Ok, Millennials. Listen up.
Here's what nobody teaches you in school. Sure, we memorized the capitals of all 50 states. We learned how to find the hypotenuse. We learned how to say, "I would like a cheeseburger, please," in French. But nobody told us how to manage our money effectively. Nobody explained what a Roth IRA is. But most importantly, nobody taught us this vitally important lesson about money:
Without a cushion, you will never (or very, very rarely) feel confident enough to take the leap and do whatever it is you really want to do.
Sure, we're encouraged to save--but save for what? For retirement? It's hard enough as a 20-something figuring out where you want to be a year from now, let alone being able to warrant putting money away now for when you're 65+.
As soon as I graduated college, the first thing I did was reach out to people who had successfully navigated the finance world and asked them what I should do. I didn't know the answer, but I knew what I didn't know--and I didn't know anything about managing money.
The overwhelming response was that I should immediately start saving for retirement, even if it was only a small percentage of each paycheck. So that's what I did. I opened a Roth IRA and started putting away 5-10% of every paycheck.
But then I started to question where my "active savings" would be. What about the things I couldn't buy now, but wanted to buy later?
At first, my mind ran to "materials" I wanted to buy. A nicer apartment? A big screen TV? A 10 day vacation?
But as I started to save more and more "active" money--as in, money not tied up in a retirement account--I started to realize that money was actually something much, much more.
Money was runway--and I was a startup.
Never before have there been so many talented young people out in the world all asking themselves the exact same question: "How do I do my own thing? How do I become my own boss? How do I take the leap into the unknown?"
The answer is, yes, you need to have a sense of what it is you actually want to do (and how you're going to do it), but you also need runway.
You need to save money so that when you do take the leap, you have a little something to stand on while you find your way.
As a young person, this is the ultimate test of patience. It is far easier to spend money as soon as you have it--and on completely worthless things, no less. The bar is not a great investment. Buying a table at a club is a horrific investment. A vacation or a trip abroad, well that's a life experience and so ok. But it really comes down to how badly you want to do your own thing. And if you want that more than anything else, you'll start saving now to bring that vision to life.
How much you save and how quickly will determine the speed that you can ultimate move in the direction of your choosing.
Start to see money as your runway, not as a big pile of cash for you to spend on things that seem important now but won't actually move you to wherever it is you want to be.