Financial Basics for Millennials

The millennials are part of the generation born between 1980 and 2000. They grew up at a time when digital technology was rapidly developing and political views became more liberal. Unfortunately, millennials are also stereotyped as lazy, entitled, and even financially unstable.

According to a 2015 report of the Global Financial Literacy Excellence Center (GFLEC), only 24 percent of millennials in the US show basic financial literacy. Only 8 percent display high
financial literacy. What this means is that millennials are not as educated and as astute as they should be about handling money correctly.

All these things don’t necessarily mean that every millennial out there is incapable of handling their finances. Poor spending transcends age brackets and socioeconomic standing, and if you’re a millennial, you can certainly break the stereotypes in the following ways.

Set Financial Goals

You can say that people think differently about the things they value. For some, money isn’t important, but it cannot be discounted that you will need money for you to pursue your passions and interests. In that case, it is only sensible for you to set your own financial goals.

You can set three kinds of financial goals for yourself: short-term goals, intermediate goals, and long-term goals. Short-term goals include going on vacations or purchasing gadgets. Don’t make a car your first purchase, though, as a car’s value only depreciates over time.

Intermediate goals include saving for a down payment or buying a lot or a house. These kinds of goals may take longer to accomplish. Meanwhile, long-term goals are more forward-looking. Saving up for your child’s education or for a retirement nest egg will require more money and probably take up the bulk of your savings. In that case, you will need more detailed planning.

Assess Your Current Financial Situation

This starts with calculating your monthly income and jotting down all your monthly expenses. On a sheet of paper or on a spreadsheet, create a personal expense report. Expenses include food, transportation, bills for utilities, and even your leisurely activities (e.g., shopping, going out with friends).

Compare your income and the total of your expenses. Are you spending more than what you earn? If you are, you should cut down on the unnecessary spending, unless you want to end up incurring debts and losing even more money.

Build Your Budget

Now that you’ve identified where your money goes, you can start working on a budget that will help you achieve your goals. Keep track of how much money you have left after all the spending, and make sure you set aside enough for your emergency fund. As there may be some unforeseen expenses and events that can always happen, you won’t be caught unprepared if you have an emergency fund.

When you’re planning your budget for the next few months, take into account your long-term goals too. Don’t get too caught up in meeting short-term needs. Differentiate your needs from your wants, and leave a certain amount for your long-term goal.

Other Ways

Manage your debts by paying them diligently and in full. If you can, avoid incurring debts altogether. Do not use your credit card unless you really need to.

Getting additional sources of income will also be helpful. For example, if your closets are full, you can consider selling clothes online. There are many platforms for that purpose, so it shouldn’t be too difficult for you.

Save Now, Enjoy Later

Always temper the impulse to buy whatever you lay your eyes on. Change that mind-set that you’re missing out on life if you’re not participating on what’s in lately. Remember that you have your whole life ahead of you.

You can’t really tell if the job you have now is permanently secure or if the economy will be stable, so you should never squander your money for a temporary moment of gratification.