Budgeting is a challenging task even for millennials. The modern world is made up of days that go like a blur, with technology making things easily accessible and done in an instant. In terms of personal finance, this can be a disadvantage – spending habits adjust with demand and supply, and the never-ending cycle of buying and paying that comes with it is hard to cope up with. In addition to that, this generation also faces many money-concerned issues such as student loans and credit card debt.
Here are some tips that can help the struggling millennial take control over his budget.
Keep A Portion Aside
Whenever a bit of money comes in, you somehow have the urge to spend it on something. Before you know it, you’ve spent more than what you have received, and it doesn’t feel good at all. One way to keep yourself from regretting over that hard-earned money is to keep it an arm’s reach away. Most people opt to keep their money stashed in savings account, where it can steadily grow. However, savings and checking accounts can still be easily accessible. A good alternative is to enroll in an account with more complex processes, like one that requires a personal appearance to withdraw money. This way, before you even get there, you can think of the many reasons why you don’t really need to spend it at all.
Create A Budget and Stick To It
A good strategy begins with a good plan. When you set your financial goals, whether long-term, short term or both, you will find yourself having a clearer image on what to do with your money. Definite goals inspire more planning. This is where a budget comes in.
By figuring out how much you need for your regular lifestyle and other plans (travel, retirement, emergency funds), you can set aside money for these items and still have enough left over.
It may seem simple at a glance, but sticking to a budget can be tricky. You want to save up, but there are just so many things that come up that somehow keeping a budget only stresses you out.
However, those thoughts shouldn’t discourage you. Instead, by practicing discipline on your spending, you ensure that you still have a particular balance left over to use for any situation where you need some extra cash.
Analyze Your Spending Habits
Before you wonder why you have little left at the end of the month, you should first ask yourself what you did during that period. You have a budget, you’re following it as much as you can, but somehow you still can’t reach your goal. Most people can’t easily identify the roots of their financial problems. It may be closer than you think.
A lot of millennials like to ride the bandwagon. When a new trend comes out, they follow suit. It may be a costly thing like the latest phone, or it could be little things like drinking a frappe from Starbucks every other day. The fear of missing out (FOMO, in modern terms) causes millennials to unconsciously use their cash on small transactions every now and then. After all, it’s just a bit. But these expenses accumulate, and come end of the month, deal a heavy impact on savings.
Of course, FOMO is not the only contributor to spending weaknesses. Your personal money pitfalls play a role too. Are you the type who buys the costlier brand of orange juice? Do you have a habit of heavy-eating ice cream when you’re down? Do you go shopping after a bad day? By taking a deeper look at your consumer patterns, you can easily identify the source of your spending and work towards fixing it.
Use Your Credit Card Wisely
A swipe is all it takes to pay for everything on your latest shopping spree. The credit card is a useful tool in making transactions – it’s fast, you don’t need to carry a lot of money around, and it offers promos and rewards every now and then. Compared to before, more people are relying on credit cards to pay for their expenses. However, this has a fatal flaw – it’s hard to monitor how much exactly you’re spending.
There is a certain sense of power when holding a credit card. It seems as if anything can be acquired. However, consumers can’t monitor how much they’re spending. Additionally, they tend to forget that credit cards eventually charge and add interest.
Many fall victim to this weakness. A tip would be to set aside your credit cards for larger or more important transactions. Instead, paying with money can help a millennial be conscious of their outflows and clearly see how much they have left after each transaction.
Control Your Debt
Controlling your debt means that you look for ways to pay off existing debt while avoiding to make new ones. Doing so will help improve your credit rating, which could be useful in the future when urgent needs arise.
When payables come in and you can afford to pay for them, do so. Expenses and liabilities accrue over time. If you ignore them, you’ll find yourself looking at an endless pile of payments one day. A risk on accumulated debt is interest - the longer you take to pay it off and the bigger the principal balance, the more interest you have to pay. The result is an even larger amount to worry about in the long run.
Aside from student loans, a liability common to millennials is credit card debt. As mentioned before, the ease and accessibility of credit cards increase the chances of impulsive spending. Many millennials struggle with their credit card payments.
Budgeting also helps you stay organized with your finances – prioritizing payments on debts with higher interest rates or principal amounts can help you pay off faster. However, when things become too much, you can also consult a debt advisor.
A financial counselor can assist millennials in organizing their payments. At the same time, there are many debt relief programs available. These programs help consolidate payments, negotiate interest rates, and budget for payments. By asking for professional help, you can ease the burden on your shoulders both financially and emotionally.
Debt has always been a prevalent issue in society. Even more so in this fast-tracked time. However, if you work on your financial decisions and discipline, credit card debt can be eliminated.
Sources:
http://www.choosetosave.org/tips/index.cfm?fa=display&content_ID=3539
http://www.curadebt.com/
https://www.forbes.com/sites/rent/2015/08/27/the-7-best-money-saving-tips-for-millennials/#2b1f77087370
https://www.huffingtonpost.com/danny-wong/7-basic-moneysaving-tips-_b_12240108.html