Keeping track of money – one of the true hardships of becoming an adult, and leaving the pocket money and allowance years behind. That eternal toss-up between an online shopping spree and saving for the future. In the case of millennials these days, choosing between smashed avo or buying a house. So whether you’re figuring it all out on your own, or adopting a financial service to help you, here are a few tips to get you well on your way to a strong financial future.
While more detailed or specific information may be best learned from financial experts, these are merely some general tips that can start you out on your road to riches.
Sort Your Spending Into Categories
Take a month and track what you spend money on – and include absolutely everything. Here are some common examples that a large percentage of most people’s expenditure would consist of:
- Monthly Rent
- Bills (Electricity, Gas, Water, Wifi)
- Weekly Groceries
- Car Expenses: Petrol, Insurance etc.
- Entertainment: Going out with friends, eating out etc.
- Miscellaneous: Birthday presents, clothing, makeup etc.
Obviously everyone’s day to day or month to month spending varies greatly, so add or delete from this list as necessary. Next, sort these into essential living expenses, and “wants” or things you can live without if you have to. For example, if you live out of home, things like rent, bills and groceries are pretty much non-negotiable. Meanwhile, things like eating out or having a car might be luxuries rather than absolute necessities if you’re on a tight budget.
Look For Opportunities To Trim Expenditure
If we’re realistic, most of us could easily cut our expenditure by 5%. This may not sound like a lot, but in the long run – this 5% could be going towards travelling overseas, your future business or becoming a home-owner one day. Here are some ideas on where you could trim a little excess spending:
- Cancelling magazine subscriptions (read free online resources)
- Cutting out cable TV (you have Netflix!)
- Cook at home more than eating out
- See if you’re on the most economical phone plan available
- Invite your friends over rather than going out to socialize
- Find free entertainment activities – parks, picnics, free gigs etc.
With just a couple of lifestyle changes that you might hardly notice, you could be putting your future first and barely realising it. If you find this hard to do on your own, it may be worth looking into a financial planning service of some sort, to set you on the right path earlier rather than later.
What Should Be Your Saving Priority?
When it comes to saving, there’s a fine line between being ambitious and being realistic. One great tip is to automatically have a certain amount of your paycheck put in a separate account, which immediately becomes savings. That way you won’t accidentally spend more than intended.
When you are first beginning to save, think short term first. Your very first savings priority should be to establish an emergency fund – in case things happen out of the blue. You should really have enough money in the bank such that if an unfortunate incident such as unexpectedly losing your job happens, you aren’t left without a penny. Not to mention you might know when you may have to spend a chunk of money, such as if your laptop breaks, you lose your phone etcetera. Your goal should be have three to six months’ worth of living expenses set aside in this fund. Only once this is established and growing steadily, should you concern yourself with longer term savings.
Education Is Key
Finally, continually educate yourself about how to handle your money, and you’ll find you pick things up over time. If you want to make the most out of every dollar you make, the following are worth looking into:
- How to develop a reasonable budget for yourself
- How to build a line of credit
- How to invest your money from a young age (stocks etc.)
- Continual ways to cut costs
- How to travel cheaply
Continually reading books on financial planning, and developing a detailed understanding how to handle your money will undoubtedly lead to you having a more successful financial future.
There you have it – a guide for twenty somethings looking to kick start their futures with a sensible attitude towards money. As tough as it might seem at the time, always remember there’s a balance between enjoying what you have now, and making sure you have enough to lead a comfortable life later on as well. Happy saving!