5 Financial Management Tips for Millennials

Having a ‘rainy day’ fund is integral for being able to weather financial storms and, for the long-term, prepare for huge purchases and set a retirement plan. When you’re unsure about where to begin, financial management is among those things that seem daunting.

Here are some tips you can use in managing your money and begin earning more:

1. Track your expenses and income

Before you begin managing your money, you need to have a correct figure of much is flowing in and flowing out – and where it’s all going. How can you do this? Obviously by keeping track of everything. Fortunately, you don’t need to have a notepad and pen at hand to write down every purchase you make. Alternatively, you can try using a program that keeps track of all of this and so much more for you. You can connect accounts like credit cards, mortgage, bank, retirement, investment portfolio, and more. You can track your spending, cash flow, how much is being saved, and the performance of your investment. You can easily view all your accounts in one location, which will assist you in managing things easily.

At first, connecting everything is the tricky part (but still quite straightforward), but once that is completed, you will only need to log in to get a clear view of your financial independence.

2. Make a budget and set limits for every spending Category

You can use the information of your day-to-day spending habits to create a budget that you will be using. Having a budget is a great hack for those who don’t let lifestyle inflation take over their lives. Budgets are good since they help to keep you mindful of your expenses and income.  Having a monthly budget will help you know how much you are spending per category every month, how much you are going to be working with, what spending habits need to be assessed, among many other things.

When making a budget, begin with the non-adjustable expenses such as utilities, rent, and car insurance. Add together the figures, then subtract that from your monthly income and see how much is left for you to work with for your adjustable expenses such as recreation, technology, food, shopping, and so forth.

The crucial thing about budgets is giving yourself limits and sticking to them – since there is a tool that will switch off your credit card after spending $200 on eating out per month. But, what you can do is use a spend analyzer—like the budgeting tool, which is user-friendly.

Still, many millennials find it tricky to adjust their habits, especially if they know they have the bank of mom and dad to fall back on. You cannot rely on this forever, though, so establishing expert budgeting skills by seeking advice from financial advisors like Monty Cerf can help you establish excellent habits for the future and ensure better financial stability.  

3. Be intent about saving

Finance company, Pronto Finance says “savings should be occupying the spot between ‘recreation’ expenses and ‘survival’ expenses in the budget- this is because long-term financial health is more important than anything.”

To raise your savings rate effortlessly, everybody should try increasing their savings percentage by 1% after 1-3 months or so.  It’s simple arithmetic showing that for each 1%, your savings rate can increase and can even end up retiring 2 years ahead of schedule. Majority of people don’t feel the 1% savings rate increase

If you are working at a place providing a retirement savings plan, it can be an excellent way of ensuring the money is out of your mind and sight.

But it is also essential to be saving at least something in your personal account, which you can gain access to when you need it. You can get peace of mind knowing you have the equivalent of around 3-6 months worth of expenses reserved away in an emergency fund. A high-interest online bank will give you the opportunity of earning a bit more on those savings.

4. Don’t be afraid of using credit cards, use them wisely

Credit cards don’t necessarily have to be debt machines, but at the same time, you should have the self-control to be able to use them. To avoid late fees and interest charges, don’t try spending on a credit card if you can’t pay it in full by the time the due date comes. To reiterate, tracking tools can assist you to monitor credit card spending to help you not become a victim of high-interest rates and debts. On your preferred tracking app, compare the amount in your checking account with credit card balance(s) and do your absolute best not to allow the latter to exceed the former.

5.Invest for the future

Investing may seem like an intimidating idea if you happen to come across some money and are new to it. Dividends, index funds, IRAs, stocks, 401(k)s… there’s just so much to learn. But when you are getting started, you don’t need to be an expert or anything. You can begin investing without necessarily knowing what Dow Jones entails or why to care.  The goal of successful investing in the long-term is diversification (your investments are spread across multiple stocks rather than just a few). Betterment and robo-investment platforms can make this easy. Both of the programs will give you a chance of maintaining a fully diversified portfolio even if you lack thousands of investing and a hands-off method to start investing, whether a retirement account such as IRA or in a personal account.

Once you begin using tools such as these for managing your money, you may end up enjoying it, particularly when you see numbers going up rather than downward. A bit of frugality can take you far. If you are living on $50,000 per year and you make $150,000, you can make bank pretty fast. It all comes down to what you really value.