101 Money Tips For Millennials

Since their graduation from college, I have given my own young adults advice on a variety of money topics. Below are 101 money tips that I have given them over the past several years. I am sharing these 101 tips with you so that you may also benefit from them!

Table of Contents for Money Tips

• Retirement Savings Tips
• Open Enrollment Tips
  • High Deductible Health Plan with an HSA
  • Traditional Medical Health Plan with an FSA
• Must-Have Bank and Brokerage Accounts
• Housing Tips
• Budgeting Tips
  • The 50/30/20 Rule
  • Budgeting for Needs (50%)
  • Budgeting for Wants (30%)
  • Budgeting for After-Tax Savings (20%)
• Credit Card Tips
  • Credit Card Best Practices
  • How to Avoid Credit Card Debt
  • Credit Card Cash Back vs. Reward Points
• Tracking Their Net Worth
• Tracking Their Financial Progress
  

Retirement Saving Financial Tips

1. Maximize their employer 401k match
   An employer’s 401k match is free money that can’t be passed up. My son’s employer offers a 401k match of 75% of his contributions up to 6% of his contribution. Thus he initially contributed 6% of his pay to get the full employer match of 4.5% for a total of 10.5%.
2. Aim to save 15% of their gross pay, including the employer match, for retirement
   In order to grow their retirement account to a balance that can support them in the future, I recommend saving 15% of their pay. In my son’s case, his goal is 11% of his pay plus the 4.5% employer match.
3. Increase their 401k contribution with each raise or promotion
   I understand that saving 11% to 15% of their gross pay is not easy. Thus, I have advised them to increase their contribution percentage by 1% with each big raise or promotion so they won’t feel the increase as much.
4. Select a Target Date Fund around the year they turn 65
   The simple way to have the proper asset allocation is to select a target date fund for the year they may retire. Given their current ages, both of my kids are 100% invested in the Vanguard Target Date 2055 fund.
5. Don’t look at their 401k balance until they are 50!
   I have advised them not to get caught up in all the noise around the ups and downs in the stock market. Simply keep funding their 401k in the Target Date Fund and not worry about the balance until they are 50! From that point, they can determine how to adjust their portfolio based on planned retirement.
6. Prioritize funding their 401k over paying off student loan debt.
   The sooner they started saving for retirement the better. Putting off investing in their 401k early in their career can reduce their retirement savings greatly in the future. So they made the minimum payments on their student loans and started investing in their 401k right away. See my blog post here for more details.
7. Avoid taking loans or hardship withdrawals from your 401k.
   There are way too many reasons that allow 401k loans or hardship withdrawals. I have cautioned my kids that using their 401k funds for purposes other than retirement is mortgaging their future. Thus, only use these loans or hardship withdrawals as a last resort.

High Deductible Health Plan With An HSA

8. Consider a High Deductible Healthcare Plan (HDHP), with low limits.
   The limits for an HDHP can be as high as $7,500 for an individual and $15,000 for a family. However, many employers offer HDHPs with much lower deductibles of $1,500 for an individual and $3,000 for a family. My son selected an HDHP with his employer with a limit of $1,500, as he is single.
9. Take advantage of a Health Saving Account (HSA), if you have an HDHP
   You can only fund an HSA if you are also enrolled in an HDHP. An HSA helps you save money for medical and prescription drug expenses now and in the future. HSA contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free if used for medical expenses.
10. Take advantage of the employer match to an HSA if you have an HDHP
    Many employers make contributions to your HSA if you are enrolled in an HDHP. In my son’s case, his employer contributes $600 to his HSA annually as long as he also contributes to the HSA.
11. You don’t lose your HSA funds at the end of the year, they are yours to keep forever!
    Your HSA savings roll over from one year to the next, so you can use your funds in the year you contribute them, any following year, and even during retirement.
12. Try to avoid spending your HSA funds
    Since your HSA money is yours forever, even if you change employers, try not to reimburse yourself for small medical bills you can afford to pay outside your HSA. My son is doing this to allow his HSA to grow from year to year tax-free!
13. Invest your HSA funds for long-term growth
    Most HSA administrators allow you to invest your money as you can in your IRA or 401k. Many plans offer target-date funds that allow you to diversify your money easily within the HSA account for the long-term growth of your HSA money.

