As a young adult, one of the biggest challenges you will face is finding a balance between living life comfortably and setting up your financial future appropriately. You have bills to pay but you want to enjoy life. Is it possible to overcome this challenge?
The fact is, it is indeed possible to pay your bills whilst cultivating healthy financial habits. Such healthy habits have helped other millennials to build wealth even in their 20s. This piece takes a look at some of these habits.
Don’t spend more than you earn.
Living within your means is a great habit but unfortunately, many millennials really struggle to do so. It is very difficult to ignore the shiny credit cards and overdrafts to fund the next hipster purchase. Your iPhone 5s is in perfect condition. Do you really need to go into debt for that iPhone 6s+? Form a habit of creating a monthly spending budget that fits right within your earnings and stick with it. A good tip here is to always pretend you earn less than you actually do. Convince yourself you are earning 20% less than the actual amount in your pay check and put away that 20% in a special account. Some accounts, like this one, come with benefits for depositing a certain amount each month as well as other benefits, so it’s good to shop around. Plan all of your spending for the month around the remainder and never go borrowing if you exhaust it.
Set long term goals.
Unless you are one of the lucky few that will win the lottery, it’s unlikely that you’ll become a millionaire without adequate planning and setting long term goals. Do you want a house of your own by age 40? Decide on a reasonable amount you can put away monthly towards it. Do you want to have a million pounds worth of retirement income by 65? Sit down with a financial expert and work out how much you need to commit to your pension fund each month to actualise that based on your earnings.
In your 20s, you need to have some grasp of what investing entails. No one expects you to embrace a full scale investment banking approach. Simply investing wisely in a small bucket of stocks could be your path to financial sustainability in the future. Ignore the miniscule payouts for now!
The theme in this piece has been to ignore spending outside your means, but there are occasions where it makes perfect sense to borrow wisely. If you find a business opportunity with great potential, you can borrow money to make it a reality as long as the amount being borrowed will not ruin you permanently when things go wrong. If the business fails, you would have gained valuable experience that could come in handy in future. Better to borrow money to start a business that could make you a millionaire in a few years than to borrow to fund some triviality that won’t add anything to your financial future!