If there is one thing we can all agree about when it comes to Millennials, it’s the fact they still have enough time. Enough time to work out their lives, enough time to figure out personal finances, and enough time to ensure a timely retirement. But these listed financial tips would ensure a good financial plan. The thing is – this train is slowly leaving the station. And if you are one of them, you are perfectly aware that, as enticing as it may seem, living from paycheck to paycheck is not possible in the long run.
Let’s take a look at a couple of financial tips that should help you sort through your financial life and start making healthy deposits for the future.
Set a monthly and annual budget
Essentially, a personal budget is nothing more than a simple spreadsheet that sets your monthly and annual expenses against your income. Keeping these figures in the written (or digital) form will help you to easily track your expenses. See how much money you have left, plan your savings, etc. If you have a problem breaking even at the end of each month. Resort to some of the popular budgeting methods like 50/30/20 rule (50% of your income goes to needs, 30 to “wants” and 20 to savings).
Think about long-term prospects
Planning your finances based on current earnings and expenses can be insanely helpful, but only in the short-term. If you want to ensure sustainable financial foundations and hassle-free future, you have to take into account a bigger picture. For instance, your parents will most likely, at some point, need the services of a reliable aged care center. Or you may want to buy a new real estate. Planning for these expenses early on will help you to address them much easier when they finally come knocking at your door.
Start putting money into 401(k)
For better or for worse, the traditional pension system is slowly going extinct. As a result, we have seen the rise of alternative plans that allow workers to set some money aside and ensure safe and timely retirement. Enter 401K – a company-sponsored retirement plan that allows workers to take a chunk of the daily paychecks and store them into a retirement plan. The taxation of your salary is conducted only after these funds are removed so the tax base is reduced. So, it’s a win-win situation.
The options are more than plentiful. Now, we are perfectly aware that stocks, bonds, futures, mutual funds and other similar words may sound intimidating at first. But with enough research and maybe even a bit of professional help you will be able to navigate the different markets and make smart investments. Of course, putting all of your eggs in one basket is something you should strongly avoid. The more diverse your investment portfolio is, lesser will be the chances of failure.
Set realistic financial goals
You don’t need to have some grand overarching plan. Simply ask yourself what your preferred lifestyle is, do you want to make some improvements and just how much money you need to close the gap. You’ll see just how motivated you’ll be to work harder and save more if you have some goal you can work towards. But remember, if you want to avoid huge disappointments, your plans need to be realistic and split into manageable chunks.
Create emergency funds
Last but not least, not all of your savings should be allocated into retirement funds or set waiting for some remote future expenses. One of your top priorities should be to put some money aside for the periods of unemployment or increased expenses. Bridging those periods often entails some unpopular compromises (e.g. accepting low paid position) that may hurt your long-term financial prospects. Make sure you have enough saved money and you won’t need to make such knee-jerk reactions.
We hope these few financial tips should help you to sort through your personal finances and set your future on solid foundations. As long as you are skillful at budgeting and know where your priorities are, you won’t have any problem finding the way out of the difficult situations even when all the odds are stacked against you.