Millennials can secure their financial future by learning to budget responsibly, prioritise retirement savings accounts and avoid debt. By doing this, they can break free from stereotypes and have a real impactful effect on their futures.
One simple way to budget is using apps to track income and expenses. Another approach is the 50/30/20 framework, which allocates post-tax money among needs, wants, and savings accounts.
1. Set a Budget
Establishing a savings and investment strategy requires setting a budget. While this may prove challenging, financial tools like Mint and YNAB can help millennials remain on track with their spending.
Budgeting is an effective way of setting spending limits that ensure maximum revenue is received each month while minimising costs, essential for building healthy spending habits.
Budgeting can also help you identify areas in which you might be overspending. It is crucial that essential expenses like food and housing take precedence over “luxury” ones like happy hour and shopping trips. Aim for a 50/30/20 framework where 50% of your income goes toward necessary expenses while 30% for wants, and 20% into savings/debt payments. An emergency fund of three to six months worth of expenses should also be set aside just in case something arises unexpectedly.
2. Set a Goal for Savings
Even though millennials may seem preoccupied with avocado toast and expensive lattes more than financial success, many young people are making smart financial moves. They’re building credit responsibly, prioritizing saving, and being mindful when taking on debt.
Setting savings goals is integral to any financial plan, but understanding the timeline required to reach them is just as crucial. Doing this will allow you to determine how much to put away each month.
Short-term goals could be as straightforward as taking a trip next year or purchasing a vehicle within two years, while mid-term goals might involve saving for a down payment or emergency fund in five or ten years time.
Setting a timeline for long-term savings goals like retirement or your child’s college fund takes more planning. Saving for these purposes typically takes five years or more and requires consistent savings efforts each month.
3. Establish a Savings Account
Millennials face unique financial obstacles as they seek to establish themselves in the workforce and raise families. Many have student loan debt and struggle to save for retirement; yet with proper planning and resources they can become successful savers and investors for their futures.
To keep themselves on track, millennials should establish a savings account with an attractive interest rate and take measures to lower expenses by tracking and evaluating spending patterns – apps can even help keep track of this data and alert them if their budgeted limits have been reached.
Millennials can also turn to influencers on social media for advice about financial independence, budgeting, retirement savings and other pertinent subjects. Such influencers can provide essential confidence-boosting tips that foster healthy money habits.
4. Invest in Your Future
An effective savings plan is key to creating a secure future. However, debt payments and credit card fees may limit a person’s ability to save or invest. Establishing a repayment plan will enable individuals to free up funds that can then be put towards savings or investments instead.
Investing is an excellent way to grow wealth over time and beat inflation. From retirement accounts, 529 plans, HSAs or any other investment vehicles available today, investing should form part of a balanced financial strategy.
While millennials can seek advice about managing money from family and friends, professional financial advice from an accredited advisor is also invaluable. To expand on personal finance topics further, visit your local Cooperative Extension office (search “county government” in your phone book) where classes, books, computerized financial analysis programs, Web sites and other programs provide relevant information on an array of personal finance subjects.
