Millennials are often stereotyped as members of a “spend now, worry later” generation. Although they have more disposable income than ever before, many still struggle with their savings accounts. Forty-eight percent said they had spent money they didn’t have to keep up with friends.
Check out these proven methods millennials everywhere should consider as part of their financial plan. Today could be the first day you start making smart decisions about your money.
- Create a budget and stick to it
- Have a savings plan
- Spend less than you earn
- Automate your finances
- Get a side hustle
- Use your credit card responsibly
- Start an emergency fund
- Shop around for better deals
1. Create a budget and stick to it
It’s a simple tip, but rarely few actually apply it. Budgeting helps you gain control of your spending so you can save more, pay off debts, and become financially independent.
There is no one-size fits all approach to budgeting. Say you need to learn how to budget your monthly expense. First, list everything you spend. Then, narrow it down to what is realistic and practical.
A typical budget includes the following:
- Food and groceries
- Utilities like electricity and water
- Internet subscription
- Health and wellness
Allocate towards discretionary spendings such as entertainment and vacations. Once you know where your money is going each month, it will be easier to identify areas you need to cut back. Track your spending using a spreadsheet or personal finance apps. If you’re the conventional type, write them in a small notebook.
2. Have a savings plan
This is one of the smartest ways to save money. It allows you to commit to a specific goal and dedicate a certain amount of your income toward achieving it. Setting aside money every month will help ensure you have a secure financial future and can manage unexpected expenses.
A savings plan doesn’t have to be complicated. The simpler the plan, the better you can stick with it. Open an account dedicated to savings. This will ensure you always have a set amount of money available when needed.
Opt for passbooks instead of debit or ATM cards. This minimizes the temptation to withdraw funds because you must visit the branch. Having a savings plan also allows you to become more organized with your finances. You know where to put your savings, investments, and an active bank account solely for settling expenses.
3. Spend less than you earn
One of the most important tips is to spend less than you earn. It’s, in fact, the number one rule of personal finance. It all comes down to cash flow — don’t overspend so you won’t get caught in debt. If you continue doing this, you will soon realize that you can save the money left over for the future.
Cut back on unnecessary expenses. How?
- Cook meals at home instead of eating out or frequent coffee shop visits
- Buy an excellent coffee brewer and use it with quality coffee beans than ordering lattes every day
- Assess which subscriptions you have and don’t use. Canceling these services could result in hundreds and thousands of pesos per year
- Avoid impulse buys and research prices online to find better deals
Overall, understanding the value of money and considering your expenses are essential for reaching financial success. Cut back on splurges and luxury expenses. You will be surprised how much money is left in your bank account at the end of each month.
4. Automate your finances
Automating your finances means you automatically set up recurring payments, transfers, or deposits on specific dates. It helps you stay on top of bills, debt payments, savings, and contributions to other accounts without having to do it manually every month.
It also helps reduce stress from remembering all these tasks throughout the month. You only need to check back at the end of each period to ensure the bank process it correctly.
For example, if you want to start a regular savings plan, you could use your online banking features like scheduling a total amount of money for transfer to your passbook savings account once your paycheck arrives.
You can then adjust the amount according to how much disposable income you have left over each month. By setting this up on auto-pilot mode, you can relax knowing that your money is transferred to your savings account each month.
Studies show that people who use automation tools are more likely to stay on track with budgeting goals than those who go through manual processes without any system. Automation forces you into action, so you don’t have time to dwell or procrastinate about your financial goals.
5. Get a side hustle
Earn additional income from a second job or freelance gig on top of your regular wage. It provides an extra financial cushion when you encounter unexpected expenses.
With additional cash flow coming in each month, you don’t have to worry about dipping into savings during emergencies or having too little money left at the end of the month after paying all bills and debts.
Plus, with the extra money you make from your side hustle, you could start investing more in your diversified portfolio or contribute towards retirement accounts—both sound investments that benefit your future self immensely.
If you’re handy with technology and computers, look into becoming an IT consultant or a website developer. Consider blogging or freelance copywriting if you’re creative and talented in writing.
Take advantage of the sharing economy by renting out rooms on Airbnb or driving people around town with apps like Grab. In short: Side hustles run the gamut—you just have to find something that clicks for you.
6. Use your credit card responsibly
Using your credit card responsibly can be invaluable for improving your finances and credit score. They allow you to spread out the cost of purchases over time, and you earn cashback rewards, travel points, and air miles.
Furthermore, many cards come with complementary insurance offerings such as extended warranties and purchase protection insurance, which can protect you from paying additional costs if something happens with your purchases.
However, remember that a credit card is not “free money.” If you don’t use it responsibly, interest payments can quickly take away all the value from those rewards and benefits.
Ensure you pay off your balance each month in full. Remember, always set yourself spending limits so that you’re aware of how much money you have available at any given time.
7. Start an emergency fund
An emergency fund is a savings account that you should use for unexpected expenses like medical bills or car repairs. It helps you avoid debt because you have enough funds to sustain yourself and pay for the costs. Aim to have at least 3-6 months of living expenses saved in your account.
During difficult times or sudden expenses, an emergency fund protects you from having to take out a loan or risk your long-term finances. In today’s uncertain economic climate and volatile job markets, it’s more important than ever for young professionals to be prepared for emergencies that may arise.
With the right planning and dedication, setting up one is a lifesaver when you need funds the most.
8. Shop around for better deals
Shopping for better deals is one of the cleverest ways millennials can save money. In a world where prices constantly fluctuate, and discounts are always up for grabs, it pays to be savvy and research before making a purchase.
Shopping around is essential because you can find better quality products at lower prices or get more value. You score the best deal on whatever you’re looking for, from everyday items to big-ticket items like cars or mortgages.
Furthermore, look out for seasonal sales—timing your purchases wisely to maximize savings. Take advantage of the Lazada and Shopee festival sales that offer you up to 80% savings, even on essential items. You also save more on delivery charges when you buy in bulk.
Shopping around takes some extra effort, but it’s worth taking the time. These small steps increase over time and could lead to hundreds (or thousands) in savings annually.
Do you have more ideas on how to save money? Share your thoughts in the comments section below.