Financial Management For Millennials

If you are a millennial struggling with piling credit card bills and student loans with zero savings account, then this article is just right for you. For a lot of millennials, our financial habits are not that ideal.

Since the oldest of our generation is entering their 40s and with the majority starting a family, it is high time we take a hard look at our finances. Student loans should be paid, retirement savings should be made, and overall budgeting should be planned.

While time is still on our side, we should plan for the future. Our chance to be is not there forever.

Nonetheless, we should not be too hard on ourselves. After all, we are the generation that faced the most overwhelming financial obligation due to the economic uncertainties we have faced — talking about the Great Recession of 2008 and the COVID-19 pandemic.

Many millennials are even delaying important milestones like purchasing a house or getting married unless and until they are financially stable. With this in mind, here are 5 tips to fast-track your financial independence while it is still not too late.

#1 Know Your Short and Long-term Financial Goals

The whole process of planning and goal setting from a financial standpoint may be overwhelming for some individuals. This is true for most millennials. With more pressing immediate needs and goals, it is difficult to change one’s mindset to focus on long-term financial goals.

But you can always start by recognizing your short- and long-term financial goals. With a mapped out concrete plan on how to reach your goals, not only do you increase your own accountability, but it helps provide a sense of direction guiding you to give appropriate strategies in place.

#2 Keep a Structured Savings Plan

Whatever type or range of goal you are working towards, it is important to know the value of creating a savings plan.

Having determined the specific amount you will set aside regularly is one highly effective way to start your savings plan. A pre-authorized contribution plan enables your allotted money to be automatically routed to your savings account. As suggested by financial experts, you have to direct at least 3 to 10 percent of your income to your savings plan.

As your income sources increase over time, so too is it necessary to increase the percentage that goes to your savings.

With this “if-you-don’t-see-it-you-don’t spend-it” approach, you help yourself go off track of your savings plans and make impulsive decisions not in line with your financial goals.

#3 Create a Budget & Stick to It

money management

Creating and adhering to a budget is a crucial component in managing your finances. But apart from that, one should also develop a realistic spending plan and habit.

In today’s digital age, there are plenty of apps and programs that you could use for budgeting purposes.

But although these digital solutions could offer convenience, the spending decision falls on you at the end of the day. These solutions merely act as a tool to keep you on track. Thus, this is where the importance of a defined spending plan and habit comes into play.

To be most effective, your spending plans should be in line with your defined short- and long-term goals. For example, you are saving up for the closing cost and down payment for a house. Rather than buying the latest gadget, say an iPad opt to have your existing iPad repaired instead if it’s still possible.

Having a proper spending plan helps you stay posted on your goals and objective as it fosters accountability and mindfulness on your part.

#4 Educate Yourself About Various Forms Of Debt

When we talk of debt, most of us automatically think that paying it off should always be the priority.

But keep in mind that not all debts are created equal. One should know what type of debts he/she and see their interest rates. Afterward, one’s debts should be looked at in comparison with the rate of return on investment.

This means some debts need to be settled right away, and others are alright to linger a bit longer. For example, since credit cards have higher interest rates, you need to pay them down first. On the other hand, interest rates of some types of student loans could be deductible for tax purposes.

#5 Learn Basic Knowledge on Investment

Expanding your knowledge on other investment options is closely tied to making a savings plan. It’s not only in the bank where you could put your money and let it grow.

Consider learning more about stocks, real estate, and other viable investment opportunities.

Final Word: Be Financially Literate

When it comes to financial planning, financial literacy is of great importance. Never fear if it is your first time. With a high level of financial literacy, you’ll be more confident in making major financial decisions.