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Personal Financing For Millennials: Budgeting 101

Written by Paul Esajian

Key Takeaways

  • Two-thirds of the American population (over 215 million people) do not have a personal budget.
  • Smartphone apps like Mint, Digit, Level Money, and LearnVest help users manage a budget, consolidate streams of income and expenses, and pay bills. 
  • Setting goals is one of the best ways to maintain a personal budget. 

Have you ever found yourself searching Google for “how to create a personal budget?” If so, you’re not alone. Fortunately, creating and maintaining a budget is possible, so long as you build healthy habits, set big-picture goals, and take advantage of the benefits of technology.

Personal financing for millennials is of utmost importance, as individuals in this generation have the opportunity to achieve financial freedom if they create a budget starting now. It doesn’t have to be hard or tiresome; it just has to be clear, concise, and chalk full of specific action plans.

The sad truth that two thirds of Americans do not have a personal budget was recently revealed in a poll conducted by New Gallop. This means that over 215 million people are not setting themselves up for future financial stability. If you want to spend your retirement years traveling across the country (think shopping in Paris, hiking the Great Wall in China, sailing across the Caribbean Sea, etc.), you better commit the following tips to memory.

Personal Financing For Millennials Who Need Help

personal budget

Don’t wait another minute to jump on the budgeting bus. The more you save now, the happier and more financially stable you’ll be in the future. Here are four tips you can (literally) take to the bank:

1. Build healthy habits: Saving money is like building muscle. To build muscle, you must have enough willpower to get yourself to the gym and eat healthy food every day. You have to be scheduled, organized, and dedicated. Saving money is the same way. You must have enough determination to put money aside each month, even when you’d rather use that money on entertainment. You have to make lists and implement systems if you truly want to see that savings account number increase.

How can you become a budgeting master? All you have to do it start building healthy habits.

It’s okay to start small. If you can only afford to save five dollars from every paycheck, that’s fine. Just be sure to increase that number as your paychecks grow. Budgeting expert Dave Ramsey stated that if you could just save $100 every month between the ages of 25 and 56, at 12 percent, you’d have $1,176,000.00.

Maintaining healthy financial habits isn’t hard so long as you are organized and implement strategies that help you stay on track. Following your credit score is a great way to know if you are headed in the right direction. There are plenty of online tools that analyze your score and dictate the areas where you need to improve. Setting up an automatic savings (that directly deposits a portion of your paycheck into your desired account) is another great way to keep up with your budget. All you have to do is “set it and forget it.” Eventually, you won’t even realize that money is being taken out of your paycheck until you see all the zeros behind that one in your checking account.

2. Set big picture goals: One way to motivate yourself to save is by setting big picture goals. You can fantasize about your dream home on an island off the coast of France, but unless you have a detailed action plan that clearly defines your goals and outlines the needed steps to take to achieve those goals, the fantasy will never become a reality.

Ask yourself, “why do I want to save this money?”, “where do I see myself in 5, 10, and 20 years?”, “is it worth it for me to save money now – even if that means missing out and costly entertainment activities, in order to be comfortable during retirement?”. These questions will help you choose goals that matter to you. Perhaps you dream about owning several (paid off) rental properties by the time you’re 55 so that you can live solely off passive income. What can you do now to make that goal possible? Avoiding credit card debt, contributing to a 401(k) or self directed IRA, and making smart investment decisions are all things that can be done to ensure future financial freedom. Creating a more concrete picture of where you see yourself in 20 years will make you more excited about sticking to your goals.

3. Let technology help: In a world that is ruled by technology, there’s no excuse for not taking advantage of its benefits. Not only is managing your budget via your smartphone more convenient, it also makes it more fun. Consider using one of the following free apps to improve your budgeting skills:

  • Mint. Mint is the all-in-one app that helps consolidate every part of your personal finance picture. Use the app to pay your bills, track your net worth, create categorized budgets, and so much more. Opt in and Mint will send you weekly and monthly emails that summarize your spending habits and reveal tips on different ways to save.
  • Digit. Download Digit if you never want to think about having to save. Are you forgetful, disorganized, or just overwhelmed with life all together? Digit simplifies savings, making your budget one less thing to worry about. Digit’s fancy algorithm analyzes how much you can save (on a weekly and monthly basis) based on your current spending habits and then automatically deposits chunks of cash to your savings account when it sees fit.
  • Level Money. Do you need someone constantly reminding you to stop spending? Do you need your mom to be the voice in your head telling you to save money? If yes, the Level Money app is perfect for you. Level Money automatically alerts you when you spend more than the budget you set or you fail to move money into your savings account after a period of time. Never worry about forgetting to pay a bill again when you have Level Money downloaded to your phone.
  • LearnVest. LearnVest not only helps you stay on budget, it also helps to improve your financial literacy. LearnVest tracks your spending and sends you relevant, personalized articles to help better educate you on budgeting and investing. Get ahead of the game by downloading LearnVest.

4. Create a budget: And for the finale, you will learn how to create a personal budget. Setting a budget is not actually very hard. Most people (especially those who are new to saving and investing) get scared, become overwhelmed by the process, and then avoid actually setting a budget all together. All it takes is a pen, paper, and probably about 15 to 20 minutes of your time.

Start by writing down a list of your necessary expenses. Rent, utilities, gas/transportation, and food should be at the top of that list. Following should be extras like pet expenses and entertainment. Subtract those numbers from your income to get a monthly budget. Of course it will be necessary to refine your budget over time (perhaps convert it to an online spreadsheet) but, simply getting the numbers down on paper is the best way to start. Once you have a ballpark figure of where you’re at you’ll be less intimidated by digging deeper. Test your budget for one to two months to see if you’re adapting appropriately. Change areas you identify need improvement and continue to do what works. Once you get used to seeing the number in your savings account increase, you’ll never want to stop budgeting.

Do you have any other tips on personal financing for millennials? Have you overcome debt or achieved a budgeting goal? Share your stories in the comments below: