Saving money in your 20’s and 30’s should be a top priority for millennials – but many seem to start off on the wrong foot. Nearly 50% of young millennials (in their early 20’s) have $0 in savings, live paycheck to paycheck, and have the loom of student loan debt hanging over their heads. If you’re in this boat, you may feel like you just can’t catch up, and the thought of saving is a far off dream.
Don’t lose hope!
It’s never too late to make a financial plan, and the earlier you start, the brighter your future. Here are 5 easy tips that will help you turn it around. So get ready to dust off your savings account and start watching the pennies grow.
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If you don’t have one, start a savings account!
Everyone has a checking account, but do you have a savings account? If not, it’s time to open one up already! Head down to your local bank or, to make life a little easier, pull out your phone, go to your banks’ phone app (most have one these days) and open a savings account right on there. It’s very easy, just follow the step by step instructions and you’ll be saving in no time.
Start off by putting whatever amount you’re comfortable with to start. If it’s only $20 a week, that’s fine, it will put you on the right path. If possible, it’s great to start to save 10 percent of your income. You can easily do this by splitting up your direct deposit so 10% goes right into your savings account, this way you never even know what you’re missing out on.
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Live Below Your Means
Make sure you’re controlling your spending. You need to have a proper budget set for your current income. Overspending and living a life you can’t afford is in no way a good start to a stable financial future. If you’re killing it and can save more than 10 percent, it’s time to jump into the popular 50-30-20 rule. This means you will put 50 percent of your income towards necessities (housing, car payments, groceries, etc.), 30 percent towards your wants (dining out, entertainment, vacation), and 20 percent towards your financial goals (savings, retirement, or any debt). Once you calculate your budget, it’s time to get started!
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Build Your Emergency Fund
Insurance is a necessity for everyone these days, but insurance won’t cover every problem that you may run into. Many financial experts advise you should start out with a $1,000 emergency fund, while others will suggest you put away a few months of living expenses. Once started you can keep adding to your emergency fund until you reach three to six months’ worth of expenses to cover any big unexpected financial emergencies; unemployment, medical bills, car repairs, unexpected tax bills, etc.
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Start Saving for Retirement
I know, you’re young and retirement seems like forever from now, but, if you start saving now it will make a HUGE difference. If your employer offers a 401(k) with a company match, it’s time to log in and set it up! That’s free money. While it will make your paychecks a tiny bit smaller, you’re actually raising your yearly income. On average, most companies will match $.50 per $1.00 up to a specified percentage of pay (usually 4-6%). Another benefit of signing up for your employer’s 401(k) plan is the money that you put in is all pre-tax dollars (hint, hint… more savings!).
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Improve Your Credit Score
What’s in a credit score? Good question. According to Credit Karma, your credit score is a three-digit number used by lenders to determine your creditworthiness for a mortgage, loan, or credit card, and is based on the transaction history on your credit report. A good credit score means lower rates on credit cards and loans (for when you purchase your dream home). By having extra money in the bank (from saving), it’ll make it much easier to keep up with your bills – which will improve your credit in the long run.
If you’re looking for a few more ways to get your finances in order, here are some awesome apps that will help out. Good luck saving! You’ll be happy you did.
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