The road to financial freedom is paved with tough decisions. Gainfully employed millenials are struggling for financial freedom as they live from paycheck to paycheck. With all the student loans to pay and personal things to buy, saving money seems like a moot point.
Here are some ways to help you 20 somethings effectively manage your finances and free yourselves from debts.
1. Set a financial goal and prioritize your needs
Assess your current lifestyle and reflect on the things you want to achieve in the future. Set a goal and stick to it. List down all your priorities including: bills, your basic needs, debts to pay and monthly savings. Yes, make it a goal to save part of your income monthly. Consider it as lost and you’ll be surprised by how much you have saved in a year. This can be your financial cushion in case of an emergency. Also, think about saving for retirement.
2. Live within your means
Don’t spend money that you don’t have. Living within your means is the best way to avoid debts. Don’t spend your money on that new shoes or new gadget when you still have pending bills to pay. Always ask yourself “Do I really need this?” Don’t Go broke trying to look rich.
“Too many people spend money they earned to buy things they don’t need, to impress people they don’t know.” –Will Rogers
3. Track your spending
There are apps available that can track your daily spending. This will help you see where all your money goes and figure out how you can cut your spending.
4. Use your credit card sparingly
Credit cards can be very useful in case of emergencies. Use cash or your debit card when you need to purchase your necessities. Don’t be tempted to swipe that plastic because you have installment options to choose from. Remember #1 and 2.
5. Pay off your debts
You can ask your bank for options. It is wise to set an auto-debit to pay off your debts. Make it a point to pay your student loans, credit card debts and mortgage (if any) as soon as possible, to avoid fines and interests. Keep in mind that a bad credit standing can possibly affect you in the future.
6. Delay gratification but reward yourself once in a while
Delaying gratification means putting off buying rewards now to be able to buy something greater later. This is a personal trait almost all successful people possess. This doesn’t mean you have to alter your lifestyle and not live your life to the fullest. You can treat yourself once in a while without overspending. Just keep in mind all your priorities. It is more enjoyable to live a debt free life.
When you think you have enough savings, you can start thinking about growing your money. Don’t just let your money sit in the bank. Annual interests are too low and the value depreciates. Stock market is a good idea. You can potentially grow your money by gaining higher returns, compound interests and deferred taxes. Do your research and start investing.
8. Secure insurances
Make sure you have your health insurance, car insurance and other insurances you need for your protection. Life is unpredictable. You’ll never know what’s going to happen next. It is better to be prepared than be sorry.
9. Always think of ways to save.
Don’t go grocery shopping when you’re hungry. If you go grocery shopping with an empty stomach, chances are you’ll be overspending on food. Walk or use your bike if you can to avoid spending on gas. Take advantage of sales, freebies or coupons. Go on cheap but meaningful dates until you can splurge on those grandiose 5 star cruises. Get a roommate so you can split bills. Always think of ways to save.
Save money because your money can save you.