Being a Millennial is hard. With student loans, low-paying jobs, and the big bad world looming above you, it’s easy to get overwhelmed. The only way to cope with it all is through your savings account. Here are three Millennial Finance tips that can help change your financial situation for the better.
Save At Least 3 Months Pay
Millennials are the largest generation in history, and they’re also the most financially insecure. A recent study conducted by the Federal Reserve found that 40% of young adults had savings account balances of less than $1,000.
And although (according to a separate survey) almost 70% of millennials want to be a millionaire, last year only 19% reported having more than $10,000 in the bank. Clearly, there is a huge gap between the way millennials think about money and the way they behave with their money.
To help close this gap, I have three easy-to-implement finance tips for millennials:
Save at least 3 months’ worth of expenses in an emergency fund:
This should be your first financial goal. If you find yourself living paycheck to paycheck, start saving as much as you can once you get your next paycheck so that you have three months’ worth of expenses in an emergency fund. This will give you peace of mind when unexpected expenses arise—which they always do!—and will prevent you from going into debt.
Everyone experiences unexpected expenses. Although it isn’t possible to predict what these expenses will be, it is possible to prepare for them by having an emergency fund ready when they hit.
Apply The 50/30/20 Rule
When you’re starting out and don’t have a lot of cash to spare, it can be tempting to throw every last dime at your debts. If you’ve got a $500 credit card balance, for example, you might try to knock it out as quickly as possible.
The problem with this approach is that it rarely provides long-term relief. The more you pay toward one debt, the less you’re paying on all your other debts — and so the higher your balances will grow.
Instead, apply the 50/30/20 rule.
It’s simple: Spend 50 percent of your take-home pay on needs (rent, utilities and groceries), 30 percent on wants (clothes, entertainment and dining), and save the remaining 20 percent for financial goals. That could mean saving up for a down payment on a house or an emergency fund. Whatever your goal is, if you aim to set aside 20 percent of your income each month, you’ll be able to reach it in no time.
* Don’t let debt control your life. Find some extra cash by cutting back on nonessential purchases, then apply the money toward your debts to get them paid off faster.*
Millennials may not be the most financially savvy generation, but they are learning. Millions of Millennials are pursuing higher education, getting married later, and having children at a slower rate than previous generations. They’re also saving more than ever before.
A recent report from Bankrate found that about 70 percent of millennials have set aside money for retirement. And even though they’re still working and earning lower salaries than their older cohorts, Millennials are contributing to their retirement savings plans at higher rates than Baby Boomers and members of Generation X when they were in the same age bracket.
As many Millennials are just beginning to think about retirement, here are three tips that will make your life much easier down the road:
Save For Retirement
Start Saving Early: It’s never too early to start saving for retirement, especially if you’re a Millennial with a lot of time to see your savings grow. Even if you can only save small amounts of money each month, you’ll be surprised at how quickly it adds up over time.
Consider Automating Your Contributions: If you want to save as much as possible for retirement, consider setting up automatic contributions through your employer’s 401(k) or IRA program. This way, you won’t have to worry about remembering to make deposits each month.
If you’re a millennial worried about managing your money, these tips will serve as an excellent starting point.
They’re intended to help you secure the future that you’ve always wanted. And if you need more guidance, don’t be afraid to seek out professional financial advisors or read additional guides to becoming financially independent.
The topics covered in this article are just the tip of the iceberg, but they should provide you with all the tools you need to become financially savvy.