Traditional Medical Plan With An FSA

14. Use a Flexible Spending Account (FSA), if not enrolled in a high deductible plan
    FSAs allow you to pay for certain eligible expenses using pre-tax dollars. Since my daughter is enrolled in an HMO plan, she contributes to an FSA account every year to cover her non-reimbursed medical expenses.
15. FSAs have a use-it-or-lose-it policy
    Except for the Transit and Parking FSA, FSA accounts have a “use it or lose it” policy up to certain carry-over limits.
16. Reduced carry-over limits for 2022 and 2023
    Pandemic relief, which allowed for unlimited carry-over FSAs, came to an end in 2021. Thus, you can carry over $570 from 2022 to 2023 and $610 from 2023 to 2024. Double-check with your employer and plan administrator for your plan’s policies.
17. FSA claims must be submitted within 3 months of year-end
    Reimbursement requests for claims incurred in 2023 must be submitted by March 31, 2024, and any unused funds from 2023 left in your account(s) after March 31, 2024, above the carry-over limits will be forfeited.
18. Only certain expenses qualify for reimbursement from your FSA
    The IRS posts lists of all eligible expenses under each of the FSAs. Also, double-check with your FSA administrator for qualifying expenses.
19. Consider a Dependent Care FSA and/or Transit and Parking FSA
    These FSA allow you to pay for the related expenses with pre-tax dollars. Before the pandemic, my daughter used a parking and transit FSA account to cover her public transportation costs. Those who need daycare for their dependent children can contribute up to $5,000 for dependent care with pre-tax dollars.

Bank and Brokerage Accounts

20. Basic Checking Account
    My kids have a basic checking account where their paycheck is directly deposited each pay period. This account is used for ATM cash withdrawals and debit card swipes.
21. Basic Savings Account #1
    This account is used to pay for all of their “Needs”. The next day after they are paid, each kid has set up automatic transfers from their basic checking to this saving account to cover their needs. They also have set up automatic payments from this account for the payees. They have total peace of mind that all their needs are covered each and every month automatically.
22. Basic Savings Account #2
    Each of my kids has set up automatic transfers from their basic checking to saving account #2 for long-term savings. Also, any bonuses and RSU payments are also deposited into this account.
23. Traditional Brokerage Account
    Once their basic savings account #2 grows above a set amount, the excess is transferred to their brokerage sweep account. This is their true long-term savings to buy a home. The goal is to grow this account to the 10% downpayment plus closing costs. When my son purchased his home he could clearly show the bank he had the money to purchase the home and that he had saved it on his own by sending them 3 months of brokerage statements.
24. Venmo / Paypal Account
    I don’t think I need any explanation here. They just need to be sure to transfer the money to savings account #1 to cover their credit card bill if they picked up the check with friends.
25. Joint Checking/Saving account #3
    When the time comes to have shared needs like rent and utilities with a partner, I will recommend they open a joint account to make sure each is paying their fair share and begin to combine finances. Hopefully, my kids will take the lead and show their partners how they can automate their finances and grow their net worth together.
26. Speculative Brokerage Account
    Any speculation in meme stocks, individual stocks, and cryptocurrencies should be kept fully separate from your long-term holdings in a standard brokerage account. Thus, I recommend a separate brokerage account for any speculation activities.

