I am a Millennial. And one of the first things I did upon entering the "real world" was reach out to successful bankers and traders for insight as to how to manage money. It's a skill that doesn't get taught in school (at least, not very well), and as a 20-something I found myself unsure of even the basics: how does a credit card work? Who takes care of my 401k? What even is a 401k? Should I start saving for retirement now? What stocks are good to invest in?
I wanted to know everything. But more importantly, I wanted to know what I could do now that would set me up for success in the future.
1. "It's Not What You Make, It's What You Save."
This is something that was instilled in me by my father at a very young age. Of course, it's difficult to comprehend and understand when your only income is $15 a week mowing the lawn, but the phrase made sense as soon as I was out in the real world.
I read a powerful article a while back telling the story of a guy who worked a high-paying consulting job, and had all the flashy things: big house, sports car, flew first class. But upon closer inspection, he was spending his income as fast as he was bringing it in, meaning that if he stopped working tomorrow, his lifestyle would immediately come to a halt.
The first rule every Millennial needs to hold themselves to is saving. Don't wait until you're "making more money" to start saving--because trust me, the moment you start making more, you are going to want to spend more. Start the habit right from the beginning.
2. Follow the 10/10/10 Rule
This was taught to me by a mentor of mine, Aaron Webber, CEO of Webber Investments. The 10/10/10 Rule is what every person (but the younger you start, the better) should follow when it comes to their personal finances.
"Look at your total monthly income, and divide it up 70/30. 70% of your income should be your day-to-day lifestyle. From the remaining 30%, 10% of that should go into a long-term vehicle like an IRA, etc. 10% should go into a more immediate savings account, intended for a bigger purchase like buying an apartment or condo--an asset, ideally (not a depreciating asset, like a sports car). And the remaining 10% should be yours to enjoy, such as traveling, or donating to a cause you support, etc."
He went on to explain (and I see this in so many of my peers--and even those that aren't my peers and are much older) that most people struggle to execute the 10/10/10 Rule, because most people operate at 5-10% above what they are earning. Essentially, they are living in debt, or slowly accumulating debt without even realizing it.
3. Diversify Your Portfolio
One of the big money-management lessons I have learned already is the value of diversification. Essentially, you never want to have all your eggs in one basket--because what happens if that basket tanks?
A great example of this happened to me back in 2014. I had just started dipping my toe into trading stocks and I thought Twitter was on the cusp of doing some really cool things, since Periscope had just caught fire. I took a big chunk of my savings (which at the time was like $1,000) and put most of it into Twitter stock. 2 weeks later, Twitter tanked. Not a fun lesson to learn.
"Diversification is key," said Jonathan Rose, CEO of Capital Gold Group. "Having some tangible assets in your portfolio to act as a hedge is critical in today's economy. With terrorism, market bubbles, and inflation, it is critical to keep at least 25% of your portfolio in precious metals. For Millennials in particular, as a generation laden with student debt, it's a smart move to invest in a safe haven asset, such as gold, that can be counted on as a store of value."
4. If You're Not A Day Trader, Don't Day Trade Stocks
When I first got interested in stocks, I asked a lot of people (young and old) who were in the game for advice.
And do you know what all of their advice was?
"If you aren't a day trader, don't day trade stocks."
Investing in long-term stocks and trying to time the market are two completely different things. And yes, I made the mistake of trying to day trade when I first came out of the gate. But the truth is, that's a whole skill set in itself, and it would be naive (and probably arrogant) of you to think that you can do (with no real training, expertise, or knowledge) what some people devote their entire lives to doing.
Don't day trade. Just pick companies you believe in and invest in them, with the intention of holding onto those trades for a good chunk of time.
5. Only Gamble What You Are Willing To Lose
This sort of conversation comes up as soon as you talk to your first wealth advisor.
They will ask you what sort of risks you are willing to take--and many will have you fill out a questionnaire from which they will determine how risk-averse you are.
When you're younger, you can make riskier investments because you have more time to make it back up if things go wrong. But regardless of how you choose to invest your money, you need to know from the beginning what you are alright with losing.
The same goes for business: you should never walk into a partnership or a business opportunity where, if everything goes wrong, you are left stranded. You need to always plan for the worst but expect the best.
When it comes to investing, this means not dumping your entire savings (like I did) into one stock, especially if you are in a financial position where if that investment goes south, you're out of luck. If for no other reason, it's just an unnecessary emotional strain on your life.
Instead, be smart with your cash flow and make your riskier investments things you would hope gave you a nice return, but if they don't, you'll survive. Live by that rule, and you'll have much better peace of mind.