8 Things Millennials Should Do To Set Their Finances Right
When your officemates and college barkada flood your social media feeds with endless vacation pictures, thinking about saving your money is impossible.
You only live once, we all point out. So, why not enjoy life and spend like crazy?
As a young mom, I realized how important it is to figure out how to use your money early on—and not just because I have a kid. Many young professionals make a lot of financial mistakes (including me), but it’s never too late to start correcting them.
Here are among the easiest, most doable things millennials should do right now to set their finances right:
1Track expenses
Finding out where to go is difficult when you have no idea where you currently stand financially.
List down every single place where your money went. Did you spend it on a 150-peso cup of coffee? Two 50-peso taxi rides? Three 60-peso fast food meals? You might just be surprised at how easily these seemingly small expenses are eating up more than half of your entire month’s pay.
Sort out your one month’s worth of expenses and categorize them into:
Necessary expenses are those that you absolutely have to pay for, such as rent, food, and utility bills.
Luxury expenses are those that have cheaper alternatives: taxi instead of the jeepney, expensive coffee instead of the one in the office, fast food instead of packed lunch.
Frivolous expenses are those that you don’t use but pay for anyway, you know, just in case you need them. It’s the gym membership you never have time for or the data plan you don’t really use because you have an internet connection at home and in the office.
2Learn how to budget
Budgeting is an art, and there is no one-size-fits-all solution. It will require a lot of tweaking, so don’t be too hard on yourself if you fail to stick to it during the first month.
Find out where to put your money on, and put a maximum amount for each expense.
Your budget should include savings, rent, utility bills, groceries, transportation and food. Add or remove categories depending on your needs. Also, set aside a fun fund that you can spend without guilt, so you don’t feel like you’re depriving yourself of good things.
Keep this formula in mind:
Income – Savings = Expenses
3Reduce credit card debt
While these powerful little plastic cards can be a source of evil, they can also be used to your advantage. Some cards reward miles, great for those who love to travel. Other cards also provide points in exchange for items or cash back to help reduce the monthly bill.
If you already have accumulated debt, start getting rid of them now. You might even want to close your account once you have paid it all off. If you don’t, then good for you. Just make sure to stick to paying off the entire due every month to prevent it from gaining interest.
4Find additional sources of income
There is really no such thing as job security. With life’s uncertainties, you just have to make sure that you have something to fall back on. Prepare for a plan B, C, D and even up to Z, if that makes you feel better.
Looking for additional income sources that do not require a lot of financial capital or time, they just need a lot of creativity.
For example, you might want to put up a small business at home such as a small internet shop or you might want to offer part-time freelance services, too, after work. If you love writing, you can even submit your articles here in Philihappy, and get paid for your efforts!
5Secure an insurance policy
Most Filipinos do not believe in the power of insurance. And young professionals? There’s no need when you have no kids or are not the breadwinner, right?
Wrong.
Insurance policies are a necessity that you hope you never use. Get your policies from a reputable company, and get financial assistance during untoward incidences. You can die in peace (sorry, but let’s be practical here) knowing that your loved ones have enough money to pay for burial or for any other debts that you left.
6Look into investment options
According to a 2011 PSE report, less than 1% of the entire population of the Philippines are into the stock market. Most people put their entire life’s money in lottery sweepstakes in the hopes of becoming the next big millionaire.
But there’s a more certain way to grow your money, and it only requires as little as 1,000 pesos every month! You can start putting money on mutual funds or Unit Investment Trust Funds (UITF) from banks, or even on stock market blue chips. Serious people can advance into trading, too.
If your head is swimming in all these jargons, pick up the nearest personal finance and investment book you can find. You can even check out blogs by Fitz Villafuerte, Randell Tiongson, and Investor Juan to get started.
7Plan for the future
It’s hard to plan for the future when you are really just starting out. However, it’s important that you have one-, three-, five-year plans to help you set goals.
If you don’t want to look into retirement just yet, ask yourself this the next time you are tempted to spend on something frivolous: “If I saved this money, what will it do to me in the next # weeks/months/years”?
8Converse with positive goal-getters
Sticking to financial goals becomes extremely difficult when you only surround yourself with spend-happy people. Why not hang out with those who are passionate about savings or investments instead?
Get yourself a mentor or find an accountability partner, and you’ll see awesome changes in yourself, your pocket, and your bank account in just a matter of days.
I love to travel, but I also want to get out of the rat race early so I make sure I balance.
You won’t always be in the best shape money-wise nor can you always count on friends and family to help you with money, so make sure that you have contingency plans that can take care of you.
