Millennials—those people born between 1981 and 1996—are in a unique sphere of early-mid adulthood. This is a time when money management becomes important, setting the stage for which people get to retire early—and which will be stuck working years after their peers. For millennials, the time has come to put money to work. However, most millennials were not offered financial literacy courses in high school or college and may struggle with their finances. Here are some quick and easy money management tips for the millennial.
Tip 1: Save for Retirement
Saving for retirement is an important part of adulthood, and unfortunately, one that far too many people neglect. At a minimum, you should be putting into your retirement account at least as much money as your employer will match. If you do not put in up to the maximum employer match amount, you’re literally leaving money behind that you are entitled to.
It can be hard to fathom saving for retirement, especially if you are struggling to make ends meet, but unless you want to be working until you’re eighty, it’s imperative that you have a retirement account going early. In fact, more than matching what your employers put in, most people should be saving at least 10-15% of their paycheck in a retirement account if they wish to continue leading their same level lifestyle into their retirement years.
Tip 2: Spend Less Than You Earn
On the surface, this tip seems obvious, but for many, spending less money than you earn can be difficult. To ensure that you’re staying on track each month, you should have a budget set up. Financial experts recommend setting money aside for your savings and emergency fund before anything else. Set the next portion of your budget aside for fixed expenses—like your mortgage or car payment—and variable expenses like groceries and gas. Whatever is left over is your allowance for fun things like video games and dinners out.
Staying within your means not only ensures that you don’t go into debt, but also allows you to have cushion in your savings or emergency account for when the unexpected occurs. Instead of worrying about how you’ll come up with an extra $500 this month to pay for a car repair or medical expense, rely on your carefully built emergency fund for these types of expenses.
Tip 3: Know If You’re a Cash or Credit Card Person
Money management experts disagree on the value of credit cards versus cash. Some say that after you’ve finished your budget and determined your allowance for the month, you should pull that amount of money out of your bank account and keep the cash in your wallet. Doing so allows you to visualize your money leaving your wallet when you make impulse purchases and forces you to stop buying when you’re done. Other experts vote for the use of credit cards, which can allow you to earn cash back bonuses and points towards your credit.
So which is right for you, cash or credit card? If you’re good with sticking to your budget and can commit yourself to paying your credit card off in full each month, credit cards can be a good option. However, if you have a hard time sticking to your budget—or might be tempted to only pay the minimum amount down on credit cards—stick to cash. Credit card companies make their money off customers paying interest on their purchases. To make the most of your money, you don’t want to fall into that trap.