Last night my “professional self” was facilitating a workshop on financial responsibility as a millennial. We talked about everything from financing a car, repairing your credit, retirement accounts, and the dirty word… budgeting. I knew right away I NEEDED to share these 5 secrets to finally stick with your budget!
So many people in the workshop felt so lost when it came to financial responsibility, that I decided there must be other confused millennials out there looking for this info too (is that a right assumption? If so join me in Invibed's next round of wealth coaching on 10/17, click here* to learn more and use code RACHELRITLOP for $50.00 off! )
Learning how to manage your money is one of the most important things you can do for yourself at any age, but particularly in your twenties. At this stage, It may be hard to imagine not living paycheck to paycheck but it's totally possible and in your reach!
The key to a successful budget is staying in control of your finances & not letting them run you!
1. Track Your Expenses
Knowing where you're money is going is the easiest way to determine where you need to cut back, but for many this is also the hardest step. The key is to track ALL your expenses, not just the big ones. Five dollar coffees or $20 manicures will slowly add up and really hurt your budget if you're not tracking them. Just think about it: $5.00 on coffee per day during a 5-day work week equals $25 per week, that’s $100 per month! No matter how small, or how infrequent the purchase, make sure you track it! I suggest using a receipt app to keep track of this, my favorite is Receipt Hog so I can earn cash while tracking my expenses! Many accounting softwares also have a receipt app (I'm looking at you Wave), which can also streamline things for your CPA during tax time!
2. Keeping Up With the Kardashians
Can you guess where I am going with this? STOP looking at what other people have or are purchasing! Comparing your finances to your friends is not a healthy habit to be in (because seriously, Facebook/Instagram inflation is a real thing). You have no idea what is happening behind closed doors, and whether or not your friend who seems to have killer new shoes each week is really swimming in debt his or herself. If you do not stop comparing yourself to others you will likely end up overspending and getting into more debt.
“The average American doesn’t know what healthy spending looks like. They see how people living around them are spending, and emulate that. But if we’re all in the dark, that’s a dangerous cycle.” – Manisha Thakor, CEO of MoneyZen Wealth Management
3. Financial Goals
From the day you create your budget you should also be planning for your financial goals. This includes planning for the unexpected, a.k.a Setting up an Emergency Fund. Nothing will derail all the hard work and organization you are putting into your budgeting than an unexpected car repair or a trip to the hospital. Develop a contingency plan for the unexpected, this can be a savings account for emergencies, or it may just be a buffer you do not touch in your checking account.
This list should also include some fun things; like saving for a car or vacation. This list can act as a motivator of what you are working towards.
4. Understand Where You Are At
Having self-awareness for your unique situation is so important. If you struggle with credit card debt or impulsivity then perhaps go old school with the “envelope system“, where you put the budgeted dollar amount (in cash) in an envelope and label the envelopes accordingly. Then, for example, when you go grocery shopping only take the exact amount of cash you want to spend from your “grocery” envelope.
If you are someone with good impulse control and trying to establish credit, then using a credit card might be best. Remember to always pay your bill on time and keep your credit utilization ratio down!
5. Comparison Shop
Living on a budget should not feel like you are a pauper. We both know if your budget has you feeling destitute or miserable, you will not stick to it. A nice way to save money, while still living comfortably is to comparison shop. Before you purchase anything, be mindful of its price. For me, this looks like sitting in the toilet paper aisle with my calculator and figuring at the cost per roll (which changes frequently because of sales). I also know which grocery stores offer the cheapest cost per ounce of spinach (something we consume by the pound in my house). There are TONS of life hacks out there to help you find the cheapest option on many household items, spending a little time to do your research will pay off greatly for you in the long run.
What are some of your favorite budgeting tips or financial questions? Would you be interested in a mini course of financial responsibility in your twenties? Let me know in the comments or here.