Millionaire Financial Advice For 18-35 Year Olds | Millennial Money

What's up you guys, it's Graham here! So for those who have not seen my second channel, The Graham Stefan Show, I regularly review a series by CNBC which covers the common everyday financial habits and financial mistakes of millennials, which is appropriately called, "Wait for it... Millennial Money."

For those who are already familiar with the series and my reviews, you understand that I've poured hours of my time reviewing and sifting through each and every episode, critiquing them, and then giving my unsolicited investing advice on how people could better optimize their spending and build up their net worth. It's really from those videos that I was able to create this one, which is really meant to be more like a Millennial Money guide of the most common financial mistakes that millennials are making, how to avoid them, and then also how to build up your net worth, which all starts, by the way, with smashing the like button for the YouTube algorithm.

Don't worry, I'm not going to ask a bajillion times in this video. I know some people are getting upset now, but I'm just going to mention it once in the very beginning, and if you do it, great! Thank you.

But anyway, with that said, here's my Millennial Money guide to finances, and it all begins with this. Now let’s start with one of the most common and obvious mistakes that I see throughout all of the money videos, both Millennial Money and Money Tours, is that a very large percentage of them cannot afford their current lifestyle on their current income. Basically, it just means that they're spending way too much money, and honestly, it's very easy to see why this is happening.

You know, financial literacy is not something that's really taught in schools, so a lot of people just enter the adult world just expected to figure it out as they go along, and by doing so, they're obviously going to have a lot of mistakes along the way. If people aren't taught to budget, to track their spending, to invest, and to think long term, then it's no wonder why we see people spending 71 dollars on Sprinkles cupcakes making 15,000 a year in New York City.

Until eventually, it just reaches the tipping point where they realize that that spending is not sustainable. From that, they either just make drastic lifestyle changes way too late, or they just accept that they'll never be ahead financially, which is not going to happen on my watch!

That's why my number one piece of advice for anyone between the ages of 18 and 35 is just to spend less money than you make. I know this one might sound like common sense to you and I, but believe me, it's not common sense to most people out there, especially when you consider that forty percent of Americans don't have enough in savings to cover a one thousand dollar emergency.

So the easiest way to get out of that trap is to cut back on your spending and get rid of any discretionary expenses that you might have. Also, websites like mint.com and personalcapital.com are completely free and incredibly easy to use. And believe me, trust me when I say this; the hardest part about doing all of this is just starting and just starting to turn this into a habit and a routine.

But once you start doing this, the benefits are going to become monumental. You're going to have extra money left over at the end of every single week, and you're going to have disposable income left over that you can now go and invest with. This step is really just about seeing the long term and realizing the opportunity that you have right now to begin investing as soon as possible.

These are really your prime savings years, because you have the power of compound interest behind you, so you may as well just take advantage of that while you still can. I'm not sure if you can see Ramsay here, by the way, but in the last video, a lot of people were complaining that I wasn't giving Ramsay enough pets, so I'm going to give Ramsay some pets here. Here you go!

And one of the tricks I often do when it comes to spending and saving money is I just think to myself, if I don't go and buy something, it's like I almost got paid not to buy it. Like for instance, because I didn't go out and spend ten dollars on a hamburger on my drive home from work, I just saved ten dollars, which is kind of like I got paid an extra ten dollars not to spend it, if that makes sense.

This way, your brain almost starts to rewire itself and rewards you for not spending money because you act as though that is just money you got paid not to spend. I don't know if that makes sense; let me know if that hopefully makes sense.

Now, given that statistic about 40% of Americans not being able to afford a thousand dollar emergency, that has been fairly consistent among all the money-related videos that I've seen where the subjects of the videos have gotten themselves into horrible credit card or student loan debt. I've seen everything from tens of thousands of dollars in outstanding credit card bills to egregious student loan balances and otherwise just a lack of consideration for trying to pay those down as soon as possible.

