The Tip Jar: 4 things millennials should be doing with their money

Just got a job and have no idea how to manage your money? These tips can set you up for the future.

Here's the scenario: You've graduated college, you've got your first job, and you've found somewhere to live. Then you ask yourself, "What the hell do I do with my money?"

That's the question I wish I'd asked myself in that situation almost a decade ago, rather than pursuing a policy of "assume everything will work out." That approach quickly led to debt.

To help the next generation avoid making the same mistakes I made, The Tip Jar has asked for some money tips from two Twin Cities experts – Phillip Christenson CFA, of Phillip James Financial, and Nicole Middendorf CDFA, the Prosperwell Financial CEO.

Save for retirement

Fidelity Investments says that by the time you're 35, you should ideally have saved the equivalent of your annual salary for retirement – yikes.

It sounds like the last thing you want to do when you start out on a tight budget, but starting to save even a small amount early on in your career can pay dividends. (That was a pun.)

If your employer offers a 401K plan, signing up is a no-brainer. Many companies will match your contributions – generally between 3-6 percent of your salary – so you're effectively getting free money.

Both advisers suggest saving into 401K, and then open and save what you can into a Roth IRA, which you can withdraw tax-free in retirement.

Pay down debt

If you've just come out of college, chances are you've got a ton of debt hanging like a millstone around your neck.

You might think that student loans should be the priority, but Middendorf says you should instead focus on any "bad debt" you have – such as credit cards that can carry interest rates north of 20 percent.

Student loans have lower interest rates and come with options to reduce repayments if you're not earning much. While you shouldn't ignore student loans, get rid of the expensive debt first.

Save for a rainy day

If you have any money left over after your rent, bills, living expenses, debt repayments and retirement savings – depressing, isn't it – then you should put some aside in case of emergencies.

Middendorfe says you should ideally have a 6-12 months* of earnings set aside in a rainy day fund to soften the blow of an unexpected bill or sudden unemployment.

Keep to a budget that allows you to save, taking advantage of coupons and special offers. Make lists, and stick to them, before shopping. Smartphone apps such as Mint's can help keep track of your spending.

*In our view, this is a ridiculously optimistic amount for someone just starting out – but save what you can.

Build your credit rating

Credit cards aren't bad if you use them right. If you're looking to eventually buy a car or a house and you want to get a good deal, you need to work on boosting your credit score.

Having a credit card and paying it off entirely each month so you don't accrue interest payments helps with this – plus there are plenty of cards out there that offer cash back, airline miles, or other rewards for using them.

"Treat it just like cash," Christenson says. "If you don’t have the money in bank, then don’t make the purchase."

The Tip Jaris a new, regular feature from GoMN looking at young people and money. If you have any burning cash questions you need answering, email

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