Housing Tips

27. Spend a maximum of 28% of your gross pay on your mortgage payment
    Aim for your principal and interest payment, homeowners insurance, PMI, and taxes to be less than 28% or less of your gross pay. The lower the percentage the better, as this will give more wiggle room in your budget.
28. Spend a maximum of 20% of your gross pay on rent
    The less you spend on rent as a percentage of your gross pay the more room you have for saving for a downpayment for a house.
29. Save at least 10% on your own for a downpayment on a house plus closing costs
    Here is some tough love. If you cannot save at least 10% of the downpayment for the purchase of the house then you don’t have the financial discipline to own a house. So if you are looking to buy a $400,000 house you need to save $50,000, $40,000 for the 10% downpayment, and at least $10,000 for closing costs.
30. Don’t be afraid to use Premium Mortgage Insurance (PMI) if you have a great credit score
    You must pay PMI if you put down less than 20% on a home. Saving another $40,000 for a $400,000 house could take a very long time. If you have a great credit score PMI will only cost you about $70 more a month and will get you into a house much sooner. My son put down 10% for his home and pays PMI. However, because of his high credit score, PMI only costs him $50 a month.
31. Eliminate the PMI payment once you have 20% equity in the house
    Over the years as you will make improvements, and reduce the mortgage principal, your home equity should grow above 20%. Once this happens get an appraisal to document you have over 20% equity and have the PMI payment removed from your mortgage.
32. Borrow carefully from family members for a home purchase
    Don’t borrow from a family member to purchase a house unless you have saved a least 5% of the purchase plus closing costs on your own. If you can’t do this, I question your ability to repay the loan. Also, include any loan payment amounts to the family in the 28% rule above.
33. Document family the loan and interest rate so you can deduct the interest on your taxes
    If you do accept a family loan to purchase a house make sure to create a strong loan agreement amongst all parties. Each month, the IRS provides various prescribed rates for federal income tax purposes. These rates, known as Applicable Federal Rates (AFRs), are regularly published as revenue rulings.  With proper documentation, the lender must claim the interest income and the borrower could potentially deduct the loan interest expense on their respective tax returns.
34. Weigh the pros and cons of accepting a gift for your down payment
    Accepting a gift for a down payment can come with strings attached. See my post regarding The Pros and Cons of a Down Payment Gift.

The 50/30/20 Rule

35. Where the 50/30/20 started
    The 50/30/20 rule was made famous by Senator Elizabeth Warren as a guideline on how to budget your finances. I suggest some expenses be moved from Needs to Wants as discussed below.
36. 50% of take-home pay should be spent on needs
    Examples of needs are rent/mortgage, student loans, car loans/leases, utilities, groceries, transportation, and Insurance for cars, homes, and pets.
37. 30% of take-home pay should be spent on wants
    Examples of wants are dining out, shopping, gym memberships, streaming subscriptions,
38. 20% of take-home pay should go to savings and paying down debt.
    The remaining 20% of your income should go towards saving. However, many individuals cannot save this 20% because they overspend on Needs, Wants, and debt payments.
39. Vacations are a Need
    Many budgeting systems put vacations under the category of a Want. My kids and their peers all see vacations as a Need, and I agree with them. Make sure you put money away each month for a vacation that fits into your Needs category.

Budgeting Your “Needs” (50%)

