It’s your first paycheck. Congratulations! Time to celebrate life, isn’t it? And of course, it’s time to make important financial decisions for life. Millennials, like you, want to do everything in life but problem is of management. It’s good trait to seek leadership, and you do not want to experience boredom at all.
You can be the most connected generation in the history of mankind but at the same time most stressed in financial matters. It’s very important to plan your finances before spending a single penny. You must think about a financially secured future also. You can do a lot of things with your hard earned money, rather than spending it all impulsively. With a little knowledge about managing your finances, you can easily live a stress-free life. Check out few tips by which you can use your income a little wisely.
1. Plan a personal budget
First and foremost, you need to create a budget depending upon your pay scale. Ideally, 50% of your in hand salary should be spent on essentials like rent, groceries, transportation and other utilities; 20% should go for future like savings for emergencies and retirement; and the remaining 30% you can use for eating out, vacations or shopping. This is an ideal saving and spending strategy.
Initially, you should avoid taking out big loans like for car or house, instead you should live in the cheapest and safest apartment, possibly near your workplace. Make a budget keeping all your necessities in mind and try following it as much as you can. Don’t keep it so stringent that it;s impossible to follow after a week’s time.
2. Avoid eating out
This might sound as a lesson from your mom, but, yes apart from health, it strains your life financially too. Three basic meals a day are a must. So, you can very well imagine how much you spend eating out everyday. Think about making it at home and how much it’s going to cost. If you don’t know, then surf Internet. Simple recipes for freshers are widely available. If not everyday, make it a routine to prepare your meals twice or thrice a week atleast. Also, you can avoid unnecessary eating or having a coffee everyday. If you are spending $5 on coffee everyday, you tend to spend $25 every week, having it 5 times a week. You are actually spending $1250 on coffee every year. Just calculate how much you can save just by avoiding your coffee habits. You can actually plan a two week vacation with that money.
3. Automate your savings
You have a well paid job today, tomorrow you might not be very satisfied with it. What are you going to do then? You can think of leaving your job and switching to a new one. However, it’s very difficult to find a new job immediately. You need to have funds that can help you survive without any monthly paycheck for at least six months.
To get that amount, you need to save every month. It’s very difficult to maintain a balance between living today and planning for the future. Rather than thinking of taking out money and putting it in a savings account, you can fix on an automatic system of transferring a particular amount from your salary to your savings account. After a few months, you would not even realize the missing amount and the savings that you’ve done. The savings can also serve you as an emergency fund.
In addition to this, you can also sign up for an automatic retirement plan, 401(k), which is surely going to help you in your older age.
4. Pay off your debts
Check the interest rates you are paying for your credit cards, switch to lower interest rate credit cards if yours have high rates. Shop around and own the best ones suiting to your needs. Pay your minimum monthly bills on time, and if possible pay an extra amount so that you don't gather debt. If you’ve any private loans, pay them off as fast as possible since they tend to have higher interest rates.
5. Know your taxes
You have a full time paid job, so, you’ve to pay taxes. Paying taxes is one of the most unenjoyable work after getting paid, but it’s important. You must understand what you are paying. There are chances you might reduce your taxes by claiming tax deductions. You must be ensured that you’re not paying extra or even underpaying your taxes.
You can get started with many of these money saving tips by just spending few hours wisely planning them. Once you put a right foot forward in the financial front, you'll save years of stress and have a debt free life.