A Gen Zer's Guide to Finance: The 5 Most Important Things to Know

Whether you're still living at your parents' house or finally out of the nest and on your own, you're likely just starting out on your personal financial journey. And for a 20-something, this can be scary. There are seemingly so many different things you suddenly need to pay attention to, from opening a bank account to getting your first credit card to paying off student loans and negotiating a salary at your first real job.

Not to worry, dear Gen Zer! We've got you — and more importantly, you've got this. We spoke to Berna Anat, a financial educator and self-proclaimed "financial hype woman," to help break down all the essentials beginners need to know in order to start making smart money moves. Reminder: be nice to yourself! It's all about a learning curve.

Think About Your Finances in Personal Terms

Anat said her golden rule when it comes to financial planning is that you need to feel it — i.e., you need to have an emotional connection to the "why" behind your plan. "I would never advise anyone to just find a spreadsheet or app and go to town," she said. "For most people, that's like giving them a handful of candy for energy instead of taking a nap. You might ride on that initial excitement and momentum, but with no feeling or personal attachment as to why you're doing this, your energy will wean and crash, you'll lose interest, and you'll probably end up blaming yourself for not being 'disciplined' enough to stick to it."

Instead, Anat said to take a second to explore your financial history with a set of questions like: What was your first memory of money? How was money handled in your house, and by whom? How was money discussed, or totally not discussed, growing up? What parts of your culture, your ethnicity, or your identity in the world have affected the way you think about money? What lessons did your family teach you about money — even the ones they didn't mean to teach you? Was there any financial hardship in your childhood, and what do you think the child-you learned from that? "And we round it all off with: how has all of that led to what you believe about money now?" Anat said. "What gives you stress, what makes you anxious, what are your financial goals?"

This is the place from which you can start thinking about your plan in more personal terms. Anat said to ask yourself: What do you hope a financial plan gives you now? What thing are you hoping to get out of your finances — whether it's tangible, like paying off student loans, or emotional, like feeling confident about your money instead of anxious?

"Everyone has financial trauma they have to unpack," Anat said. "If we don't, then we fall back into our old cycles of shame. But if we interrogate our financial past, we clean the slate and start a new path for ourselves."

Stay on Top of Your Credit Score

Strengthening your credit score is going to be super important if you want to make any larger purchases or get loans down the line. Think: higher education, buying a car or a home, or starting a business. The higher your score — and the longer you keep that high score — the more likely you'll get approved for the best loans and interest rates. That being said, Anat stressed, "A credit score is not a grade of your financial goodness. A credit score is simply a tool to get what you need — just like a loan, a credit card, or a bank account is a tool. So before we talk about the importance of a good credit score, it's important to note: a good credit score is a tool, and not a judgment on you as a human."

So it's a smart idea to keep tabs on your credit score — and a great time to use tools to help you get the most out of it. "I check my score every two weeks as part of my biweekly budgeting date with myself," Anat said. "I use a few different tools to monitor my score, and I use a money journal to jot down thoughts on its progress. What score am I shooting for, and why? If it changed at all from the last time I checked — why? What from the last two weeks might have affected my score? What do I need to do in these next two weeks if I hope to see it tick higher next time?"

Enrolling in a tool like Score Goals from American Express® MyCredit Guide can help you create a path to a better credit score — and stay on that path. It analyzes your credit history to give you personalized recommendations so you can set realistic goals and hold yourself accountable. The best part: it's free, it's available to everyone (not just American Express customers), and it won't hurt your credit score.

Get Educated On Managing Credit

Credit can be a tricky thing — it's easy to see your credit card as an unlimited source of funds when it should be used as a smart financial tool. Instead of using your credit card as your primary means of payment, take the time to educate yourself about when it makes sense to borrow money. The most important thing to stay on top of: paying the money back on time and on a regular schedule. This can actually help improve your credit score and help you secure better interest rates or loans in the future.

That said, carrying a credit card balance likely something you'll deal with at some point. And that's ok! Anat said, "You're already carrying the financial stress. You don't need to carry emotional shame with it."

When paying off your credit card bills, you need to be prepared for some repetition. "Paying off what you owe is about consistency, which is super repetitive," Anat said. She suggested tinkering with a free payment calculator online to find out exactly how much you can pay off each month and exactly when your finish line is. "Once you've got your monthly marching orders, you've got to make it fun for yourself, or else you're much more likely to fall off the path," she said.

Anat said a surefire way of holding yourself accountable is by partnering with a friend on a similar journey. "Check in with each other at least every two weeks with your wins and challenges," she said. "Create a visual tracker — a poster or a jar that you fill up every time you make a payment. Celebrate smaller milestones with treat-yourself moments along the way. Making it fun is mandatory!"

Start a Retirement Fund

Starting a retirement fund early on will make your future self so much happier. Even if you just contribute small amounts from each paycheck into a 401(k) or an IRA account, that money will add up over the years. "Remember that building retirement funds is all about leveraging time," Anat said. "Retirement funds are often the first way we invest, and good investing means starting as early as possible so that your funds have more time to grow and multiply. Fact: you're never going to be younger than you are now! And if your employer can contribute to your retirement fund, that basically unlocks free retirement money, and you'll want to take advantage of that as soon as possible. Nobody hates free money."

Start Building Up an Emergency Fund

Don't be afraid to start small! Even if you can only put away 20 bucks every month, that's still going to add up in the long run. "The truth is: a majority of Americans have an incredibly hard time saving extra money on top of surviving from their current paychecks," Anat said. "When we talk about building a savings, we have to acknowledge that the number one thing that would help most folks save money is straight-up getting paid more."

In the meantime, play around with a free savings calculator online to find out exactly how much you can contribute each month and how long it will take you to reach your goal. A goal could be saving anything from $500 to $10,000 at the end of the year — whatever you decide is reasonable and attainable. Then, consistency is key. "Be consistent with those contributions, find any ways possible to contribute more to bring your finish line closer, and make it enjoyable and rewarding for yourself along the way," Anat said.

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