And here's the thing: I really believe that having any amount of unpaid consumer debt will grossly hinder your ability to build wealth in the future. It's almost as though you're borrowing from tomorrow and the day after to go and pay for today, if that makes sense. So if at all possible, avoid consumer debt at all costs. Use it only as a last case resort if something terrible happens, and you just need it to put food on the table, or there's just no other option to turn to except for a credit card.

But do not make that a substitute for, "I can't afford to eat out with my friends every single night at Nobu and Malibu, so I'm just gonna go and put it on my credit card so I can worry about it later." The proper way to handle debt is really just as simple as this: it's okay and even encouraged to use credit cards for your normal everyday spending to then rack up the points, get cash back, get free stuff, and build your credit score. That's cool!

But under no circumstances should you ever carry an unpaid balance and pay any amount of interest on the credit card ever. Always just pay it off in full by the time it's due with money you already have in your bank account. It's also okay and even encouraged to use debt as a way to maximize your return on leveraged income-producing assets, like having a mortgage on a rental property could be a good thing.

Going and getting a low interest rate loan so you could just not tie up your money and invest your money elsewhere at a higher return is a good thing. But the big differentiation here is that if the debt isn't helping you make more money, don't do it and avoid it.

If you happen to find yourself in any sort of bad debt, whether it be credit card debt, student loan debt, or any sort of personal loan, make it your new priority to pay off that loan as soon as you possibly can. Take on a second job, work overtime, cut back on all of your expenses—don't go out to Nobu and Malibu with your friends—just get those loans paid off.

Having that type of consumer debt could really be one of those things that's as if you're walking around with a ball and chain. That debt is just going to be constantly holding you back and pulling you down at a time where you should really be prioritizing building your wealth and investing as much money as possible.

Now, the third mistake that I've seen between pretty much every money series and something that for the most part all of us are guilty of on some level or another is getting accustomed to lifestyle inflation. This is the practice in which we start making a little bit more money each and every month, and then from there we start spending a little bit more money each and every month.

Maybe we just get a slightly nicer apartment, or drive a slightly nicer car, or start going out to slightly nicer places. Now, the issue isn't so much doing this every now and then as a special treat, but instead doing it so often that it now becomes your new baseline level of spending and what you consider normal.

And once you become accustomed to that new threshold, it just becomes exceedingly difficult to ever go down from there. The biggest issue that I've seen is that people just get used to spending all the money that they have, so that anytime they have any extra money left over in their bank account, it's almost as though they don't know what to do with it, so they just go and spend it.

So really the only way to fight this is to first acknowledge that lifestyle inflation is unavoidable. It's going to happen to all of us. And it's really important to work with it rather than just not acknowledge that it exists or think it doesn't apply to us.

And the easiest way to begin working with this is by paying yourself first. Every single paycheck, before you spend any amount of money, put a set amount aside that you do not touch under any circumstances for any reason whatsoever. Just pretend that that money doesn't even exist before it even hits your account. And that way, there's no chance of you ever spending it.

I personally recommend setting aside at least 15 to 20% of your monthly paycheck each and every month. If you're able to save more than that, then by all means, that will just make me even happier! But just get in the habit of starting to do this consistently to prevent yourself from spending any excess money that you might have.

Ramsay, get down! Now when it comes to that, another concern I see is that a lot of the millennials featured in these videos do not have any sort of emergency fund at all. In fact, sometimes it seems as though their only emergency fund is just a credit card, which, like I said, ends up costing you significantly more than you ever need to spend if you don't have the money to pay it off immediately.

Now, for those that don't know, an emergency fund is basically money you set aside to only be used in the event of an emergency where you otherwise have no other option to turn to. Ideally, the amount in this emergency fund should be equal to three to six months' worth of your living expenses and kept easily accessible for emergencies.

And remember, when it comes to this, an emergency fund is not money that you set aside just to frivolously spend as you want to. It's not money that you set aside to go and invest with. It's just money that you have at your disposal in case something hits the fan and you need something on short notice, like if you lose a job, you need to pay rent, you need to pay for food, your car breaks down, or anything like this. You got your money there already!

