As millennials when you begin to embrace life in all its glory saving money for future is the furthest thing on your mind.
Being a millennial means having fun, experiencing an adventure or two, making mistakes and learning from those. It ‘s a time of self-discovery to evolve stronger and wiser.
Also most people begin living independently at this age; start working, which probably means rented accommodation, possibly a car loan maybe a student’s loan as well.
So yes, despite all the buzz of being a millennial life is not exactly hunky dory and as much as you want to save money it gets pushed down your list of priorities.
But just imagine how wonderful it would be if you could start saving money young and build a nice little fortune by the time you hit forties. Lovely isn’t it?
So here I have made a list of 12 important money-saving tips to guide you in creating a good financial system to manage money better and enjoy your financial independence.
Smart Money Tips for Millennials
#1. Retirement fund & magic of compound interest
There is honestly no right time to start investing. If you start saving from a young age you will retire really rich, since your monies will increase exponentially with compound interest
You may have heard the term magic of compound interest but what is it actually. Here’s a simple example.
1.Say you have $1000 in your retirement account, earning an interest of 5% each year. So in your first year you will earn an interest of $50 (1000*5/100= 50) so your total stands at $1050.
2. The next year your interest will be calculated on $1050 and not your original invested amount of $1000 so you will earn an interest of $52.5.
3. So now your total stands at $1102.
4. Imagine how much you’ll earn if you keep this amount for long term say for 25 to 30 years.
Now imagine how much more you’ll earn if you keep investing a certain amount in your retirement fund each month.
This is compound interest for you in layman terms.
Most countries have a retirement plan for its citizens, where you have the provision of setting aside an amount each month or annually into your retirement fund. Do some research on this and start accumulating your wealth today.
If you live in India, I suggest you open up a Public Provident Fund (PPF). You can open an account with any bank or post-office with as little as Rs 100/- even if you are not earning.
#2. Create an emergency fund
You may think as a millennial why I even need an emergency fund.
But saving for a rainy day never hurts. Emergencies have a terrible way of surprising us when we least expect it.
During troubled times we are already emotionally and mentally strained so we don’t need an additional worry about finances.
Make this commitment to yourself to start an emergency fund ASAP. Each month set aside some amount for this purpose.
Tips on creating an emergency fund
- Create a goal on how much you wish to save for emergencies, say for eg $1000-$2000.
- Now automate a certain amount of your salary to go into your emergency fund every month.
#3. Keeping up Appearances
Just think for a minute whether you are living for yourself or just living to keep up appearances. Consider these three scenarios.
1.First; your friend from college buys those strapped red leather boots that are totally lit! You really need to have one of those. So what do you do? You purchase a nice purple boot for yourself that’s even better than what your friend has.
2. Now a second one, your favourite social media influencer recommends some high-end “organic” skincare products to you and you buy it right away.
3. Lastly, you see a dress so perfect to make every head turn, but it’s really pricey but you buy it anyway, never mind the pending student loan!
In all these above mentioned situations you are living a life dictated by others.
I understand, as a millennial social media makes it difficult to stop the comparison. You are influenced by what your favourite celebrity or your best friend uploads on Facebook.
But here’s the thing most social media images are curated to sell you an idea of perfect life.
That perfect image of your favourite celebrity has probably been airbrushed. The fully furnished rented accommodation your friend just moved into was paid by her parents.
Falling into comparison and appearance trap you are just resenting yourself as well as others. Create reasonable expectations and goals for yourself.
#4. Ditch that Credit Card
Getting a credit card is the norm after you attain a certain age also it seems cool to have one.
But what if I said you don’t actually need a credit card. In fact I have never used a credit card, totally by choice.
My debit card is quite good, it fetches me generous cashback points each month. It keeps my spending in check, since the amount is deducted from my savings account at time of purchase.
I do agree a credit card may be beneficial when you handle it properly and pay your credit dues every month. But many a times, people go overboard with their spending limit despite being tight on cash. So think if you are willing to take that risk.
For me having a credit card is an additional financial commitment especially if there are obligations like home loans, student loans etc. So no thank you!
If you can’t totally discard the use of credit card I would suggest you use it cautiously like making big purchases or during an emergency.
TIP: Before taking a credit card research about the charges, credit limit, cashback points, extra benefits or any hidden charges.
#5. Track Monthly Expenses
I know creating a budget may seem boring but it’s totally worth the effort. You need to track your expenses and income sources to know your spending habits.