40. Make a list of all your fixed expenses
    Fixed expenses are paid in the same amount every month. Examples include Rent/Mortgage payments, cable, cell phone, Netflix, Spotify, Apple TV, and other subscription plans.
41. Make a list of your utility bills
    Utility bill payment amounts vary month to month, such as; electric, heating, and water bills. So electric costs would be higher in the summer, and natural gas higher in the winter months. To make the budgeting process easier, estimate the yearly cost for each utility, and divide that amount by 12.
42. Make a list of your periodic expenses
    Periodic expenses are recurring expenses that are not paid monthly. These are bills like car insurance, renters/homeowners insurance, life insurance, and real estate taxes. A periodic expense can also be a one-time big expense that you want to save for in the future. Examples would be a vacation fund or a car repair fund.
43. Make a list of your debt payments
    These payments are typically car loans/leases, student loans, home equity loans, and credit card minimum payments. Exclude your mortgage payment as we included it as a fixed expense above.
44. Make a list of your grocery bills (not including dining out!)
    Determine how much you typically spend on groceries a month. You can include meal kit providers like Blue Apron and Hello Fresh. However, do not include dining out socially.
45. Add up steps 23 to 27 to determine your “Needs”
    Now total up the amounts from steps 23 to 27. This is the monthly amount you have determined is required for your survival.
46. Set up a Basic Savings Account #1 for your needs
    Each payday transfer into a separate saving account the money needed to cover your needs. If you are paid twice a month and your monthly needs are$3,000 transfer $1,500 each payday to your saving account. Pay your needs directly from savings or transfer to checking as needed.
47. Keep your Needs below 50% of gross pay
    Take the Need amount from Step 28 and divide it by your monthly gross pay. Hopefully, the percentage is below 50%. If not, then this is why you are most likely struggling financially. You have little leftover from paying for your Needs to spend on “Wants” and for any savings.
48. Make adjustments to get below 50%
    If you are spending more than 50% of your gross pay on Needs, then you make some hard choices. First, try to cut some of the expenses above. Second, make sure your partner is paying their fair share of the items above. Lastly, find a way to get additional income by getting a second job or other ways to increase your income.
49. Use my free spreadsheet
    I have put together a free spreadsheet you can download to figure all of the about out very quickly.

Budgeting Your After-Tax Savings (20%)

50. First, make sure you are contributing as much as possible to pre-tax savings
    Maximize your pre-tax saving first by contributing to your 401k and HSA or FSA.
51. Start with 10% if 20% is too much
    If you’re putting 6% in your 401k with a 3% or more employer match and funding an HSA or FSA it is ok to start with saving 10% after tax.
52. Set up a separate Basic Savings Account #2 for your savings
    Put your savings in a different account to see your progress and avoid using for other purposes.
53. Automate transfers from your checking account to your Basic Savings Account #2
    If your take-home pay is $2,500 and your saving goal is 10%, set up an automatic transfer to move $250 to savings #2 each payday.
54. Save at least 3 months of paychecks as an emergency fund
    If your take-home pay is $2,500 and you are paid twice a month, then you should aim to have $15,000 in your savings account #2. Knowing you have 3 months of expenses in the bank should lower your stress levels and help you sleep better.

Budgeting Your “Wants” (30%)

55. Actually, I believe budgeting your wants is a waste of time!
    I have never been a fan of budgeting wants by category. Tracking every dollar you spend for coffee, gas, dining out, and other wants categories simply takes too much time and effort.
56. No money for Wants is because of too many Needs
    If you are pinching pennies on your wants, then you are spending too much money on your needs. Go back and review your needs and your share of paying for needs. If you can’t lower your needs then consider a part-time job to cover your wants.
57. My kids don’t budget their wants!
    After my kids have automatically transferred the amount to cover their Needs to Basic Savings Account #1 and transferred a set amount of Savings to Basic Savings account #2, the amount that remains in Basic Checking #1 is available for them to spend on Wants. Because they know all their needs and savings have been covered, they can now spend what remains in Basic Checking #1 for all their wants.
58. Use only cash and debit cards for paying for Wants.
    My son only uses cash and his checking debit card for spending on his wants. Once his basic checking account gets low, his spending on wants is done! He knows he has a “spending freeze” until the next payday.
59. Never use a charge card for Wants
    If you have credit card debt, never use your credit card for paying for a want. If you don’t have the cash in hand or in your basic checking account for your debit card swipe then you simply cannot afford to pay for that want.

