Managing finances in your 20s can be extremely difficult. You have so many goals you want to begin saving for like a car purchase, future home, and hopefully retirement, on top of all the new-found expenses of living on your own. At the same time, you are most likely making the least money you ever will in your life. It can be quite daunting. I wanted to share a few steps that I often recommend to my friends and the children of our clients:

1. Create a Budget

To be completely honest, I hate those three words. Even for a young professional working in the world of wealth management, I find “budgeting” to be one of the more difficult tasks. That’s not to say creating a budget is difficult. In fact, creating a budget is quite easy. Determine net inflows, subtract fixed monthly costs, and then spread the left-over amount across various variable expenses and savings for future goals. Really, not that difficult or time consuming.

The hardest part of budgeting isn’t creating one, it’s sticking to it. When you are 3 weeks into the month and your “dining-out” category is already capped, are you really going to turn down Sunday brunch with your friends? Probably not. What I often recommend to young professionals who want to begin saving for future goals is to automate your savings as much as possible. Having a portion of your income go directly into a savings or investment account, where you never even see it enter your checking account, makes it that much easier to know how much you can spend each month, AFTER your saving goals are accomplished.

Or you can freeze your credit card – literally put them in a Ziploc under water and stick them in your freezer. This way, you will have to think about that spontaneous online purchase as the credit card ice cube defrosts.

2. Set Aside an Emergency Fund

Before saving for that future car or home, I strongly encourage everyone, not just young professionals, to have 3-6 months of liquid cash set aside. This doesn’t mean you need to stockpile cash under your mattress, there are now many FDIC Insured Online High-Yield Savings Accounts that pay a significantly greater amount of interest than the local credit union or bank and allow you to set aside cash for an emergency without forgoing liquidity for higher interest payments.

People always want to know exactly how much cash they should have set aside, and my answer is: it depends. Do you have a high level of job security? If you lost your job could you easily find a new one? How much fixed expenses do you have? Do you tend to be risk-averse?

3-6 months is a great starting point, but it certainly depends on the individual. Lastly, the most important part of an emergency fund: once you dip into it for unforeseen expenses, you need to replenish it!

3. Begin Saving for Retirement

Once you have a good grasp on your finances and have steady income that allows you to cover your expenses, it’s time to begin thinking about saving for retirement. Trust me, I know it’s not a conversation starter at the local bar and you probably won’t impress your date talking about your 401k, but there is no better time to start than in your 20s. You have around 40 years to let these dollars grow and take advantage of compounding interest.

If your employer has an employer-sponsored retirement plan, such as a 401k, I highly recommend stashing away a portion of your income each paycheck. If your employer provides a match on your contributions, say 5%, then at a minimum, contribute at least 5% of your paycheck. It is free money! Each year or each time you receive a pay increase, simply increase your contribution percentage by a small amount and soon enough you will be maxing out your 401k.

Lastly, for those of you who do not have an employer-sponsored retirement account, consider opening a Traditional or Roth IRA where you can contribute up to $6,000 in 2019. Traditional or Roth? It is highly dependent on your income and in fact there are income limits that will phase you out of the ability to contribute to each type. For most young professionals, a Roth IRA is typically the way to go. You pay taxes on the dollars you contribute today, most likely at a lower tax-rate than you will be at in the future, and the dollars grow tax-free and are withdrawn tax-free in the future. It is really the golden nest-egg of retirement accounts, especially for young savers.

4. Saving for Personal Goals (Short-Term Goals)

Like I previously mentioned, the best way to begin saving for a future goal is to automate your savings. Never even give yourself a chance to spend the dollars that you are stocking away for that future home or vehicle. If you don’t see it, you most likely won’t spend it.

Once you get yourself on a steady savings plan, the next question is: Should I invest these dollars for short-term goals (5-8 years)? The answer most of the time: No. The stock market is volatile and unpredictable. Do you really want to run the risk of your hard-earned savings experiencing bear market returns (-20%) right before you were going to use the dollars for a down payment? If you are going to invest the savings for a short-term goal, use safer short-term bonds or a high-yield savings accounts, where you can earn a decent amount of interest with substantially less risk than stocks.

Saving for the future in your 20s is difficult and truly a daunting task. But walking into your new home, paying cash for that brand-new car, or retiring 5 years before your friends, will definitely be more rewarding than the avocado toast brunch you missed that one weekend.