Although millennials have a plethora of positive traits that make them one of the most interesting age groups on the planet, they are far from perfect. In fact, many older Americans would argue that younger individuals have a lot to learn. In some cases, unfortunately, this tends to be true. As stereotypical as it may seem, there are certain areas of life with which people who are under the age of 30 tend to struggle. A great example would be the finances and making important spending decisions.
This does not mean that every young adult is going to lack the necessary skills to handle their money. Instead, it just states that a large percentage of those who do have money issues are young adults. Fortunately, the resources available to people who are looking to improve and become better at handling debt, earnings, and attaining financial freedom are practically limitless. To that end, what are some of the best ways for millennials to learn how to take charge of their financial situations?
Going Back to Basics
As sad as it may seem, the reality nowadays reminds us that most young people do not run budget analyses. Whether this is caused by a previous lack of financial responsibility or laziness does not matter. What does matter, however, is the fact that these individuals are failing to run basic forecasts of their weekly or monthly expenditures and cross-reference that with their income. Predictably, the outcome tends to be a situation in which one takes on too much debt or fails to allocate their money properly. So, they lack the necessary disposable income to make ends meet.
According to a graduate from Yale University who studied economics, Luke Persichetti, a lack of budgeting is the quickest path to bankruptcy. Why? Because it can easily snowball into a situation that has no visible way out and a declaration of complete insolvency may be the only possible solution. Well, the problem here is the fact that declaring bankruptcy is a surefire way to ruin one’s credit. Thus, if they ever require any loans again, they will either not get them, or their interest rate will be sky-high. Hence why bankruptcies and car repossessions are two of the most damaging items on credit histories.
Relearning the Basics
Luckily, the solution to the low number of people who do budgets is to teach everyone about some good techniques. First, recognizing that some people do not really get the bottom-line concept of a traditional budget is important. After all, not everyone is an accountant or a finance expert who has tangible experience in this area. So, teaching people about income and cash inflows versus costs and cash outflows is a perfect starting point. Then, one can introduce some timeless strategies that have helped millions of people lead a safer life. For example, consider the popular rule of 20/4/10 that relates to purchasing a vehicle.
Namely, the twenty stands for the percentage of the car’s price that should be made as a down payment to avoid high interest or prolonged repayment periods. The four represents the loan period that should not exceed four years or 48 months. Lastly, the ten stands for the percentage allocation of one’s monthly income and should be the most one spends on the vehicle. This includes everything from monthly payments to things like insurance and gas. As Luke Persichetti knows, there are hundreds of rules such as this one that are very easy in theory. In practice, on the other hand, most individuals fail to consider them because they never heard of the concepts. Thus, helping people become aware of such spending strategies could make their lives easier.
Dedication Requires Recognition
When someone must budget for an extended period of time, simply trying to make ends meet may not be a reason good enough to keep them accountable. If, however, there is a tangible goal that the person is pursuing, then they would have a greater incentive to keep up with their spending plans. So, saving up money for a large purchase, renovation, or something else can be a great way to keep one’s eyes on the prize. Not to mention that reaching a point where someone’s budgeting allows them to make a large purchase will be one of the most rewarding feelings in the world.
To make this part of the process easier, people can take advantage of smartphone apps that have been developed. Since almost everyone owns a mobile phone nowadays, this will make it very easy to keep track of their progress. Additionally, those apps are known to have state-of-the-art features that can incentivize one to stay on track and continue saving.
Founder Dinis Guarda
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