5 Must-Have Financial Habits For Millennials
Your 20s can be a daunting time. The reality of adulthood is beginning to sink in. You’re faced with the prospect of paying off your student loans while still struggling to make ends meet. The terms “financial freedom” or “financial stability” seem like words bandied around by somebody pushing a pyramid scheme. However, did you know that with the right habits and some discipline, you too can enjoy the good life? To help you get started, here’s 5 financial habits you need to have in order to achieve financial independence.
- Live Beneath Your Means
Being able to live beneath your means is the cornerstone of solid financial management. In a nutshell, living beneath your means is defined as ensuring that you spend less than you earn every month. Being thrifty in your spending allows you to build a surplus of cash which can then be used to multiply your earnings. Instead of expensive dinner dates, impress your SO with your gourmet cooking skills. Go for a walk in the park instead of the movies and take public transport whenever possible. Over time, as your savings grow and your earnings multiply, you’ll find yourself enjoying a significantly better quality of life when compared to your peers.
- Make Your Money Work For You
As the old saying goes, money makes money. We are not saying for you to bet on sports, although if you have knowledge on football or horse racing and want to gamble on the Breeders Cup picks, it might be a way of getting some cash. Still, be aware of the risks of gambling and wage responsibly, otherwise you will be even more in debt. However, instead of leaving your cash in the bank, invest in low-risk financial assets such as treasury bonds to slowly build up your portfolio. Alternatively, you could also park your cash in a fixed deposit account in order to earn interest income. While the rates of return are relatively small, these investments are a great way to build your passive income stream without risking your capital. Every month deduct a percentage of your salary and use it to build your investment portfolio. Dividend paying stocks can also be considered if you’re looking to diversify your investments. It will take some time for your investments to start paying off. However, once the returns start rolling in, you’ll never regret investing.
- Avoid Debt Like The Plague
Sure, owning things like a flashy new car or the latest smartphone are great. However, unless you’re earning tons of cash every month, such purchases may be beyond your budget. As a result, you may sometimes be tempted to take out a loan to help you finance an expensive purchase. Don’t be fooled. If you have to borrow to buy it, chances are you just can’t afford it. While credit cards are useful if you’re looking to stretch your paycheck, they can land you in severe debt when left unchecked. Stick to paying with cash and saving up to buy something you really want.
- Pay Off Your Debt Quickly
Admittedly, it may be impossible to live a life totally free of debt. There’s student loans and bills to worry about after all. Hence, if you can’t avoid debt, the next best thing is to pay off your debt as soon as you can. Take credit cards for example. While they’re a great source of free cash, they also charge extortionate interest rates on outstanding balances. So, keep this in mind whenever you’re tempted to pay just the minimum amount on your credit card. In fact, paying the minimum amount only is the equivalent of giving the bank free money. Hence whenever possible, always aim to pay off your credit card debt in full.
- Start a Side-Business
As we’ve written about in the past, the internet has made it possible for just about anyone to earn money online. You could open an online store to sell your products. Or you could monetize your skills and become a freelancer offering a variety of services. Whatever you choose to do, the added income will most definitely be welcome and can help you further build your investment portfolio. Furthermore, online side businesses can be run from the comfort of your own home and offer you a degree of flexibility. Hence if you’ve been looking forward to starting your own enterprise, now may just be the time. So there, here’s our list of 5 must-have financial habits for millennials. While it may seem daunting at first, always remember that the journey of a thousand miles begins with a single step.