5 Best Financial Tips For Millennials
April 26, 2021
What are the best financial tips for millennials?
- Manage your cash flow
- Have a three-month pay emergency fund
- Build credit score
- Diversify your savings and investments
- Seek a financial expert’s help
If you’re a millennial, know this about financial planning: Time is on your side, but it won’t be for much longer. Financial literacy is rarely taught in school and if you don’t gain knowledge about managing your money while growing up, you can easily get yourself into debt or other financial troubles in the future. Fortunately, knowing about this guide for the best financial tips for millennials can help you get off on the right foot.
Most millennials are now in their 20s and 30s, which is the time when many financial decisions are made. While it’s true that building on the resources you need in life can be complicated, the sooner you start, the better off you will be. Below are 5 of the best financial tips for millennials. Read on!
Manage Your Cash Flow
Just like how companies manage their cash flow, millennials should, too. There are four basic factors everyone should know about finances: income, expense, assets, and liabilities.
Record your monthly income and make a list of everything you spend money on each month. This can involve groceries, monthly electric bills, unanticipated medical bills, and other household bills. There are numerous tools to monitor your cash flow such as online banking accounts to help you make sense of your finances. Knowing how much money is coming in and how much is going out is one of the most vital building blocks for personal financial planning.
In addition, take a closer look at your expenditures and look for ways you can rein in that spending. For example, if you’re spending P8,000 a month on rent, that is a fixed expense. The same goes for other fixed costs, phone bills, or insurance. You can cut into monthly expenses such as dining out, traveling, or even online shopping.
Some expenses can be cut down and free up some money for more important financial aspects like buying a home, starting a business, paying debts, or retirement savings.
Have A Three-Month Pay Emergency Fund
Yes, you might think you’re young and healthy. However, numerous situations can place you in financial peril easily. This can range from a job loss, a sudden illness, injury, a major household repair, to even a startup that fails. That is where an emergency fund can help.
Having savings equivalent to three months of pay should help you survive a short-term financial emergency. Start building an emergency fund by cutting out at least 10% of your monthly income. Think about saving your emergency fund into a high-yield savings account where you can earn higher interest rates or where the money is insured.
Building a three-month pay emergency fund can be a challenge. You may have to cut expenses or even take other freelance jobs to manage it. Nonetheless, you’ll be glad you did if financial disasters strike because you have an emergency fund backing you up.
Build Credit Score
Your credit score is used to determine whether or not you qualify for loans such as home loans or car loans. Furthermore, your credit score will determine if you will qualify for higher loan amounts and credit card limits with lower interest rates.
Simply put, the better your credit score, the more financial leverage you’ll have in the future. It can serve many purposes be it for an emergency or as capital for business opportunities. If you can, build a good credit score early.
To build credit, you have to stay on top of credit cards and outstanding loan debts. Be careful not to miss payments, which can negatively impact credit scores. Avoid going over credit limits and not closing credit cards that have a remaining balance. If you have an existing balance, settle it first before applying for a new one.
Diversify Your Savings and Investments
Saving up money is great, but unfortunately, it is not the best way to grow your wealth. It is known that most savings accounts are associated with small growth rates that will feel slow.
If you want to improve your financial health significantly, start investing. Although you will be taking on some risks, there are plenty of ways to invest your hard-earned money safely. Start by researching the various types of investments and investment strategies to get a better understanding of your options.
Many savvy millennials diversify their investments to spread out risk. If one of your investments loses value, you will be protected. It is the same notion as not placing all your eggs in one basket. With compound interest, your investment assets slowly grow during the first few years, then much faster as the years accumulate.
Take, for example, you have a P25,000 beginning account balance and a monthly investment of P500 that has a 9% annual interest rate. After five years that will turn into 77,136.93.
Seek A Financial Expert’s Help
As a millennial, you will face several financial decisions which can be overwhelming. It doesn’t matter if you are an entrepreneur earning six figures or have a freelancing job, handling finances can be daunting.
Thanks to technology, there is a plethora of information available online for a self-help approach. However, picking the brain of an expert is far superior. Find someone who you can consider a financial mentor. Their insights can be tailored to your specific needs.
If you’re a millennial, there’s no better day than today for moving toward financial security. Follow the five best financial tips for millennials above and you can set a stage for a well-managed life in the future.
For more expert support in building financial security, click here to contact Benito Keh. As one of the most prolific entrepreneurs in the country, he can provide effective insights to manage and grow your finances.