Northwestern Mutual: Financial Philosophy - 10 Ideas for a Better Life

As a financial advisor, I’m often asked to meet with my clients’ adult children. The ask usually goes like this: “I wish I were better with money when I was their age. Please help educate them on how to do the right things with their money.”

The “right things” can be incredibly subjective. That being said, I have compiled a list of 10 money philosophies that I believe are helpful for today’s young professionals. Spoiler alert: Most of these are likely beneficial for the rest of us, too.

I hope you enjoy the learnings from this list.

Philosophy for Young Adults

1. Follow the 50/20/30 Rule (fixed and discretionary expenses/savings). It is incredible how much of your financial health results from how you organize your fixed expenses, savings and discretionary expenses. This will create margin and avoid living paycheck to paycheck.
2. Find a way to save 20% of your income, or you will eat, drink or spend it away. Good habits have a compound impact over time, and you won’t miss the money.
3. Make all savings automatic from your checking account or paycheck.
4. You should have at least three months of spending saved in an emergency fund.
5. The maximum mortgage you should have is 2-3 times your income. Your default should be a 30-year fixed-rate mortgage, but don’t go below a 5/1 or 7/1 ARM. If your time is shorter than five years, you should rent.
6. Your default down payment should be 10-20% down, but you can get away with as little as 3.5%.
7. Keep your car payment under $500 per month. You should purchase instead of lease unless you drive 15,000 miles a year or less and keep cars for less than three years.
8. Always carry a $0 balance on credit cards each month. If you don’t have the discipline to control spending, use a debit card; The credit card points will pale compared to the cost of overspending. The nice thing about a debit card is that it stops working when your account is $0, which prevents you from spending more than you have.
9. Don’t spend more than $5,000-$10,000 on an engagement ring. Most people can be rich or act rich, not both.
10. Newlyweds should merge their accounts when they get married; too little transparency can lead to problems.

As with any list, this isn’t perfect, but the important thing for today’s young professional is to have a money philosophy that guides your decisions. Today’s world has a million temptations to “keep up with the Joneses,” and it’s easy to get off track.

Developing strong money habits early in life can have a compound effect that will reward you for decades.

Cheers to those young adults who have the journey ahead of them.

Can LiveWell Capital help you live your best life? Contact Marty Geiger at 513-366-3698 or email marty.geiger@nm.com. For more information, visit livewellcapital.com.

Ben Beshear uses LiveWell Capital as a marketing name for doing business as a representative of The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI and its subsidiaries. Investment brokerage services as a Registered Representative of Northwestern Mutual Investment Services, LLC, a subsidiary of NM, registered investment adviser, broker-dealer and member FINRA and SIPC. Investment Advisory and Trust services provided as an Advisor of The Northwestern Mutual Wealth Management Company ®, subsidiary of NM and a federal savings bank. Ben Beshear is an Agent of NM. LiveWell Capital is not a registered investment adviser, broker-dealer, insurance agency or federal savings bank.