Born between 1981 and 1996, many young millennials are in the process of starting families and buying homes; elder millennials have expensive mortgages to pay and ballet recitals to attend. And the generation as a whole will likely be caring for their parents in the not-so-distant future. So what does all this amount to?
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It’s fair to say millennials are in a very expensive stage of life. And they could certainly benefit from saving money by learning to live below their means. Yet, in a world full of social media posts and constant comparisons, choosing wealth building over status symbols may prove difficult for many.
That’s why GOBankingRates put together six tips to help millennials live below their means.
Have a Date With Your Finances
Jennifer Victor, vice president of retail sales and service at Travis Credit Union, advocated for what she called having a date with your finances.
In other words, do a full walkthrough of your spending where you can see what money is being spent on a need and what money is being spent on a want. Victor cautioned that this date can be time-consuming and emotional, since it’s bound to uncover some uncomfortable truths about your behavior… but it’s a necessary first step.
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Budget
Once everything has been laid out, it’s time to get intentional regarding where your money goes and where cuts can be made. In order to build wealth and ensure you’re living below your means, income should exceed spending.
Determine your monthly, after-tax income, track and categorize your expenses, and set financial goals. Personal finance expert and editor at Finansplassen Olle Pettersson advised using an app or spreadsheet to track what can be trimmed without sacrificing quality of life.
And Linda Rapisardo, CFP at Canela Wealth, agreed budgets help establish tangible goals: “It’s much more effective to say, ‘I want to save an extra $300 this month,’ than to hope there is something left over at the end of the month.”
Share the Load
When it comes to living below one’s means, Pettersson advised leaning into community instead of trying to do everything yourself. This, he stated, can save both time and money.
Sharing childcare with other moms, cooking meals together with aging parents or sharing streaming services with siblings are all ways to trim some of your expenses. You will never be a burden as long as you’re contributing.
And the best part? Human beings are social creatures. You’ll likely strengthen your relationships in the process.
Automate Savings
Pettersson advised eliminating poor financial decision-making by automating your savings. In other words, right after payday, set up automatic transfers to savings and/or retirement accounts before you even have an opportunity to see the money hit your account.
As the saying goes: Out of sight, out of mind.
Investigate Reasons Behind Spending
In order to curb a habit, you must first understand what’s causing it. Once the root cause has been ascertained, better solutions can present themselves — and, in this case, less expensive solutions.
Nicole Stanley, founder and money coach at Arise Financial Coaching, used the example of individuals working from home who overspend on the weekends at restaurants and cultural events to escape their daily routine.
“This expense can add up and hinder you from using your money for vacations, home improvements, retirement, debt payoff, etc.,” she explained. “The solution isn’t to stop going out to eat cold turkey… It’s to change where you work throughout the week.”
Going to a café or library during the week can diminish the impulse to binge-spend on the weekends in order to make up for the root cause of that spending: work-from-home claustrophobia.
Ensure You’re Not Unnecessarily Overpaying
Carelessness is an unfortunate fact of life, and accidents are bound to happen. Getting overcharged for utilities or mistakenly signing up for two memberships to the same Pilates studio is a lot more common than you think.
It’s important to stay vigilant, review your statements and call service providers if something looks off. Additionally, Stanley recommended shopping around and trying to negotiate better rates in order to lower your bills. Sometimes a competitor will drop their rates if it means getting or keeping your business. It never hurts to ask.
“It may feel inconsequential, but saving $100 monthly adds up to $1,200 yearly,” Stanley said.
And every little bit counts.
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Sources
- Jennifer Victor, Travis Credit Union
- Olle Pettersson, Finansplassen
- Linda Rapisardo, Canela Wealth
- Nicole Stanley, Arise Financial Coaching
This article originally appeared on GOBankingRates.com: 6 Practical Tips To Help Millennials Live Below Their Means
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