Financial Tips to Avoid Credit Card Debt

60. Keep their Needs below 50% of take-home pay
    Spending over 50% or more on Needs leaves no room for wants, savings, or paying down debt. My experience shows that spending too much on Needs leads to credit card debt.
61. Where’s the cash coming from to cover the swipe?
    My kids know before they swipe where the cash is to cover the purchase. Big ticket items are paid from Savings #2. If it is a need they know that it is paid from Savings #1.
62. Avoid paying for wants with credit cards
    Initially, wants should only be paid by cash and debit cards. My kids use their credit cards for wants once they got a feel for their spending patterns.
63. Never pay more than their fair share, especially on your credit card
    When dating or living together, ensure your partner pays their fair share of housing, food, and utilities. Are you paying 60% of your take-home pay for needs and they are paying 40%? Balance it out by percentage of income. Both should pay 50% based on their own income.
64. Align your wants with your partner’s wants
    Are you both aligned on your wants? Are you watching the spending but they spend freely? Are they buying a more expensive car than they need or other large ticket items without an overall budget and plan you both agree to?
65. Just say No
    At some point, you just have to say no when you are spending too much or others are taking advantage of you.

My Credit Card Best Practices

66. Don’t charge it if you don’t know how you are going to pay for it
    I told them early on that if you don’t know where the money is going to come from to pay for the item, then they couldn’t afford it.
67. Never carry a balance on your credit card
    My kids have never carried a balance on their credit cards. They pay off their full balance due each and every month. The next steps explain how they can do this.
68. Schedule the payment in full each month to be paid automatically.
    To avoid late fees and interest charges and maximize their credit scores my kids have set up automatic payments of their full account balance each month.
69. Link the payment credit card balance due from the Basic Checking account
    The monthly balance due to pay off the credit card is automatically deducted from the basic checking account on the due date.
70. Transfer money for any needs paid by credit card from Savings #1 to Basic Checking
    When my kids charge items like cable, electricity, gas heat, or other “Needs”, they transfer that amount to basic checking from the Savings #1 account to cover the balance due.
71. Transfer money for big-ticket items paid by credit card from Savings #2 to Basic Checking
    When my kids charge a big ticket item such as a piece of furniture, take a trip, or a Peloton bike, they move the amount from their Savings #2 to the basic checking account to cover the balance due.
72. Compare the online credit card balance to the basic checking account balance
    By comparing their online credit card balance to their basic checking account balance they can quickly determine if their credit card spending is on track.
73. Stop credit card charges when the account balance exceeds your basic checking balance.
    By following the steps above my kids know to put the credit card away when the credit card online balance exceeds their basic checking account balance.
74. Change your credit card statement date to the first of each month for easy comparison.
    My daughter’s credit statement cuts off on the 1st of each month. So when it is getting towards the end of the month she can quickly see if her spending for the month is exceeding her checking account balance.
75. How to change your credit card statement date to early in the month.
    Call your credit card company and ask them the number of days in your grace period. If it is 25 days, tell them you want the credit card payment due date to be the 26th. By doing this, your activity cutoff date will be the 1st of each month (the 26th of the month less 25 days equals the 1st of the month). If they don’t let you pick the 26th, go to the 27th or 28th, that way you will only be a few days into the next month. See my detailed post here!

Credit Card Reward Points vs. Cashback

76. I have always opted for credit cards that give reward points
    Due to the nature of my job, I always used credit cards that awarded points for free airfare and hotel stays. My wife and I charge nearly everything we buy from groceries to gas to maximize points for free hotel stays and airline trips.
77. My Kids both opted for cashback rewards
    My kids have opted to use cards that award cashback on purchases vs. reward points. They feel they get the most value on cashback based on their spending habits.
78. Swipe away if you never carry a credit card statement balance
    My kids have followed my “best practices” of credit card usage and never carry a balance. They know they can earn cashback without going into credit card debt and they sure do swipe away!
79. Let the cashback balance grow for big purchases
    My kids let their cashback balance grow from month to month. By saving the cash for specific big purchases my kids shoot to earn as much cash back as possible.
80. Use one credit card for all your purchases
    My kids only carry one credit card and use it for every purchase to maximize cashback. Using one card also helps them manage their credit card balance.
81. My daughter selected a cash-back card that suited her spending habits
    My daughter chose the Capital One SAVOR card, with an annual fee of $95, which pays cashback of 4% for dining and entertainment, 3% at grocery stores, and 1% on all other purchases.
82. My son opted for a flat percentage on everything
    My son chose the Wells Fargo Active Cash Card which pays a flat 2% cash back on everything he purchases, plus his card has no annual fee.
83. Enjoy the big purchases without guilt
    My daughter used her cashback toward her Peleton bike and my son used his cashback toward his Traeger grill.

