Money management tips that millennials need to know
Taking the time to manage their finances is something that not everyone is keen to do. This is particularly true for millennials, many of whom are landing themselves in a spiral pit of debt. This kind of situation can be easily avoided if one takes the effort to learn a bit about money management.
It will not only help them control their finances better, but it will also give them the much-needed insight into the world of investing and growing their wealth. If you are a 20-something person who is just starting his/her career, then you will definitely want to read on for tips on how to manage your money better.
First Things First - Learn to set up a Budget!
This is, without a doubt, the first step you need to take to manage your finances. In fact, budgeting is the starting point of achieving every financial goal that you will ever set in your life. Granted that it is going to take some effort, but it is well worth doing it. Having a budget will help you realise how much money you are earning and spending and, in turn, enable you to monitor your finances efficiently.
To make your job easier, you may want to download mobile applications like the BankBazaar App which not only track your transaction history but also set up reminders for your bill payments and credit card EMIs.
With this, you will get an overview of where your money is going and identify areas where you can cut back and save, especially if you are spending more than you are earning. As you get in the habit of budgeting, you will soon find yourself becoming financially sound and responsible.
Keep a track of your loans and credit cards
If you have taken a loan or regularly use a credit card, then you will need to be extra careful while managing your expenses. Since these debt instruments charge a high rate of interest, it is advisable to pay off the ones that have the highest rate. Your monthly budget needs to be prepared such that you can easily meet your monthly obligations on loan agreements and credit cards, apart from your usual expenses.
It is important to remember that your credit score depends heavily on your payment history. If you fail to clear your dues in time, your credit score will be negatively impacted. You should also make sure to use your credit card wisely. The prospect of having a line of credit can be quite tempting initially but if you cave in, you will soon find yourself in a debt with an astounding sum of interest to pay.
Lay down your financial goals
Your financial priorities and goals will play an important role in the way you manage your money. For instance, if you are saving for a trip that you plan to take in six months time, then you are likely to be a bit more frugal in comparison to saving for a world trip in a few years time. That’s why, in addition to focussing on big goals such as marriage or buying a house, you should also set short-term goals to keep yourself motivated along the way.
Start saving as soon as possible
If you are not doing it already, you should start doing it now - put aside at least 10% of your paycheck into a separate savings account. You may not require it for the time being but you will be at peace knowing that some savings to fall back on in times of financial crisis. Moreover, your funds in the savings account will also earn an interest. As and when you progress in your career, you should increase your monthly savings to reflect your income.
Get in the habit of investing
A wise man once said that a rupee saved can amount to much more than a rupee earned. This is possible through the power of compounding which essentially tells us that the longer you stay invested, the better will be your returns. This is because the returns earned on investments are invested back into the instrument instead of withdrawing them. Investing is, in fact, the best way to accumulate wealth.
There are plenty of instruments for novice investors to choose from - mutual funds, stocks, bonds, recurring deposits, public provident funds, et cetera. However, before you get started, it is advisable to research and learn about these various methods of investing.
Instead of letting money control us, we should learn to control the money. Managing your money isn’t as difficult as it may appear to be. It takes discipline, patience, and to a certain extent, dedication. There are a plethora of applications out there which have made the task of managing money a whole lot easier. The idea is to start with having a monthly budget and then building around it. All the best!