of Aptus Financial, co-founder of the Save10 Challenge, a permanent trustee for the Donaghey Foundation and runs the blog Ladysplaining Money. She holds an MPP from Harvard University and the CFP designation. Her passion is to solve the retirement crisis for women and to inspire young girls to save money at an early age.