Trust me this will only help you in being more financially aware. It less than takes 10 minutes to track your daily expenditure.
I also use a really simple app called Money Manager to track daily expenses it’s pretty simple to use though not robust, but overall a decent app.
#6. Create some financial goals
Goals-setting gives you a purpose and keeps you motivated. Your financial goals are equally important as other goals.
But remember to set realistic and reasonable targets, don’t go overboard with too many things.
Reasonable money goals for millennials
- List your all your goals like paying off loan, buying a car, travelling to a new country, saving “X” amount in a year etc.
- Out of your list select 3 goals that are your topmost priority, Do this every year.
- Allot a certain amount weekly/monthly to pay yourself. Use this amount to meet your expenses.
- Make a financial commitment of saving at least 10% of your paycheck towards priority goals.
- If you have money left after your financial commitments invest it again. In fact it’s good if you write down how much you want to save in a year.
#7. Have a loan repayment plan
Remember the magic of compounding interest; well it works in the reverse way too.
When you avail a loan, its repayment consists of the paying loan plus an interest.
Before taking a loan, research where you’ll get loans at a low interest rate. Most importantly, have a repayment plan in place.
You also have the option of refinancing your loans. Refinancing can help you to pay loans with lower interest rate and over a longer duration.
Before visiting your bank make a list of all questions you have, be absolutely clear about terms and conditions offered, read your papers thoroughly before signing.
#8. Side hustles for millennials
Some extra cash flowing every now and then feels good right, especially when you are trying to live independently.
Depending on your skill set earning a decent amount each month is possible. With the boon called internet, you are never short of opportunities.
Even non-internet jobs like renting your car, Airbnbing your room, babysitting, dog-walking are equally lucrative.
Here is a long list of 40 legit side gigs that you can consider if you are trying to earn some extra bucks.
#9. Financial Education
I really feel any sort of financial skill you acquire will only help you in long-run.
Consider learning about investments like mutual funds, real estate, crypto-currency and stock markets. Be curious about investment methods.
There are so many courses online you can learn for free. I know for a fact Quora is a very good source for sprucing up your financial knowledge.
#10. Get rid of freeloaders
We all have that one classic freeloader friend who is always wants to have fun but never take the responsibility.
Freeloaders never pay their bills; never return the money they owe you. Suffer from amnesia if you remind them of paying back.
If you have such people in your life ask yourself if you need such people in your life.
#11. Myth of Independent life
The charm of living independently is so exciting.
It means free from prying eyes of parents, living in your own apartment, unlimited fun with friends, some impromptu road trips, concerts, clubbing, dining out. I mean that’s the dream right!
But many would hate to admit living independently can be difficult even lonely at times.
Further, you are responsible for right about everything – your rent, grocery, car servicing, paying utility bills, managing your money etc.
Gradually, the lure of partying all night also fades away. Many a time you might be cash-strapped.
If you are tired of living alone maybe moving back home isn’t such a bad idea or consider moving to an affordable locality which doesn’t burn your pocket and instead of living alone get a roommate, this way you will get some company as well as split up costs.
#12. Save in little ways
There are so many ways you can saving up small amounts each day. You just need to make little tweaks your lifestyle to save more. Here are some tips.
A. Cancelling multiple streaming subscriptions
Those little cable subscriptions do add up and let’s be honest you are not going to watch Netflix, HBO, Hulu and Amazon Prime all together.
Truth is you don’t need multiple subscriptions because you simply don’t have the time.
B. Invest an hour each week for meal-planning
Meal planning and prepping will save you some hard-earned money which otherwise goes to buy take-outs.
C. Brewing your own coffee
Imagine how much of that Starbucks coffee money is going to your bank account if you brew your own coffee.
D. Tracking your credit score every six months
It is so important to track your credit score. It gives you accurate information on how much your are in debt. If you are preparing to avail a loan the first thing the banks would ask is your credit score.
E. Opting for carpooling or public transport
Not only will you be helping the environment by limiting carbon footprint but you’ll also save that fuel cost.
F. Making cash payments whenever possible.
When you part with physical cash the pain is real usually the risk with both debit and credit card is you might go overboard with your expenses. Additionally if possible shop at thrift stores.
Final thoughts on money tips for millennials..
As millennials managing finance on your own is totally possible; you just have to take the first step. The time is here and now. If you start early will thank yourself in the future, I promise you that.
Do leave your thoughts below!