Obviously, anyone can use the power of 100 so the title was just to draw attention to what we want to say.
Young adults: Got a full-time job? Time to start using the power of 100: Part A
A-1. Here’s What we want to say
Save $100 ten times and then you will have $1000. Repeat the same process by saving $1000 ten times. Now $1000 x 10 equals $10,000. Consider the $10K to be a Starter Emergency Fund. That is a good start toward building a more robust emergency fund and eventually a family financial portfolio.
A-2. Disclosure
We are not financial advisors. We are not certified in any financial industry and only provide this information as a starting point for an individual to develop a plan for getting control of his/her financial situation. Everything presented is our opinion. No one is required to take any of the actions detailed in this document. There are no guarantees that anything written here will materialize exactly as described. We believe that it is essential for young adults to demystify money. That’s why this discussion is intentionally filled with redundant information so understand that hearing the message multiple times is done in hopes that young adults will think well beyond their age and start proactively preparing for future financial situations.
A-3. Why should young adults pay attention to this information?
If you have not thought about it yet, realize that it is important to be aware that successfully navigating through life is getting more complex and more expensive. Denial or blissful ignorance of this fact will eventually affect in a very personal way. We recommend that you follow multiple, credible news sources in regard to global and national-level current events so that you are informed about politics, jobs, prices, conflicts, business, etc. Why, you may ask? Because as a young adult, you are going to be held financially responsible for yourself and those who depend on you for the next several decades. Your mindset should be that since emergencies and unexpected expenses are always going to occur, I need to have enough cash savings to handle those events without going into credit card or personal loan debt. Take it from us ‘old people,’ the quicker you accumulate at least a starter emergency fund, the better off you will be long term. It’s essential that you understand that being a ‘good person’ will not make you immune to emergencies and unexpected expenses so be proactive now and financially prepare yourself instead of being stressed out and angry when bad things happen.
A-4. Why you should begin mastering money during your 20’s
Every young adult has the potential to be successful, but one of the first things young adults need to master is money. It’s doesn’t matter where you are financially or where your family started regarding money, because everyone has the ability to prosper. Winning with money is a mindset, not luck.
A-5. Can I opt out of my current financial obligations in order to start saving?
You can start on the financial winning track with as little as $100, but first get caught up on all your existing financial obligations. In other words, clear up any financial delinquencies before you embark on the journey toward accumulation of a starter emergency fund. Also, note that this starter emergency fund accumulation process is completely separate from having funds available to pay for routine expenses such as rent, mortgage, recurring car maintenance, typical monthly utilities, and essential groceries. Additionally, this starter emergency fund is distinct from retirement investing or saving for a specific purpose such as a house down payment, home improvements, to purchase a vehicle, or to fund a college degree. Bottom line: You will encounter a significant number of financial obligations over the course of your life. We highly recommend that young adults not squander their youth and their hard-earned money by chasing feelings, experiences and entertainment instead of using cash to establish a financial foundation for the big expenses to come.
A-6. Are you a visual learner? If so, here’s a perspective about money that may resonate with you
For those of you who want a visualization to grasp financial concepts, here’s a practical way to think about amassing a starter emergency fund using the construction of a house in order to illustrate our points. Before building a house, the contractor spreads out good soil and then compacts it. Your starter emergency fund is thus analogous to the house’s compacted soil. Next, the house’s concrete foundation is poured on top of the compacted soil. Consider the combination of the compacted soil plus the concrete foundation to be analogous to your robust (full) emergency fund. Next, you frame the walls, add a roof, and then build out the rest of the house and add furniture. Those things are the so-called ‘pretty stuff.’ Everyone marvels at a beautiful house (curb appeal) and all the unique decorations inside (wow-factor), but if it is built on a shaky foundation, then it is dysfunctional and unsafe (a so-called house of cards). Same thing goes for your finances if you do not build a solid foundation first. Here’s what we think should be the ultimate goal for young adults going forward: your family financial portfolio is the starter emergency fund first, then the robust (full) emergency fund plus all the other financial instruments such as investments, properties, savings for specific purposes, insurance, etc.
A-7. Financial Boot Camp
Here are some other ways to think about money: every 4-star military general started by completing some type of boot camp when they were young, usually between the ages of 18 and 22. Returning back to money, that’s why we believe that young adults should get going toward building at least a starter emergency fund (aka financial boot camp) during their 20’s before proceeding to buy the ‘pretty stuff.’ If young adults want to increase the probability of becoming financially independent decades in the future, then they should plan to earn increasing income over time, minimize spending money on non-essential things and focus on saving $10K as quickly as possible during their 20’s.
Learn more at Overton Leadership Associates blog titled, ‘Young adults: Got a full-time job? Time to start using the power of 100: Part B’