And the reason you shouldn't be investing this money is because on short notice, your investments might be falling at a time where maybe you need it the most. Like for instance, let's say a recession happens and stocks drop 30% in price. And then all of a sudden you lose your job and you need your emergency funds, so you start selling off your stocks after they've already dropped 30% in price. When chances are you shouldn't really be selling those stocks.

Instead, you should always aim to keep your emergency fund in a high interest savings account where it's safe and where you're guaranteed to get a return on your money, even if that just means you're keeping pace with inflation. You could go and use Ally Bank, which pays you 1.9% in interest. You can go and use Wealthfront, which pays you 2.32% in interest, or a myriad of other options out there that you have to choose from.

Just do me one favor and make sure you get at least 1.9% in interest on a high interest savings account, so that that way you can make the biggest use of your money. Now, given all of those previous mistakes, here's a bit of a backwards mistake that some people just tend to fall into because they end up too careful with money. And from that, they don't end up getting a credit card.

It's okay to err on the side of caution and make sure you don't go into debt and only spend money that you have available in your account. That is all good, but I've also seen that there's very much an extreme of that situation as well. Those are the people who always pay with cash or debit. They don't have any credit cards, and because of that, they don't have any credit score.

In my opinion, that could be just as equally detrimental as the type of person who can't control their credit card spending. Like not getting a credit card because you're afraid of getting into debt is a lot like carrying around a fire extinguisher everywhere, just expecting, "What if there's maybe a fire and I need to use this?"

Getting a credit card and learning how to handle that responsibly is such an incredibly important part of your financial future. Not only will a credit card provide you with purchase protection, rewards, and cash back on pretty much all of your purchases, but you're also going to be continually improving your credit score, which will give you the best and lowest rates anytime you decide to get a mortgage, to finance a car, to rent an apartment, or to pretty much do anything that involves running your credit score.

And a very large part of your credit profile is built up from what's called the length of your credit history. So all things being equal, the person who's had a credit card for ten years is going to have a significantly higher score than the other person who's just had a credit card for one year.

And doing all of this is incredibly easy. If you don't have a credit card already, just go and open up a secured credit card. I recommend Discover's secured card. Go and put a few small expenses on it every single month, and then just go and pay it off in full by the time it's due. Just continue doing that, and then every six to eight months, go and get another credit card, preferably one with no annual fee, and just go and do the exact same thing with that one.

Over time, you're going to develop a really great credit score that's going to give you the best and lowest rates on pretty much anything you'd ever want to finance, which again just ends up saving you more money. And if you're still confused with all of this, by the way, I'm going to link to a video that I did a while ago down below in the description that'll teach you exactly how to build your credit score in like under 20 minutes.

Now, another one of the mistakes that I see in those Millennial Money episodes is that very few of those people are taking advantage of their retirement accounts or investing. And from the way I see it, this is a huge missed opportunity with pretty much nothing but upside.

For example, the best time to contribute to a Roth IRA is when you're young and when you're not in a high tax bracket. That's because you're already in a low tax bracket and not losing a lot of money to taxes, and you have more time for your money to grow into something much bigger. And with the Roth IRA, all the profit within that account becomes completely tax-free after the age of 59 and a half.

Or another one you could use is a 401k, which would help reduce your taxable income now and postpone it until retirement. Not to mention that a lot of employers will match your contribution dollar for dollar up to a certain amount. That's pretty much just absolutely free money that so many people are just not claiming. And by doing so, they're leaving a lot of free money on the table just by not knowing about this.

So I highly recommend going for these retirement accounts. Always just always make it a priority to contribute up to the employer match, max out the Roth IRA, take advantage of everything at your disposal, and do it consistently. Remember how I mentioned earlier in the video about paying yourself first? Well, this is perfect! Pay yourself first into some of these retirement accounts.

