As the cost of living continues to rise, good money management has never been more important. And while every generation can benefit from financial stability, Millennials might need it the most, being at that age when they’re considering buying their first home, starting a family, or simply making a name for themselves. The economy has never been kind to Generation Y, but that doesn’t necessarily mean that financial health is impossible to achieve. There are still many ways you can enhance your finances, and here are just some of the most important rules that will allow you to achieve financial stability:
Track your monthly expenses
In case you don’t know where your money is currently going, it will be nearly impossible to pinpoint the areas where you can cut expenses. For that reason, it’s recommended to keep a record of your monthly expenses, whether you do that manually or use a helpful budgeting app such as Mint and YNAB. This doesn’t only mean writing down larger costs such as rent and utilities, but also the smaller expenses, down to your daily coffee to go. Track these regular expenses for at least a month or two, and you will have all the information you need to follow the next steps in the process of improving your financial health.
Create a more suitable budget
At its core, budgeting involves knowing your income and your spending habits and then creating a plan to spend less money than you make in order to save what’s left at the end of the month. Once you’ve determined your regular expenses and income, you will be able to prioritize your spending in an effort to reach your financial goals. There are various methods you could use for budgeting more efficiently, but the 50/30/20 rule seems to be particularly popular among younger generations. This budgeting method requires you to allocate 50% of your income to necessities (housing, food, etc.), 30% to wants (entertainment and going out), and 20% to savings.
Choose your credit cards wisely
While a credit card is used for spending money, the right solution might help you save some cash as well, thus allowing you to improve your financial health even while shopping. For instance, you can apply for rewards credit cards and experience some excellent benefits. For every dollar you spend at David Jones, petrol stations, major supermarkets, and anywhere else this card is accepted, you can earn reward points and experience great advantages such as free delivery, deferred payment options, etc. If you choose a credit card like this one, which gives back with each purchase, it will be easier to avoid overspending and make more meaningful purchases.
Minimize unnecessary costs
If you’d like to reduce your regular spending as much as possible, keep in mind that even the smallest of factors can have a large impact. For example, you can save money on utilities by being more economical with your electricity and water usage, you can cook more at home instead of ordering takeout or eating out, or you can simply review your paid membership subscriptions to streaming services and cancel everything you haven’t been using for months. Although small, all of these aspects can quickly add up to significant savings and slightly better financial health.
Consider more affordable housing
There’s no denying that housing is among the largest living expenses, and it truly pays to reconsider this factor when attempting to enhance your financial health. Although homeownership might seem like the norm in today’s society, it’s not realistic for many individuals, especially Millennials and Gen Z-ers. Instead, renting will prove to be a much more affordable solution, not only in terms of monthly payments but also in additional costs such as upfront financing, maintenance, repairs, etc. In case you’re already renting, downsizing or moving to a less expensive neighborhood could also be of great help. In case you’ve already bought a home, however, see whether refinancing is right for you.
Attempt to reduce your debts
You can’t expect to achieve financial stability if you’re still dealing with debt. And while paying off all your debts might seem nearly impossible at the moment, especially when it comes to large student loans, it can be done. In most cases, the ‘debt snowball’ and ‘debt avalanche’ methods are recommended, in which you either begin paying off the debt with the highest interest rate first or start with the smallest balance and then move on to the next smallest one when that one is paid off. Minimizing or even completely eliminating your debt will be a challenging process, but the sooner you manage to get rid of it, the more comfortable and financially stable your life will be.
Don’t hesitate and don’t wait. Start today, minimize your expenses, reduce your debt, and create a good budget in order to improve your financial health and ensure a more secure future.