Millennials are now becoming the driving force of the economy but are having difficulty creating the lifestyle their parents had. Whether it’s due to poor financial education, lousy job prospects, or something else, millennials seem to be struggling to find their way.
If you’re a millennial looking for advice on how to become financially stable, we’re here to help. Here are five easy but effective things you can do to start getting better with personal finance.
Tip 1: Don’t accept being in debt
Now that you’re entering middle age, it’s time to stop paying for your past mistakes (literally). You might feel like having debt is just going to be part of your life going forward, but that’s simply not true. Paying interest for old purchases is like throwing money away, so stop accepting it as another cost of living. There is a way you can live debt-free, so look into which strategy is best for your situation. We’d recommend comparing the snowball vs. avalanche methods as they’re designed to work based on different motivations.
Tip 2: You need a budget
Many people avoid budgeting because they think it will mean giving up the little pleasures they love. The truth is, budgeting allows you to have the things you want; you just need to account for them.
Getting a $7 lunch every weekday at work adds up to $175 a month. If you add that $175 cost to your budget, you’ll be able to plan for it so that you don’t end up short at the end of the month.
Put together all of your bills and regular purchases. Congratulations, you now have a budget! The next step is weighing those expenses against how much money you bring in every month. If you’re spending more than you make, then some decisions will need to be made. You can either cut costs or increase your income. Speaking of increasing your income…
Tip 3: Don’t rely on only one source of income
Millennials know better than any generation before them how fickle the job market can be. Start protecting yourself from financial emergencies by creating more streams of income. That way, if you lose your job or an emergency comes up, you’ll be able to weather it easier than if there was only one paycheck coming in. You can start a side hustle, sell old stuff, take up gig work, or pursue whatever method most appeals to you.
Tip 4: Make saving money a priority
Saving money is a critical habit you should form if you haven’t already. Start by building an emergency fund that covers your expenses for a few months in case you’re out of a job. Once that’s made, pay off your debts. Once you’re debt-free, put that money you’ve been using to get out of debt into retirement accounts.
If you can automate this through auto-deposits with your payroll department, then make it happen ASAP. Put money away into a 401k or IRA, and make sure you’re taking advantage of any employer match because that’s just free money. If your employer doesn’t offer a 401k, you can sign up for an IRA through companies like Fidelity, Vanguard, or even your bank. We suggest putting 10% of every paycheck into a retirement account to start.
Tip 6: Spend frugally, but well
It’s time to start investing in quality over quantity to improve your financial situation. Things such as fast fashion or cheap products might seem like good deals at the time, but you’ll end up spending more money to replace them than you’d expect. Instead of getting into a continual cycle of spending, save up for better quality items that will last you for years to come.
Above all, start slowly. Don’t feel like you need to accomplish all of these tasks at the same time. Having good financial health is a long-term game, so take it one step at a time and add on the further you get.