How to Be a Grown-Up with Your Money
When you’re a millennial, there’s a good chance that you have a lot to juggle money-wise. It’s no secret that our generation is struggling financially under the highest student debt load in history. At the same time, we’re generally careful with our money and good savers, unlike our Gen X elders.
This means we have a lot going for us, and that we can be adults about money, even with limited resources. (Woot-woot!) Here are the habits I’ve found most helpful as I’ve whipped my own finances into shape while still enjoying the good life.
You may have heard the advice “Treat savings as an expense,” and that’s because it’s smart. If you have a job with regular, direct deposit payments, route a dedicated percentage of those deposits directly to a savings account. Then treat what’s left in your checking account as all the money you have — hard stop.
If you’re a freelancer or juggling multiple part-time jobs and your income is erratic, follow the same approach by manually or automatically moving a set percentage of each payment or group of payments into savings right after you deposit it to your checking.
If you’re not ready to commit to a set amount of savings and need a more fluid tool, experiment with Simple or Digit. Simple predicts how much of your money is “safe to spend” based on your saving goals, then transfers money to savings automatically. Digit also saves for you on the sly, using algorithms based on your spending patterns to squirrel away small amounts of money on your behalf every two to three days.
While the conventional wisdom is to build an emergency savings fund that can cover 3-6 months of living expenses, don’t feel too bad if you’re not there yet. You’re doing well to sock away $1,500-$2,000 to cover those unexpected costs that can be real doozies (think car repairs, dental work, and vet bills).
Settle IOUs Immediately
How many times have you been out to drinks or dinner with a friend, spotted her $20, and then heard, “Hey, remind me that I owe you the next time you see me?” If you’re like me, you’re never going to remind your friend, because niceness. But there are several easy — and free — apps out there that make getting or giving cash among pals a breeze. I use Circle to text or email my friends money — or to send them requests for money. And I do it while we’re all still sitting at the bar, so I’m neither the forgetful ower nor the broke owee. My Circle account is linked to my debit card, and my friends don’t need anything other than a phone number or email account to receive my cash or reminder.
Do Your Taxes Early
We millennials often earn tax refunds, and those extra funds can make the difference between Spring Break at Myrtle Beach or Spring Break on Aunt Myrtle’s couch. Do your taxes as soon as you get your W-2s or 1099s from your employer/s. (Hint: That’s around the end of January.) If your tax situation is straightforward, it’s manageable (and free) to file your taxes yourself. Just be sure that you’re maximizing your refund by taking advantage of the most Gen-Y-relevant tax breaks. Even easier, if you’re eligible to file a 1040A or EZ, you can use TurboTax’s Absolute Zero, which guides you through the federal and state filing process and costs — wait for it — absolutely zero.
Open A Retirement Account Now
If you’re lucky enough to have a job with a 401(k), your employer might match any contributions you make. You should think of this as free money, because it is. To take advantage, contribute as much as you possibly can up to the employer’s match percentage, and simultaneously continue to contribute to your emergency savings fund.
If you don’t have a 401(k), you can still start saving with an individual retirement account (IRA). Consider opening a Roth IRA, a good choice for millennial workers because money invested there can grow tax-free. A Roth is also a good option if you’re overwhelmed thinking of saving for both emergency funds and retirement, because you can withdraw your contributions without penalties or fees.
You’ve probably heard it before, but it bears repeating: The sooner you start saving for retirement, the better. Delaying just five years can end up costing you hundreds of thousands of dollars. For example, say you’re 22 today, make $50,000 a year, save 10 percent of that in your 401k and get an additional 3% employer match. You’re looking at emergency funds and retirement before taxes at age 65, assuming a modest 6% return on your investments. Delay saving for just five years — to age 27 — and your stash shrinks to less than $ emergency funds and retirement. Hundreds of thousands, my friends.
As a millennial, sometimes reading the news about our generation’s money woes can be dispiriting, to say the least. But by adopting these grown-up money habits — and with youth, time and technology on our side — I say that we’ve got the smarts to prosper.
8 Free Apps That Help You Save Without Thinking
9 Best Tax Breaks For Millennials
Interested in learning more about how to handle money well? Be sure to read Money Management: Budgeting Secrets When Your Broke: Little Known Strategies That Could Change Your Life.
I never remind people that they owe me money because it can be awkward. I like the idea of a special app that can do it for me 🙂
Yes, we agree that could be awkward, at times. And yes – Nowadays, there are a lot of apps out there that could help us in several aspects of our lives. 🙂
Great tips! The best thing I ever did was have some money automatically get deposited in my savings account that way I don’t even see it.
Oooh, that’s smart, Agnes! Thanks for reading. 🙂
These are all excellent tips to help every get their financial picture in order. Of course, sometimes life throws a few mishaps our way and we have to start over. But these are great.
Thanks for sharing your opinion, Eliz. 🙂
some great suggestions, I find we are a nation of buy now pay later and end up with credit card debt! I don’t know a single person without some sort of debt! We send money to the savers like a regular bill too and it really works
The most interesting thing about all these tips is that a human must be taught about it )) To be a grow up doesn’t mean to be able to do properly so many things in this world. Same about personal finances, I wish I was taught as a child how to deal with the earnings. Nowadays, I teach my son financial literacy.