Top Tips for Millennials to Stay on Top of Their Finances
Millennials often get some really bad press. They are accused of being an entitled, irresponsible, whingeing, short sighted “lost generation” that is not willing to put in the work but wants to have lots of fun. Compared to the previous generations, the millennial is falling short in all wealth indicators. They are more social, travel a lot, spend a lot of money on the “vanities” and are falling behind on saving for a home or some wealth fund. In fact, most have settled to renting property rather than working towards home ownership.
A study by PayPal Australia found that millennials spent a lot of money on coffee and Uber for themselves and their friends and are as a result under pressure to save enough to meet more critical financial milestones such as buying a home or a car putting aside a substantial amount in their superannuation.
But millennials have also been victims of circumstances. They have come of age at a period of Great Recession where the jobs market has been saturated. The cost of living has also risen while the wage gains and investment returns have been weak. However, this does not mean you should be stuck in a rut. Even in the current economic condition, it is still possible for the pennywise millennial to work solidly towards attaining their financial milestones, just like the previous generations. Here is how:-
Cut down on the wasteful spending
How much are you spending on coffee, entertainment, expensive holidays or an Uber ride every month? It’s common for many millennials to lavish themselves with little luxuries and the costs may appear small but with time they can quickly add up to quite a handsome amount.
Evaluate your lifestyle and identify some of the expenses that you could cut out to make extra savings. Millennials often lavish their friends with treats and these may end up destroying your ability to save anything. Try to structure out your expenses. Budget for your monthly expenses and try to stick to the budget to avoid throwing money down the drain.
Crunch the numbers
Do you have a figure of how much you are making every month? Do you know what you are spending on your monthly bills? What are your miscellaneous expenses? If you don’t have the numbers, you are unlikely to plan. Sit with a piece of paper and start crunching the numbers so as to get a bird’s eye view of your income and expenses.
Increase your savings
Here is a simple and achievable strategy of putting yourself on the path to wealth: start saving 15% of all your earnings and stick to the plan through thick and thin. Doing this consistently from a very young age will help you reach your financial goals much sooner than you think. This 15% should be a combination of your retirement savings and personal savings. Start early and you will be in a pole position to attaining your financial freedom at an earlier age. Even if you are managing to save only a tiny amount, it will still offer you a great financial cushion for any future eventualities or emergencies.
Put more money into your super
There is good news on this front. Millennials managed to boost their share of their superannuation funds by 382% in the decade between September 2007 and September 2017. Putting more into your super will ensure that you live comfortably during your retirement. The earlier you start setting aside some money in your super, the higher your probability of saving more money and meeting your retirement goals. Apart from superannuation guarantee, see if you can leverage some salary-sacrifice contributions and personal contributions.
Set specific financial goals
When it comes to money matters, it always helps to set very specific goals of the things you want to realize. Lifestyle costing can be a good start. List your financial goals and the costs involved and work out a strategy and timeline on how you are going to realize these goals with your current income.
Without clear goals, you will be working in a vacuum. It’s like throwing darts into the dark. You don’t know what you are going to hit and it is a waste of time. Having specific goals will help you define your investment targets which could range from mortgage to student loans or even boosting your superannuation payments. Once you have identified a specific goal and determined if it is a long term or short term aspiration, you will be able to formulate the best investment approach that is suited for your financial situation.
Hire a professional accountant
Many millennials may not appreciate the value of having a professional accountant Melbourne manage their finances. A good accountant or a financial professional adviser will not just help you with your taxes but can also help you plan or make changes to your current plans or financial strategy. Relying on accountant for your financial needs will always put you in a better financial position.