It’s never too early to start saving money and reach your financial goals. That being said, the struggle to budget your income and manage your debt can feel overwhelming. Millennials (those between the ages of 24 to 39 as of 2020) are predicted to be an extremely wealthy generation, inheriting $68 trillion in the next decade. So how can you mange your finances in order to reduce your debt, save and earn more potential wealth? Check out the below tips for financial success.
1. Create an ongoing budget.
Establish a projected monthly budget to help manage your money. Allocate a certain amount of money for your regular expenses like housing, transportation and groceries. Some expenses will be at a fixed amount (such as your monthly rent, health care, or cell phone bill), while other expenses—like groceries—might fluctuate from month to month. Nevertheless, try to establish a set amount you want to spend on those fluctuating expenses.
You can also set aside some of your income for what economists called “discretionary expenses.” These are voluntary expenses and can be related to going out, clothing, travel and entertainment. It’s recommended to budget your money using the 50-30-20 rule. This means spending 50% of your take home pay on necessary expenses, 30% on discretionary expenses, and then save the last 20% for the bank and investments. By prioritizing your money this way, you can be financially responsible while also having fun. Remember, just because you’re saving doesn’t mean that you can’t have fun. Search for “shopping near me” to find places that carry high end clothing so that you can look fabulous while winning at finances.
2. Invest early and often.
Start investing early—even a minimum investment of $10 per month can go a long way. Studies show that, due to compound interest, investing in your twenties is worth more in the long term than if you start investing later on in life. Compound interest is when you earn interest on your initial investments as well as on the money already earned. This time of interest multiplies your investment earnings over the years.
Discover the sort of investment opportunities you can pursue through careful research. You can start investing through a 401(k) plan offered through your employer or choose from among alternative investing options. This Yieldstreet review explains why you should consider this investment platform as part of your investment strategy. Yieldstreet offers advice on what type of investment you can make and explore investment opportunities through real estate. What’s great about this investment platform is its clear explanation of investment risks and benefits. Yieldstreet also claims that its investments have low correlation to the stock market, so your assets should not drop when the stock market falls.
3. Save for retirement.
Just like with investing, start saving for retirement early! Your older self will definitely thank you. A little goes a long way, so assess your annual income and deposit what you can into a bank account reserved for your retirement. A good recommendation is to put 10% of your take home pay into savings and the other 10% into your retirement fund.
4. Establish an emergency fund.
Set aside a bank account to use for emergency purposes. Aim to have this account filled with at least three months of income. Keep this savings account away from your investments and the volatility of the stock market, so the money is truly safe and not open to financial risk.
5. Check your credit score.
If you haven’t checked your credit score yet, do it now and make sure to regularly monitor it. Checking your credit score won’t affect the number as it is considered a soft check. You need a good credit score in order to obtain things to increase your wealth such as buying a car, a home and even getting a job! A good credit score falls between 700 to 749. An excellent credit score goes beyond 750.