With today’s overwhelming economic uncertainty, financial planning is important to be mastered by millennials (born between 1980s-1990s) in order to secure their future. Basically, financial planning encompasses certain knowledge and methods of how to earn, save, spend, and basically manage their money strategically.
By implementing the right step you can easily achieve your short term or long term financial goal. However, financial planning can be intimidating for some as it is not a subject to be taught properly at school back then. Continue reading to find out essential tips and strategies that can help young adults manage their financial affairs.
1. Spend Less Than You Earn
The first basic rule is to spend less than you earn. No matter how high your salary or income is, if you can’t control your spending habits, you will never feel enough. Spend less by identifying which unnecessary cost can be trimmed and which couldn’t be.
You can start by something simple, like cooking home meals bento instead of having lunch at a fancy restaurant, making your own coffee instead of ordering a grande at Starbucks, etc. Don’t drain your bank account for something basic, only splurge on the things you really enjoy.
2. Create A Budget
Take control of where your money goes. Always set a budget on your average spending per month and regularly update it as your lifestyle and goals change. You can easily determine if you overspend your income by tracking all of the expenses and see if it is possible to save more money.
When you realise how much you spend on living cost, you can easily set more control over your expectation towards your own financial goal.
3. Build An Emergency Fund
Maybe at the moment you’re fit, healthy, and basically have a stable income. But no one can really tell if one day or next month unemployment happened or your business went bankrupt. For this reason, it is important for millennials to save some money in a separate bank account as an emergency fund. This should be prioritized before payoff debt or saving for large purchases as some emergency events may come inevitably.
Now, you probably will ask about the amount of money you should save for it. Depending on your situation, but most financial planners would recommend saving at least equivalent to your three months up to one year of living expenses.
4. Saving For Retirement
Due to inflation, there’s no way that you can save enough cash for retirement without doing investment. The best option is to earn compounding interest so that your savings will be beneficial for your future-self, and thus the only long-term strategy is by starting to invest in the stock market. Regardless of your age, the sooner the better as you will earn more money in contribution towards retirement.
5. Buy Insurance Plan
Whatever your status, married or single, with or without child, It’s important to have the right insurance to protect your income, savings, and family in the case of disability, natural disaster, or death. Life insurance and health insurance are generally the best options. They are affordable and can cover medical expenses, funeral bills, debts, and replacing your income until the given time.
Before purchasing insurance, remember to compare and investigate insurance plans and policies from various providers to get the lowest rates with the best coverages that you need. Alternatively, you can also hire a reliable independent insurance agent to efficiently find the right plan based on your needs and financial condition.