Track Their Net Worth

84. Tracking Net Worth provides my kids with a personal financial report card
    In school, my kid’s teachers gave out quarterly report cards to show their progress. Calculating their net worth from time to time gives them a report card on how they are doing financially.
85. The Simple Net Worth Formula
    Assets (what they own) minus Liabilities (what they owe) equals their net worth
86. Exclude Personal Items as Assets
    I advised my kids to exclude personal assets such as; the value of their furniture, jewelry, clothing, and other personal items. Including these non-liquid assets gives them a false sense of achievement.
87. Value of their home
    My son lists his house as an asset. I advised him to be careful not to overstate his home’s value as it will give him a false sense of financial achievement.
88. A Car Value as an Asset
    If you have a $25,000 BWM per kbb.com, and you have a loan of $15,000, then the net asset value of the BMW of $10,000 as an asset. Don’t forget to list the loan as a liability. Please note that inflated car values are another area that provides a false sense of financial achievement.
89. Investment Assets to include
    So, for assets, that just leaves you with a few more categories: retirement savings accounts, such as 401k/457b, IRAs, and SEPs, accounts earmarked for college tuition such as a 529 plan, and money in a brokerage account or savings account not earmarked for any of their recurring expenses or other bills.
90. Mortgage Debt as Liability
    Since my son has a mortgage he lists it as a liability. He doesn’t have any home equity lines of credit which should also be included here.
91. Student Debt and Other Debt as a Liability
    Both of my kids have student debt so they list it as a liability. However, neither of my kids carries any credit card debt or has any personal loans from the “Bank of Dad”. Otherwise, they would include it here.
92. Car Loans and leases as a Liability
    My son has a lease on his truck. His truck value exceeds the buyout value of the lease. He does not list the truck as an asset or a liability. If the lease was “underwater” he would list the negative lease value as a liability.
93. Calculate their Net Worth
    Subtract the total of your assets from the total of your liabilities to determine your net worth. This is their financial report card as of today!

Track Their Financial Progress

94. Automate the Process of tracking their Net Worth
    There are plenty of online tools for my kids to track their net worth. My daughter uses Mint and my son uses Quicken.
95. My kid’s first goal was to get to a zero net worth
    Like many young people, my kids started out with student debt and little to no assets. So their first financial goal was to grow their assets and reduce their student debt so that they at least canceled out each other.
96. Less negative is a positive!
    Going from a negative $40,000 net worth to a negative $30,000 net worth is a positive! By building their retirement accounts, purchasing homes, and increasing their investment portfolios, while slowly reducing their student debt, my kids are making financial progress.
97. Celebrate having zero net worth!
    Having your assets offset 100% of your liabilities is an achievement! A small celebration is in order when this occurs, but make sure not to overdo it!
98. Pick a Positive Net Worth Amount and Aim for it!
    Any competition is better when you keep score. The best measuring stick is based on your gross income. Your gross income is a number almost everyone knows off the top of their head.
99. The sooner you get to 1x of your gross income the better
    Once you have a net worth of 1x your gross income you are on your way to financial independence. If your gross income is $100,000, your first goal is to reach a net worth of $100,000.
100. Then shoot for a net worth of 2x, 5x, 10x, and 20x your gross income
     Financial independence is within reach when you get to a net worth of 20x your income. For some, it may take until they are in their 60s and others may shoot for financial independence in their 40s.
101. Net Worth Targets by Age or Work experience
     Financial Samurai provides the following guide that you can you use for your own net worth targets. You can read the chart here.

Conclusion

So there you have it. That’s the complete list of financial tips I have given my daughter and son over the past several years.

Did you find this list useful?

Is there another area that I didn’t cover that interests you?

Let me know in the comments section below.