As a financial planner who specializes in working with Gen X and Gen Y clients, I’ve come to learn a few basic facts about money.

I'll share those with you today in hopes that it provides you some insight to what, from a professional standpoint, you can do to be smarter with your money.

Pay yourself first.

This is a really important concept. When you get a paycheck, you save a portion of that money before you even pay your bills. You make this automatic, and you can set up automatic payments either through HR or bank drafts. Money is automatically being saved for all of your various financial goals — and that’s what it means to pay yourself first.

Focus on your income.

Too often we get caught just looking at the expense side of things and how much you can cut out of your budget. We preach about spending less and saving more. But we don’t look at how much more money we can earn.

Whether that be through salary negotiations at work, through a side hustle, or even through handyman work on the side, it’s important to find ways to focus on your income, too. How can you increase your earnings? What actions can you take to earn additional money?

It’s a lot easier, in my opinion, to find ways to make an extra $500 a month than to cut your monthly spending by $500 a month.

Invest in yourself before saving for retirement.

The number one rate of return that you will ever get on an investment is going to be through investing in yourself. What this means is getting additional certifications or designations, going back to school, getting additional expertise, or whatever that is for you and your career path that can help you earn more money.

That's going to give you significantly higher ROI long-term because it’s going to increase your income more than it would to simply sock money away for retirement. Now that’s not to say it’s not important to save for retirement, but if you're forced to choose between the two — especially as a young individual — invest in yourself.

Entrepreneurship is the best path to financial independence.

When you take control of your career or take control of your job and your income, you can truly experience financial independence. When you're working in a job as an employee, you're basically helping someone else gain financial independence.

Now, it's very possible to be an employee and a business owner. You can start a side hustle, create a business on the side, or build a full-time company while holding down your day jobbefore you take the leap. Some form of entrepreneurship is the easiest way to control your destiny when it comes to obtaining financial independence.  

Live for today, but also save for tomorrow.

As financial planners, we tend to focus on tomorrow. We’re always talking about retirement and what's coming in the future, but I think it's really important that we also focus on today and what's at hand.

Take the opportunity to enjoy your life. Take the vacations and have the experiences of the time with family and do the things that make you truly happy. You can balance this with the priority of putting some money away, too, so that one day you'll have enough money to reach financial independence.

Track your spending.

I’m not a big fan of traditional budgeting, but tracking your spending is huge because it gives you insight into where the money's going. If, at the end of the month, you can’t say where all of your money is going, then you can’t know how you can make adjustments.

My advice is pick up a free app like mint.com. Or you can use the envelope method — or you can just use an Excel spreadsheet and keep up with all your receipts. Whatever works for you is fine, as long as you’re tracking your spending by some system. Know where your money is going, because that's how you're going to take control of your spending in the long run.

Don’t buy a home.

I spend more time talking young people out of buying houses than pretty much anything else with clients. Now, I know it's the American Dream and I know that we've been told that buying a home is cheaper in the long run than renting — but honestly, it’s not always true.

Homeownership is a good way to really screw up your finances. You end up with all of your money in your house. It’s very illiquid. It’s tough to sell. It’s expensive. It's immobile and whenever you want to chase a new job opportunity (or you get laid off and you need to downsize), or you want to move to a different state or life takes an unexpected turn in some way, homeownership tends to tie us down quite a bit.

I generally recommend renting for absolutely as long as you possibly can. One caveat: not buying a home does not apply to investment property. If investment real estate is something you want to get into, it’s certainly an option, but you should consult with a financial planner first to map out the best plan of action for your investment.

Always take advantage of free money.

If you have a 401k at work and your employer matches your contribution, take advantage of it. That is free money! If they're going to match $0.50 on the dollar for the first 3% of your income that you save, great! Save 3% of your income and then move on to some of these other tips.

Live well below your means.

We have this concept called “lifestyle creep.” As we make more money, we spend more money. The we make a little bit more and we spend a little bit more.

You really want to keep your spending as low as possible compared to income. Ideally, you’d spend no more than 50% to 60% of your income. That sounds crazy, but when you think about it, the money that you were making when you first came out of college is probably significantly less than what than you're making now if you're in your 30s or 40s or 50s.

And as we make more money, we tend to reward ourselves by spending more. But earning more provides the perfect opportunity to be able to save more money.

Additionally, if you ever want to take a risk, take an opportunity to start a business, to go work for a startup, to go work at the family business — or do anything outside of the norm — it’s difficult to do if you’re spending every bit of money that you make.

If you can keep your expenses significantly lower than your income, it gives you a ton of flexibility and that’s what true financial independence is: the flexibility to do what you want, when you want.

Avoid debt at all costs.

I get very tired of hearing this conversation around good debt, bad debt; whether or not the debt is tax deductible and you should take out a mortgage simply because you can deduct on your taxes. All of that is absolute crap! It is not true. That is used to sell you on taking on debt.

You can live your life with no debt. You will be happier and you'll be financially healthier than anyone that you know taking on debt.

Work with a financial planner.

I know this sounds incredibly self-serving because I am a financial planner. But you need understand that financial planning is not about facts. It’s not about knowledge. Financial planners don’t know anything that you can’t go find on Google.

You can go search for any of the information that your planner's going to tell you. Financial planning is truly about managing behavior. It’s about helping you make good financial decisions. (Which is why I believe that financial planners should have their own financial planner, too!)

I recommend that everyone work with a financial planner, especially if you have a significant other or partner. They'll be able to take your goals and their goals and be able to merge them into a single plan and keep you on track, and that’s really what financial planning is all about.

Alan Moore, M.S., CFP is a fee-only financial planner, and co-founder of the XY Planning Network, which is dedicated to bringing financial planning to Gen X & Gen Y clients.

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