Get Smart With Your Saving Habits
By Chelsea Vincent
Stuck wondering how to save money? Don’t miss these basics on how to get your financial act together, no matter what you make.
Recently, my grandmother (affectionately called Grammy) commented that the reason most young people today (read: 20- and 30-somethings) can’t afford homes is that we buy more things than her generation did. And to some extent, she’s right.
Now, don’t get me wrong — I definitely presented to her some hard-hitting obstacles we’ve got to deal with these days, like:
- On average, rent is a whopping $1,442 per month
- We will pay 39% more for a first home than baby boomers in the 1980s
- The cost of having children is now higher than ever
Just reading those is enough to make you want to hide in your childhood bedroom forever. There’s a huge mountain to climb when it comes to being financially independent — and even successful — in the world of today.
However, where Grammy had a point is in the way that many people have responded to these challenges. For each person who sees these statistics as challenges to overcome, there are also people who say, “I’ll never be able to beat those odds, so I’m throwing in the towel and spending my money on $14.95 avocado toast, concerts, and the latest iPhone.”
That’s where we have some room for improvement. A staggering 49% of millennials have no retirement account, and those who have debt owe an average of $40,000. I’m all for documenting memories, and I like trying out cool filters as much as the next person, but do we think the Instagram photos will keep us happy and fed when we’re in our seventies and eighties?
What many people fail to realize is that you don’t have to come from a wealthy family, or even have a college degree, to be wise with your money. Many of us didn’t learn about savings strategies or establishing credit in school (who knows why this isn’t mandatory high school learning — that’s another post). But with the internet available 24/7, we can learn how to save money now, and we sort of owe it to our older selves.
At a basic level, smart savings starts with living within your means. In other words, you need to make the most of the money coming in, while wisely spending or investing the money going out.
Set a monthly budget (and have the discipline to follow it). We know – setting a budget isn’t the most riveting activity. But rather than procrastinating, taking the time to write out a budget is something anyone trying to be independent needs to do, no matter how much you do (or don’t) make.
Separate your wants from your needs. Make the things you have to pay for each month your priorities — like rent, utilities, car loans, and insurance — and then make sure you also have an allocated amount for groceries and savings. Also set up budgets for the fun things in life like travel, meals out, and gifts. Then, stay within your spending limits for each category. The concept may be simple, but the execution requires some willpower.
Manage debt. Get out of debt asap. Obviously, this will take longer for some than others, but you need to work toward this like you are training for an Olympic event. If you need to get a temporary side hustle (or three), do it. Defaulting on loans can sabotage your credit score, which can haunt you down the line.
And speaking of credit, while credit cards are a bit of a necessary evil (as you need to establish good credit), use them only for purchases you can pay off quickly, to keep you from getting further into debt and owing interest.
Set up automatic transfers to your savings and retirement accounts. You can live like a saint, but life still happens. At some point, you will need to pay for car repairs, medical bills, or other “adulting” expenses, so you need to have a pot of money put aside for those needs, not to mention money for when you can’t work as much as you do now.
On average, we’re living longer, which means we’ll need money longer. Unfortunately, it’s not nearly as fun to think about paying for groceries at age 79 as it is to splurge on that new outfit or pair of shoes. But again, which one do you actually need? As an added incentive, the younger you start putting money into a Roth IRA or other investment account, the more money you’ll get back in the long run. Ka-ching!
Yes, living today means some added financial challenges. But, let’s be real – it also means we have access to advanced technology, longer lifespans, and broader career options. So instead of getting bogged down in the hurdles, make saving smart a part of your broader life affirmations, and get to work. You’ve got this, boo.