High school is likely a distant memory by now. You had fun in college and got your degree. Now you’ve officially reached the next stage of your life – adulthood. For many of you, you’re now officially responsible for your entire financial well being. Now is the time to start being smart with your money. Here are a few tips from one millennial to another that will set you up for financial success.
Be As Frugal As Possible
Learn to be very conservative with your finances. Start by setting up a budget for yourself. Once you do that take an even harder look at your finances and see where you can make even the smallest of cut backs.
We all have aspects of our lifestyle that we can afford to cut back. Things such as learning to save while grocery shopping, cutting back on driving to save on gas, and limiting yourself to going out to only once a month could save you over $400 a month.
The old saying, “A penny saved is a penny earned,” is so true. Train yourself to keep every penny of spare change you get from making purchases and change you find laying around. At the end of the month, cash in the spare change. You’ll be shocked on how much additional money you will have. You could cash in $30-$50 a month if not more. Being frugal and conservative with your money will help you financially long-term especially in your savings.
Learn How The Economy Works
The biggest mistake many financially stable people make is putting all of their extra money in a savings account and just letting it sit there. To most people this looks great but in reality that’s one of the worst mistakes you can make. Why is that? It’s because you’re not accounting for inflation.
Inflation increases in small percentages every year in our economy. As your money just sits in your savings account, it’s actually losing more and more value every year. This is why it’s important to learn how the economy works. As a young millennial you’re in a great position to get a head start on this.
Learn and educate yourself on how the economy works and functions. That way you know how to invest your money properly and also how to survive financially should our economy ever get into another recession. The better educated you are, the better you’ll be financially for years to come.
Start Retiring In Your Twenties
We as millennials are always caught in the now. Even though you may only be in your early twenties, your retirement should already be on your mind. If your job provides a 401K, understand what benefits they put in your 401K. Does your job match it? If they do, what percentage do they match up too?
Look into setting up IRA’s and interest bearing accounts. Set up financial portfolios for yourself. Young millennials need to start learning about all aspects of retirement. The earlier you start, the better off you’ll be. Start setting aside money now to invest in your retirement. Your 65 year-old self will thank you.
Preserve Your Credit
Your credit is your financial lifeline, so take care of it and preserve it. You’ll learn early on your credit score is crucial when it comes to making major purchases from buying a car to buying a house.
A great way to start building your credit is with low-level purchases of no more than $100 a month. Then immediately pay it all off so you have no debt on your credit. After a few months of this you will have built up enough credit history to get you going. Once you have enough credit history, stop using your credit cards for petty purchases.
A good rule of thumb is, “If you can’t afford it with cash you likely don’t need it.” Don’t build up debt with large amounts of petty purchases – especially with high interest rate credit cards. Your credit is your financial baby, so take care of it.
Always Buy Appreciating Assets Not Depreciating
A high level financial advisor told me in college, “If it drives, flies, or floats – lease it.” In other words, don’t spend large amounts of money buying assets that depreciate in value such as cars, clothes, and jewelry. They look nice and shiny to show off, but you’ll never get the full value back if you try to sell off those assets.
Spend a large portion of money on appreciating assets such as homes, stocks, bonds, etc. With appreciating assets, you will not only get your money back when you sell them, but you will likely make money. Learn the difference between appreciation and depreciation of assets.
As a young millennial, there’s so much to learn as you step into adulthood and become fully responsible for your financial well being. There are many tips that you can take away from this that will put you on the right track to financial success.
Jonathan Baker is an entrepreneur and business owner. He studied Business Marketing and Finance at University of Texas at Arlington. He is currently Co-Owner of Heavensent Massage Clinic in Arlington, Texas, KJ Vending in Arlington, Texas, and Founder of Kev/Jon Capital Group LLC. His blog can be found here.