Millennials and Finances
We work with a lot of millennials, most are single and just out of post-secondary education. Last week we were asked to blog about advice for singles living on a tight budget. The cool part about personal finance is that each situation is unique, but given that, we’ve created a general framework to help get finances organized.
#1 – Live Within Your Means
This applies to every person reading this, whether single, married, or divorced. To be financially independent, you must live within your means and not to the expectations of others. If your social group visits restaurants weekly, you may not be able to attend every outing. You can also consider an alternative idea (think potluck!) and present it to your friends. They may end up thanking you and you’ll all save money!
#2 – Prioritize Your Budget
Begin by breaking down your budget into fixed expenses (those that don’t change) and variable expenses (those that do). Look at your fixed expenses first. Review what bills you pay on a monthly basis. Can any be eliminated fully? Maybe a gym pass or a Netflix account you no longer use? Can any fixed expenses be lowered? Maybe it’s time you shopped around for a new cellphone plan. Once your fixed expenses are sorted, what you have left in your budget is what will cover your variable expenses. Typically this is the area that most people have trouble with in the budgeting department. Perhaps your variable expenses indicate you spend too much on restaurants, hobbies, or vices like smoking or drinking. Only you can choose to control those. Ultimately, if the budget is still too tight, you have two options: 1) Find a way to increase your income or 2) Find a way to reduce your expenses.
#3 – Protect Yourself Against Risks in Life
Living too long, dying too soon, or becoming sick or disabled along the way are the three main risks in financial planning. Earning an income is your greatest asset in life and if money is always tight, what are you going to do if you can no longer earn a living? While single people may not find a need for life insurance, they should certainly look into disability insurance for protection. If you are no longer able to work, you’ll still be responsible for the fixed expenses mentioned above, so it’s important to still have some sort of income. Many millennials are also considering critical illness insurance as they see the financial impact diseases like cancer and heart attacks have had on friends and family members.