This is a guest post from Pauline of InvestmentZen.com
If there is one thing that all millennials want, that is to have a secure future. But what are they doing to prepare for it? Studies show not a lot. The surprising truth is that millennials are spending less on investments than their counterparts. Let’s be honest, if you want a good future, you have to invest in it. Follow these tips to help jumpstart your financial future.
8 Tips For Millennials To Jumpstart Your Financial Future
#1. Start Now
Planning for your financial future shouldn’t be put off until your kids are out of the house. Start planning now to have a safe future. The younger you start planning, the better off you will be in the long run. Every day you waste is a day you can’t ever get back.
#2. Have A Plan
Having a plan in place using SMART goals makes it easier to accomplish. SMART goals are goals that are Specific, Measurable, Attainable, Realistic, and Timely. If you want to save $1,000,000 by the time you retire, but only put in $20 a month then you are setting yourself up for failure. Knowing what you are planning for and how to get there will help you on the journey. Online savings calculators can help with savings goals. Your plan should cover your short term goals, such as taking a holiday this summer or buying Christmas gifts without charging your credit card, mid term goals like replacing your car or saving for a down payment on your first house, and long term goals like college for your kids and your own retirement.
The general consensus when it comes to retirement planning is that you can safely withdraw 4% of your nest egg every year to make it last forever. So if you want to have $40,000 a year in retirement you need to save that million. Breaking it down in small steps makes it less scary than it sounds.
#3. Stick To A Budget
It’s not enough to just have a budget. You must stick to the budget you create. It’s okay to change the budget, changing it is to be expected, but sticking with what you budget is a must. Doing so exerts willpower and control over your finances. If you have trouble sticking to a budget, then you will have trouble with some of the later steps.
Write down all your sources of income and all your fixed expenses. And then give yourself a weekly or monthly allowance for variable expenses with what is left over. You can use this guide to help you set up and follow a budget.
#4. Pay Off Your Debt
Paying off your debt is your number one priority to jumpstart your financial future, since the high interest can cripple you over the long term. List all your debts, and try to negotiate the rates with your lenders. Applying for a 0% balance transfer credit card is a smart move to stop paying interest on your balance for a few months. The same way, you can look into refinancing your mortgage at a cheaper rate, lowering your payments. You can even refinance your student loans as well and save a ton of money.
High interest debt should be your priority, get rid of it as soon as possible so you can start saving and investing.
#5. Reduce Expenses
Maybe cutting out your weekly coffee or convenience store run isn’t an option. Instead, look for other ways you can reduce expenses. This may include trading in your phone for a less expensive one, or downgrading your cable package. After tracking your expenses for a few months, you will begin to see places where you can cut back, in order to have more money to spend where it really matters.
And don’t forget about memberships ans subscriptions to things you no longer use. You can use a free app to help you find these expenses and cancel them to save money.
Now that you have reduced expenses, start saving. There’s no guarantee that your job will be there 5 months from now. The extra money you freed up by reducing your expenses and paying off your debt can be put towards savings. Saving for the future begins with saving for now. Start with small goals. This could be a $1,000 emergency fund and then savings to get you by in the event of a job loss. The ideal is to have enough in your savings to live off for 6 months while getting back on your feet.
You can check out this post for a monster list of ways you can save money.
Sure, saving money is great, especially when some banks offer great interest rates, but investing really is the way to go to jumpstart your financial future. From stocks and bonds to mutual funds, there are so many ways to invest. There are many advantages to investing, but the best one is simply the amount of money you will be able to earn compared to a savings account. Invest in different index funds and solid dividend paying companies to diversify your portfolio and spread your risk.
The sooner you start investing, the more time your money has to grow.
#8. Evaluate Often
Situations and budget changes don’t have to be permanent. If you start working fewer hours or even switch jobs, finances can change. Re-evaluate your plan often and make changes if necessary. That is the great thing about life, it never gets stale.
How you live now determines how you will live in the future. If you want to jumpstart your financial future, begin taking the steps and investing now to make that happen.you might have to make some sacrifices in the short term, but everyone does. It is a part of life. But if you make the sacrifices now, you will be in great shape in the future. And not having to worry about things then will make your life a lot more pleasurable.