One of the things I most enjoy about working with Millennials is that they have the same outlook on life that I do: the future is a limitless possibility and if we put ourselves in position to succeed, the sky is the limit! This is especially true when it comes to finances.
I recently weighed in on a survey looking at what successful Millennials are doing right and where they are missing the mark. MoneyTips.com polled 500 self-described successful Millennials for the eBook "Millennial Next Door (REVEALED): How To Be Financially Successful In Your 20s." (Download eBook for free: http://www.moneytips.com/millennial-next-door-ebook )
Seeing that 85% of successful Millennials made my heart swell with pride! But it
broke when I read that only 59% regularly spent less than they earned and 34% of
are concerned about living within their means. Fortunately, I'm here to help solve that problem.
Millennials, here's the one formula that can help you begin to gain control of your spending.
Need it? > Love it? > Like it? > Want it?
Before everything you buy, run it through that equation. Do you need it? A need is something you have to have in order to live - food, shelter, basic clothing and water.
A love is something you buy that increases your quality of life. This is how you identify your loves...Ask yourself this question, "If I had Oprah's bank account, what would I do, or what would I do more of?" Think experiences vs. things.
Likes and wants are temporary fixes. They don't increase your life's value, but they do decrease your bank account's value.
So if you don't need it or love it, you should probably leave it.
The MoneyTips study showed that successful millennials save 21% of their income
and that not saving enough was one of the five biggest worries millennials are facing. Now that you're not buying anything you don't need, you've got all of this extra money. What do you do with it?
Save it! Savings doesn't have to take as much discipline as you think.
One of my first lessons from my successful Live Richer Challenge
(www.livericherchallenge.com) is to create automatic savings withdrawals and decide how much you want to put away each week, each month, each year. Set up the transfer and don't think about it - the money is gone before you can spend it.
Lesson 2: separate your savings. When it's all in one pot, you can't get a full grasp of
where it's all going. I call that gumbo savings, just everything tossed together. Sure,
it's a pretty number, but it has negative impact on your financial well being.
Open one account for your bills, another for your income, and one each for any
respective goals you have - whether that's buying a house, a car, going on vacation,
a wedding, anything. That way when you get close to your goals, it'll feel like you've
Lesson 3: Use online banks. It takes 2-5 business days to transfer that money back
to your regular bank, so it makes it tough to make impulse purchases. Online banks make your money inconvenient and inconvenient money does not get spent.
Don't forget to consult with a financial advisor to set up a retirement savings account you can automate.
Now that you've set up your savings, and identified what's necessary, you have to look at when will you need the money and how much you will need. What is the cost of that wedding, that new house, that used car and how much do you need for retirement? Figure all of those things out and let technology do the work for you!
Of course savings and cutting spending are only a portion of the picture. The
MoneyTips study showed us that millennials have concerns about credit card
debt, insurance, investments and crippling student loan debt. Millennials are
straddled with more student loan debt than any generation in history, racking up an
astounding $1 trillion!
How do they overcome that? Join me and more than two dozen other finance experts (mny.tips/MTExperts) on Tuesday, March 31 for the #MillennialTalk Twitter chat as we help millennials answer all of those questions.