Millennials, in particular, must keep track of their finances in order to thrive in a world of competition and uncertainty. Millennials should seize this opportunity to strengthen their finances and improve their financial position.
Millennials should develop a financial plan to help them get their finances. We’re talking about a financial strategy to handle your household budget, emergency needs, and even an investment plan to keep financial worries at bay as you get older. Let’s look at a few strategies.
1. Implement the 50/30/20 budget rule strictly.
The 50/30/20 budget rule is a straightforward and effective method for managing finances and instilling the habit of saving. The proposition under this rule is straightforward. You spend half of your income on necessities or expenses that are absolutely necessary. These are some examples:
- Bills for rent, groceries, and utilities
- Fees for children’s education
- Insurance premiums and EMIs
The beauty of this rule is that it can be applied by millennials regardless of their financial situation. It provides them with an opportunity to save at least some of their earnings. The monthly savings of 20% will add up to a sizable sum in the long run.
2. Take benefits of digital savings account
You often hunt for the best savings plan which provides you with reasonable interest rates while keeping your funds secure and accessible. Now you have the solution right in front of you! Digital accounts are high-interest savings accounts. They provide interest more than savings accounts and fixed deposits in conventional banks.
Few benefits of having an online savings account:
- Effortless Process of Opening the Account
- Opportunity to Earn High Interest
- Instant Access to Your Funds
- Safety of Account Balance & Information
- No Time Limit
- No Additional Cost on Transactions
The digital savings account is a boon to super busy millennials and professionals. No standing in the long queue, not waiting for banking hours or working days for the transaction, no additional cost, and no paperwork! You now have one less thing to worry about, and that is taking time out for bank transactions.
3. Begin a Mutual Fund Systematic Investment Plan (SIP).
Another option for millennials to begin saving is a systematic investment plan (SIP) in a mutual fund. A fixed amount of money is deducted from your savings account and invested in your chosen fund on a set date in a SIP. SIPs instil discipline in investment and aid in the accumulation of the desired corpus for various life goals in a disciplined and sustained manner. SIPs provide additional advantages. They assist you by:
- Invest throughout market cycles.
- When markets are down, assist in accumulating more units, and vice versa.
- Develops a disciplined saving habit
- In the long run, the power of compounding increases your wealth exponentially.
4. Reduce Discretionary Spending
Discretionary expenses are non-essential and are classified as wants. Even if these costs cease, your household can continue to function. However, these expenses are frequently the cause of millennials’ lack of savings. Ways to Reduce Discretionary Spending:
- Putting a Limit on Your Credit Card
- Analysis Before Purchasing:
For example, if a new mobile phone is released and you intend to purchase it, determine whether your current handset can handle the job and lacks features that you may require. Otherwise, it makes little sense to replace your old set with a new one.
- Reduce Your Desire for Instant Gratification
5. Avoid incurring unnecessary debt.
Taking on debt that isn’t necessary can often become a noose around borrowers’ necks. Not all types of debt are bad. A debt taken out to learn a new skill or purchase an asset is a good one, but one taken out to meet instant gratification may land millennials in trouble. Swiping credit cards for minor purchases is not a good idea because credit card interest rates are high.
Paying only the minimum balance is also undesirable. As a result, before incurring debt, millennials must determine whether or not they require it. It is also critical to read the fine print in the loan documents to avoid surprises later.
While the art of saving is best learned over time, if you can begin thinking about it in the long term, you will naturally begin to adopt habits that will kick-start your savings plan.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, digital savings account app that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken it upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
Photo by Karolina Grabowska: