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Want to buy a home? Have kids? Four money tips for surviving adult life

A survey of American millennials showed that they may have different priorities than previous generations.

Darren Calabrese/The Globe and Mail

Shannon Lee Simmons is a financial planner in Toronto who works with millennials to get their finances on the right track.

Your financial life as an adult arrives the moment you realize that life costs a ton of money you don't have.

But if you think it's tough starting out, wait until you hit major life milestones – otherwise called expenses – like buying a home, having kids or getting married. So, what can young adults do to prepare for adult life?

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Here are four tips to put you on an improved financial footing:

1. Make spending guidelines
Since the word budget sounds like diet – and nobody likes those – I prefer to use "spending guidelines." In 2016, set some "spending guidelines" for yourself. I put this tip first because if you only read one tip, I want it to be this one. It doesn't matter how much you know about investing, ETFs, bond trading, hedging or debt-repayment plans, if you don't have enough money at the end of the month to put towards these things, your financial knowledge is moot. A budget is the key to all financial success. It is, legit, the most important thing you can do.

TIP: Separate your monthly spending between fixed costs (things you have to pay whether you like it or not), savings and variable spending. Try to get your fixed costs at about 50 per cent of your after-tax income each month, your savings at 20 per cent and your variable spending at 30 per cent. This is the 50-20-30 rule. It works. If you've got a mortgage and kids in daycare, it's cool if your fixed costs are up around 60 per cent. These are likely the most expensive years of your life so just try to breathe through it and not take on more debt.

2. Plan and save for spikes in spending
Life happens. Basements flood. Laptops break. Kids go to camp. These things spike your spending in a huge way. If you're not ready for them, they go directly to credit, hanging out there for way too long. Prepare for them – these expenses are like your very own financial apocalypse.

TIP: Plan ahead. Put a specific amount of money aside each month (or annually if you're self-employed or if you receive a lump-sum bonus) for these expenses. Check out my video on how to calculate your emergency savings. If you've got a lot of debt on credit cards or lines of credit, put the money earmarked for these types of expenses toward the debt. At least this way, you'll save on the interest throughout the year. Don't stash this money in a savings account earning 0.8 per cent and slowly pay down credit cards at 19.99 per cent. Also, see tip No. 1. You may need to rein it in a bit this year. Short-term pain for some medium-term gain.

3. Automate savings
I don't care if it's additional debt payments, travel or retirement savings – automate it so it will actually happen. This administratively annoying 15-minute task will make a huge difference in your financial life and maybe even your love life. You will walk taller and be more confident. I ask you, what is sexier than knowing you can pay for additional physiotherapy if you hurt your back and run out of benefits?

Automated savings ensure that you're getting the important stuff done because it forces good financial behaviour. You can capitalize on the 15 minutes of optimism and willpower you had when you were setting up those automatic withdrawals. The good financial behaviour will continue – whether you like it or not!

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TIP: Turn off Netflix. Go directly to you bank (or call or go online). Do not pass Go and do not withdraw $200.

4. Pay debts first
If you are carrying debt outside of your mortgage, pay it off first before you save. I know: buzz kill. It's way more fun to see money in your savings accounts, but debt sucks. Carrying debt can negatively affect your credit rating and directly eats into your monthly spending money. In addition, the stress and anxiety isn't worth it. Get rid of it first and then focus on savings.

If you've got a credit card charging 19.99 per cent, it's very unlikely that any investment is going to guarantee you a 19.99-per-cent return each month. If you manage to find a GIC paying 19.99 per cent, please let me know about this financial unicorn.

TIP: List all debts from the highest to lowest interest rates. Consolidate where possible. Focus your additional (automated) savings each month to the highest-interest-rate loan first. For example, if you can save $400 a month on top of your minimum payments, don't put $100 toward one loan and $300 to another. Pay the minimum payments on lower-interest loans and focus the rest of your $400 in savings to one highest-rate loan at a time. Be systematic about it. This is the biggest bang for your buck.

Dominate your finances in 2016. You won't regret it. Adult life is coming, whether you're financially ready or not.

What financial roadblock is keeping you from reaching adult life? Tweet your replies to @globemoney with the hashtag #adultlife

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