Likewise, Vanguard conducted a survey and found that one in five millennials owned no stocks whatsoever. I mean, some of that makes sense because we've seen the aftermath of the 2008 financial crisis, and I think a lot of people are just scared to have that happen again and to lose money. But that doesn't mean that stocks are inherently bad or risky at all.

By investing younger, you're just able to weather those storms and come ahead much more than you could if you were investing in stocks, let’s say, right before retirement. And finally, from all the advice in this video, this is the one that I feel like is the most important: You should use your 20s as a time that you could just work your ass off, save as much money as you can, and use all of that to get ahead.

Now is the time to absolutely pursue any career aspirations you might have, to work harder than you ever thought was possible, and to save more money than you ever thought was imaginable. Because trust me, as someone who did that throughout their entire 20s, I'm 29 years old now, and I've pretty much set myself up to never have to worry about this stuff ever again for the rest of my life because of what I did between the ages of 18 and basically now.

And while sure, it's okay to relax and have fun every now and then, just stay disciplined, because the work that you put in right now and the money you save right now could be enough to carry you forward throughout the rest of your life. Because I'll tell you from my experience, it just becomes more difficult as you get older.

You're probably not going to have as much energy as you did back when you were 18. You're probably just going to start needing maybe just a little bit more sleep, and you're going to start wanting to try new and better things. Having that money invested in the bank is going to give you the flexibility to pursue the things you really want to pursue while getting the heavy lifting out of the way early on.

And also during all of that, it's just as equally important to focus on now starting to increase your income at the exact same time as you're focusing on decreasing your expenses and saving as much money as possible. And sometimes people just can't save enough money, and it's not a fault of budgeting or a lack of just frivolously spending. A lot of times these people just don't make enough money, and instead they need to focus on increasing their income rather than trying to scrimp and save as much as they possibly can while not earning a lot.

That's why beyond a certain point, it's worth it to start switching jobs if that means you could start making a little bit more money, or maybe learn new skills so that you could start increasing your income and working towards something that's potentially a little bit more financially ambitious.

And when it comes to investing, just keep it simple! A broad index fund is just one of the easiest, simplest, and safest ways to invest your money when you hold it long term. It's really as easy as just buying a target date retirement fund or just one simple broad index fund, continuing to buy more each month, and just doing that over and over again.

Or it could also be as simple as spending an hour a day on BiggerPockets and YouTube, just learning how to invest in real estate, and then going on weekends to check out open houses. By the time you have your down payment ready, you'll be able to invest in real estate and learn exactly how it's done.

And if there's any piece of Millennial Money investing advice that I highly recommend, it's to really focus on cutting down your living expenses as much as you possibly can while you're young. Arguably, housing is one of the biggest recurring monthly expenses that you're going to have, so figuring out how to reduce this while you're young is going to have the biggest impact going forward long term.

And if you want my recommendation, even though I'm very biased because I do this myself, it's to look into house hacking. It's to go and try to find a multi-unit building that you can move into one of the units, and then you rent out the other units to cover your cost of ownership.

Ideally, if you do this correctly, you should be able to live there for free while still getting to own a multi-family income-producing real estate deal, while also building equity at the same time by paying down the loan. And then eventually, you should be able to go out and move into something else and maybe repeat the exact same thing. Meanwhile, you're slowly building up a portfolio of income-producing real estate that one day will be your retirement.

Investing doesn't need to be something complicated, and budgeting doesn't need to be something that's difficult. It's really all about learning the basic financial skills early on and then just making that a habit long term. And if you just do that, you're going to be on your way to making a ton of that Millennial Money.

So with that said, you guys, thank you so much for watching! I really appreciate it. If you guys make it to the very end and you haven't already subscribed, make sure to subscribe, hit the notification bell so you can be a part of the notification squad, because I post three videos a week every Monday, Wednesday, and Friday.

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So with that said, thank you again for watching, and until next time!