Most people could use an occasional lift managing money; members of the millennial generation may be at a particular disadvantage. Some observer believe the group lacks the skills and experience required to effectively administer their finances. The group is also known to eschew traditional tactics, so millennials’ consumer philosophies and financial values are also unique, compared to members of past generations.
Though some members of the group might prefer turning their backs on personal finance, most millennials recognise the importance of keeping tabs on money matters. These financial tips and tricks are aimed at millennials striving to boost their money IQ and set the stage for future financial security.
Focus on Expensive Debts
Under ideal circumstances, your debt balances would all move in the right direction, until your accounts reach zero money owed. However, with other financial pressure to manage, it isn’t always possible to make steady progress reducing all your debts. When you have to choose between multiple outstanding balances, paying your most expensive debts first is the most cost-effective strategy for wiping balances.
High yield debts should be prioritised over less costly obligations such as student loans. As you reduce and ultimately remove an expensive obligation from your debt load, the money can be used to address your next most expensive debt, and so on, until you’re free and clear.
Adopt the 50-30-20 Rule
Budgeting is a key feature of long-term financial success. Without spending guidelines and limitations in place, cash flow can quickly run amuck, leaving you without adequate funds. When your income does leave you wanting, short-term loans with no credit check can help you make ends meet between paychecks. With a sound budgeting strategy to lean on, you may be able to stretch your income, avoiding credit card charges and other finance expense.
One popular approach to budgeting splits resources into 50-30-20 per cent shares, representing 100 per cent of your income. The strategy dedicates 50 per cent of earnings to personal must-haves, such as housing, transport, food, and other necessities. The next 30 per cent of your income is earmarked for items you want, such as entertainment, travel, and day-to-day leisure expense. The remaining 20 per cent share of your earnings is assigned to future finance concerns, such as savings and investments.
Building a 50-30-20 budget may uncover unsustainable spending at home, such as basic living expenses that far exceed the 50 per cent budget threshold. If standard living expenses are more than you can afford, putting together a budget may illuminate cost-cutting opportunities to help you create affordable conditions.
Start Investing Today
When money’s tight, pressing financial needs naturally get priority attention. In practice, that can leave you short on savings – despite your commitment to put by money for the future. Saving when you’re young provides a big advantage, compared to later-life efforts to build a retirement pot. Early investments simply have more time to grow, so even small contributions are worthwhile. The magic of compound interest ultimately adds earnings to earnings, generating “free” money for your future.
Stash an Emergency Fund
You never know when your finances will take a turn for the worse. To hedge against unexpected income slowdowns and unforeseen expenses, finance experts recommend setting aside an emergency pot, worth at least enough to cover three months’ worth of expenses. Six months in reserve is even better, providing a more substantial cushion. Reaching an attainable three-month goal is a good start.
Find a Better Interest Rate
The credit card industry is extremely competitive, so companies offer widespread promotions and incentives to lure and retain customers. From introductory offers and cash back, to travel rewards and other perks, it’s easy to get caught-up in the credit card frenzy, flocking to attractive deals. In the end, however, the interest rate you pay on outstanding credit card balances may be the most important factor, influencing your card choices. If you’re serious about saving money, look for lower rates and don’t automatically fall for offers that may cost you more in the long run.
Millennials may have less experience with money than older UK workers, but the younger generation is coming on strong. These straightforward tips are only a few of the building blocks helping millennials reinforce personal financial security.