THE BLOG
07/15/2014 04:49 pm ET | Updated Sep 14, 2014

Are You 18 to 35? Read This Before You Spend Another Dollar

By Paula Pant, WiserAdvisor contributor

Do you think that just because you're young, you don't need to worry about money? Guess again.

Whether you're a high school graduate, college student or you've recently entered the working world, getting a good handle on your finances is key to living a happy life. It doesn't matter how much money you're currently making; what matters is that you manage it well.

These five tips are a great place to start to develop a healthy relationship with money that will last you the rest of your life.

Create a Budget -- and Stick to It

Regardless of how much money you're making right now, you need to learn how to spend it wisely. The first step: Create a detailed budget that tracks your income and expenses and gives you a plan for how you're going to harness your (limited) dollars.

Be honest with yourself when you create this budget. Separate which expenses are necessities (rent, basic groceries, car payments) and which are indulgences (eating out, going to the movies, beer). Be diligent about sticking to your allotted budget each month, and if you happen to run over before the month is up, learn to live without.

We live in an instant-gratification, highly materialistic society. Learn to resist the siren call of sales, ads and shiny new gadgets. Ask yourself what you really, truly need to survive, and learn to say "no" to your own impulses. This might be the single most crucial financial lesson that a 20-something or early 30-something can learn.

Live Within Your Means

Sometime in the future, you can own matching furniture and a car with voice-activated controls. Now's the time for hand-me-down futons and that beloved first junker car you'll remember fondly in years to come.

In other words? You likely aren't yet making the sort of cash that will allow you to live as well as you one day hope to, so don't act as though you are. Living outside your means -- which often involves taking on copious amounts of consumer debt -- will only hamper your ability to live well down the line. Whatever upgrade you think your current living situation needs, it's not worth years of repayment.

So enjoy whatever lifestyle you're currently able to afford -- even if that means spaghetti dinners and $1 nights at the cheap theater -- and know that it won't always be this way.

It's Okay to Live with Your Parents

If you're like many Millennials, you may need to live at home while you're in school or while you're searching for a job. You may even have your own apartment for a while after graduation, then realize you need to move back home for a bit to make ends meet.

This is totally, 100% okay.

Between the recession, an uncertain job market and hefty student loan debt, many young adults have had to return to the Hotel of Mom and Dad. That doesn't mean you're immature or don't know how to handle your money -- it means you realize your financial limitations and don't want to incur any unnecessary debt.

If you're feeling weird about moving back home, you can always offer to pay reduced "rent" to your parents, chip in for household expenses or pull your weight in other ways, like cooking or taking care of the yard. Don't try to pay for an apartment (or, goodness, a house) you can't afford. Remember: You're making a financially-responsible decision by moving back home. That's a very grown-up thing to do.

Build Your Savings

Things happen. You get sick. You get in an accident. You lose your job. Your car needs a new transmission.

In addition to sticking to your budget and living within your means, you also need to set aside some funds for those inevitable unexpected expenses that can throw even the best-laid budget into whack. Every month, put aside as much as you can, even if it's only $20. As your income increases each year, increase the amount you save.

It's Never Too Early to Think About Retirement

Retirement may seem far away, but that doesn't mean you should forget about it altogether. The sooner you start saving, the more you'll have to lean on when you're older. Plus, it's easier to get into the habit of saving for retirement when you're young and relatively carefree (no family to feed yet or mortgage to pay down).

The easiest ways to start building your retirement fund now? Sign up for your employer's 401K program if they have one, and contribute at least up to their employee match. If your employer doesn't offer a 401K, open your own Roth IRA with your local bank.

You don't have to put a ton into these funds each month if you can't swing it yet, but every bit counts. Just $100 or $200 per month (or per week, if possible) will make a substantial difference.

The Bottom Line

The financial habits you put into place now can help you (or hurt you) for the rest of your life. Learn how to become money-savvy, and you'll enjoy years of financial happiness down the road.

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