Despite what the previous generation seems to think, things are a whole lot different now. The way we live and work is different, and inflation has taken its disproportionate course. The financial advice your parents have to offer may not be the wisest, because things were vastly different when they were young, and even more different when their parents were young. Antiquated tips aren’t going to work in the modern world, so you need to look at your personal finances through a new lens.
Create a basic budget
The only way you really know how much money is coming in and how much money is going out is through creating a basic budget. Save all of your receipts for a month—you need everything from rent to food to the occasional Starbucks trip. Divide them into categories, and add up how much you make in a month. Look at where your money is going, and in what percentages. You may find a few areas where you need to cut back. Once you’re used to seeing things from this perspective, you’ll begin to naturally make better decisions with your money.
Know where to make sacrifices
Should you really be going to a movie and out to dinner with your friends when it’s more feasible to watch the newest movies added to Netflix and order a few pizzas from whoever is running the best special? Going out once in a while probably won’t drive you into tremendous debt, but you need to limit it to special occasions. In fact, creating your entertainment budget around services like Netflix where you’re paying a low set amount may even make it easier for you to stay on track.
Don’t even think about your savings balance
Just start putting money in there. If your paychecks get directly deposited, have your bank withhold a set amount (say, 5%) and place it directly into your savings. Don’t look at it until you find yourself in a real emergency. That’s what that money is for. If it’s easier for you, you can always invest it, or give it to a trusted relative to hold onto. Anything you can do to prevent temptation is something you should consider.
Give yourself an allowance
Yes, you can buy a new phone. Just give yourself an allowance. It’s your money, and you are absolutely entitled to spend it on selfish, material things once in a while. You need to be able to reward yourself. One of the most common pitfalls is to avoid material needs, and then blow a lot of money on something big that you really can’t afford because you feel so deprived. Even if you don’t spend all of your personal allowance during that pay period, allow it to accumulate until you find something you really want. Find a set amount to etch out of your budget for pocket money.
Don’t forget about retirement
Retirement seems far off, but it’s going to hit you hard. That’s the money you’re going to need to live off of. It’s never too early to start a 401k, especially if your employer offers great assistance. Now, a lot more work is freelance. There’s startups popping up everywhere in different industries that may appeal to you. These don’t offer immediate security for retirement. If you want to investigate these routes, do it while there’s still time. Make sure you’ll be able to save for retirement before it’s too late.
Finances are kind of tough to navigate, especially when you’re just starting out in your field. It may be a while before you feel financially secure. Just make sure you’re always living within your needs, and remember that a credit card is not a shopping pass.
Keeping these tips in mind when managing your personal finances will certainly help Millennials in today's world!