According to The Motley Fool, 64% of millennials say their generation isn’t good at managing money. Interesting, when you consider that millennials may just turn out to be the wealthiest generation yet.
In a study put together by UBS, millennials could be worth almost $24 trillion thanks to a combination of factors including their entrepreneurship, and the fact that many of them are poised for significant transfers of inter-generational wealth by 2020.
While money may not buy happiness, money worries or financial stress can mortgage off our happiness quickly if we are not careful.
Learning to manage one’s own finances begins with a willingness to live within our means and plan for rainy days. Those of us who don’t want — or even like — to manage our own finances should not run away from financial planning — no matter how intimidating or overwhelming it can feel.
If it’s true that millennials like instant gratification, then here are a few easy steps that will give us a sense of accomplishment and financial promise pretty quickly:
1. Create a Budget and Learn about your Financial Habits
Make a simple list of all your expenses. This should include everything from your weekly happy hour, to your monthly expenses for online shopping.
There are fixed personal costs that are hard to avoid such as:
- Student Loans
- Medical Costs
Then there are our variable costs – those costs that we can control depending on our preferences:
- Restaurants/Eating out
Stack up your expenses against your income and try to find a sustainable balance that can help you feel financially secure.
Key? Finding away to leave extra income left on a monthly basis for unexpected expenses.
The simple creation of a budget will force you to question your spending habits, and will ultimately help you make smarter financial decisions.
Ideally, you want to have a little surplus that you can put towards your savings every month.
Budgeting is all about discipline. It provides no use, if it is only created and not followed. Your budget will help you achieve your goals.
2. Research Before Making Big Expenses
Now that you have a budget that you can use as a reference, make sure to consider the implications of large purchases.
Add a potential large expense to your budget, and study the effect it will have on your financial stability over time. A great example is a car purchase.
When financially planning for a car, make sure to include monthly costs for insurance, parking, maintenance, and gas.
Take your time in making your decisions, and continue to educate yourself. According to The Motley Fool, 92% of millennials would participate in employer-provided financial education. Be open to learning from others about their spending practices, and seek financial advice from people around you.
3. Create and Follow a Savings Plan
Saving money should be a priority. An emergency fund is always a good idea in case you are laid off and need some time to find another job, or in case you encounter a medical emergency.
In a study conducted by GoBankingRates, most “young millennials” (aged between 18 and 24 years old) had less than $1,000 in their savings accounts, and 46% had nothing saved at all.
This is in part due to the low starting salaries of many millennials, and the large amounts of student loan debt. To help yourself get out of debt, try to pay more than the minimum amount due each month.
Try implementing this into your budget, and study the things you would need to cut out in order to add a little more to your minimum payment.
For your savings account, start with a plan and come up with a goal. For expenses other than those fixed costs, it would be worthy to think about if that extra expense is really needed. An important step to developing a solid financial/savings and investing plan is to develop the right financial habits.
After several years, you would have something to build off of.
Debt can make it particularly difficult to build savings, but putting away a small amount over time can go a long way.
4. It’s Never Too Early to Think About Retirement or Insurance.
According to The Balance, fewer companies are offering full pension plans.
Now that you have considered a savings account, start to think about saving for your own retirement. With the uncertainty of social security, it is important to save for your retirement with both your 401(k) and IRA accounts.
A 401(k) is a qualified employer-sponsored retirement plan, and an IRA account is an individual retirement account.
Another important component to consider in financial planning is insurance. Make sure you are protecting yourself. If you don’t have insurance through your company or through a family member, strongly consider life insurance, homeowners’ insurance (if you own a home) or disability insurance.
Disasters and accidents can happen, so make sure you are prepared financially.
5. Always Invest in Yourself
As the Huffington Post points out, “investing in yourself is one of the best return on investments you can have.”
Continue to challenge yourself and seek out new opportunities at work. Millennials are great about being assertive when it comes to growing their careers.
According to a recent report by NBC News, 80% of millennials who asked for a raise got one. Take the time to learn about investing, it’s basics such as interest, stocks and bonds.
Learn more about ways to invest and how now you can invest towards solving global issues. A branch of investing called impact investing. Be confident in your abilities to plan, save, and invest.
And most importantly, invest time in your creativity, health, and confidence.
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By providing access to our impact investing platform, we hope to inspire every individual to invest alongside their values.
Learn more about us and sign up for early access today.