When it comes to their finances, Millennials are usually known to have a much different attitude than their parents, the Baby Boomers. For Baby Boomers, the mentality was simple: go to college, get a good job after graduating, work hard to climb the corporate ladder, buy a home, and retire.
However, for whatever reason, Millennials are known for being more nearsighted with their financial goals. They usually care more about funding a lifestyle that will give them purpose now and consider saving for the future as an afterthought. This mentality could be part of the reason that Big Banks are posting record profits while consumers are getting the minimum value.
To help turn the tide back in your favor, we put together this quick guide with a few strategies on how Millennials can manage their money.
Before jumping into our strategies, we want to cover a few general tips for handling banking in the United States in general. This section is not limited to Millennials but is something that almost everyone can benefit from.
Here are a few general tips:
This is important because this means that your cash is slowly becoming less valuable as it sits there (more on this later). Instead, it should be investing in a place where it can grow.
Now let’s take a look at a 3 step formula for how Millennials can effectively manage their finances to grow their wealth.
Regardless of which income bracket you are in, it is very important to spend less than you earn. If you find yourself spending just as much as you make each month then it does not matter how much money you earn. You could be making $200k per year but if your expenses are $200k per year then you will still technically be living paycheck to paycheck. Additionally, if you are spending even more than you earn each month then you will slowly find yourself getting crushed under more and more debt.
On the other hand, if you set a budget and are sure to live below your means then you will be able to set money aside for the future. This might mean making a handful of sacrifices now but in the long run will provide you incredible results.
This brings us to the next step...
How much you save per month will be dependent on your financial goals and how much money you are comfortable saving for the future. However, a good rule of thumb is to set aside at least 10-20% of your income to be invested.
Once you have established how much you want to save, it is important to find a place to invest it. This last step is crucial because, as we mentioned at the beginning, simply keeping money in a low-interest checking or savings account is next to useless. If you leave your savings in a place where they are not growing then your spending power will slowly be eroded by inflation.
If you are not familiar, inflation is “the slow increase of prices over time.” However, another way to say this is that money gets less valuable over time. To visualize this, just imagine watching an older movie from the 1960’s or 70’s. Chances are that one of the characters ordered a meal and only paid about a quarter for it. Today, that same meal would probably cost $15-$20. This is caused by inflation and, if you are not careful, could leave you scrambling to cover your retirement costs.
Instead, you need to find a place where you can invest your money and let it grow at a rate faster than inflation (The average rate of inflation is approximately 2-3%).
Let’s look at one of the best places to do that.
Once you have started to consistently save money, it is important to find a place to invest it.
When it comes to investing your money, there are almost unlimited places that you can start. However, the one place that is widely considered to be one of the most reliable places to grow your money is the stock market.
Despite the day-to-day fluctuations, the stock market is reliable for a few reasons:
There you have it! These are some of the simplest wealth management strategies that Millennials can use to start saving for the future and improving their financial health.
We hope that you have found this article valuable when it comes to understanding how millennials can manage their wealth. If you are interested in reading more, please subscribe below to get alerted of new articles as we write them!
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