Millennials get a hard time for being, well, Millennials. They’re young, inexperienced and were branded as lazy, eating Cheetos and holding out for management positions. None of that is true anymore. In fact, they’re not really that young anymore. Sorry.
The truth is, Millennials must work harder to get what previous generations may have had easier. Gasp! The income to debt ratio is much worse today than it was for Boomers or Gen Xers, and it’s much harder to get ahead with large amounts of debt that college-educated Millennials will have to deal with for quite some time. Down payments on a home when real estate prices are high, seem harder and harder to reach.
So, here’s some tricks for Millennials that are struggling to save money (P.S. This works for anyone, but let’s not tell the Millennials).
Track what you spend. It’s not that difficult, but that’s exactly how you know where the heck all your money went to. Maybe it’s on a $5 latte every day (ooh, that’s bordering on being ageist), or maybe it’s all your streaming services, but regardless, you need to know where you’re spending and how much, so you might be able to figure out just what can be nixed.
The Envelope Method. Most people have heard of this, and it’s pretty straight forward. It’s basically a budget laid out in envelopes. This much money for this, and that much cash for that. And you don’t deviate. When the money is gone from the entertainment “envelope” whether that’s a physical thing with actual cash in it, or digital assistance with a PFM (Personal Financial Management) app, you can do it. You look at what your net income is, what your hard costs are like rent, food, debt servicing, car payment or insurance, etc. Then you take what’s left, earmark a specific amount for savings. Maybe it’s only $50 a paycheque or more, then divvy up what your other fluctuating expenses might be, like eating out, entertainment, shopping for things you’d like, but maybe you don’t need. Then, stick to it.
Living off what you earn in the previous month. That’s a Zero-Sum Budget. How it works is that anything that may have been left over from the previous month gets moved to a savings account, and you live off just your current paycheque. You’ll get to know in a hurry what your true expenses are, and what can be eliminated when that extra cash is not easily accessible. You may need to be somewhat flexible as unexpected expenses come up, but keep in mind that it will likely have to come from some other part of your budget.
Once you have that little nest egg, start putting it away for whatever goal that might be for. Perhaps it’s a new vehicle, trip, or a down payment on your first home. Maybe it’s just getting out of debt. Using the above tricks, set the date for your goal. Maybe it’s a year or two, maybe it’s longer term. If it is longer term, then start thinking about investing your savings. There are plenty of options for medium to longer-term solutions from standard term deposits, and/or Tax-Free Savings Accounts. Although rates are low and they don’t provide huge returns, it is better than just sitting in your savings account earning pennies. There’s always the adulting step of talking to financial advisor at PlanWright Financial. They have options for even better returns, but most of it is in a longer-term strategy.
If you’re thinking about starting your retirement savings, it can go in an RSP (Retirement Savings Plan), which will help reduce your taxes paid to the government. Yeah, it’s true. It’s your money and you get to keep more of it. You just can’t spend it until later. Much later.
Check out encompasscu.ca and look under investing, as well as our free budgeting tools to help you save some money and prepare for the future. You might be a Millennial, but you also can start saving now.