Overspending is the easiest thing in the world–but being strategic about managing your money right, that’s something Millennials would be wise to do more of this year.
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With a plethora of financial advice on the internet, however, it can be hard to decipher the best money moves to make. Thankfully, experts explain their most recommended strategies for growing your wealth as a Millennial.
Here are some of their top suggestions.
Adopt A ‘Pay Yourself First’ Strategy
One critical piece of advice Jeff Mains, founder of Champion Leadership Group, offers Millennials — drawn from personal experience and professional practice — is “to adopt a ‘pay yourself first’ strategy as a cornerstone of their monthly expense management.”
This approach, according to Mains, involves setting aside a predetermined portion of your income for savings and investments before allocating anything toward livingexpenses and discretionary spending.
“It’s a method that disciplines you to prioritize long-term financial growth over immediate gratification.”
By treating savings and investments as non-negotiable monthly ‘expenses,’ as Main suggests, Millennials can ensure they consistently build their wealth over time, evenif it means starting small.
“The beauty of this strategy lies in its simplicity and effectiveness,” he explained. “Itleverages the power of compound interest, turning even modest monthlycontributions into significant sums over the long term.”
He also says it encourages a shift from seeing savings as what’s left after spending to treating it as the first charge on your income.
“This mental shift is crucial for building sustainable wealth.”
Additionally, he notes that embracing technologies and tools that automate savings and investments can streamline this process, making it easier to stick to yourfinancial goals without actively managing transfers each month.
“Automation ensures consistency and removes the temptation to skip or reduce the amount you set aside for your future.”
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Regularly Review Expenses
Sherman Standberry, licensed CPA and managing partner at My CPA Coach,advises jotting down all the expenses you make within a month, whether it’s a big one like rent or a small one like a cup of coffee, and then reviewing this list at the end of the month.
“Reviewing your expenses is a great way to know where your money is going and where you can cut back,” he explained.
“For instance, if you haven’t been putting that gym membership to use but still pay for it on a monthly basis, then it’s time to cancel it.”
Building this habit helps you avoid overspending.
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Create A Budget
Once you have reviewed your expenses and figured out what you can cut back on, Standberry says it’s time to create a budget for the next month.
“Allocate funds for all the necessary expenses, such as rent, bills and groceries,” recommended Standberry, “and make sure to also allocate a portion for savings and investments.The money left is what you can use for discretionary spending, but don’t go overboard with it.”
Stanberry suggested, “Set a limit on how much you can spend on non-essential items and stick to it. This will help you be more mindful of your spending habits.”
Tackle High Interest Debt
According to Karina Newman, real estate investor and owner of iBuyers, it’s crucial for Millennials to tackle high-interest debts head-on.
“Especially if you’re juggling credit card balances or loans with sky-high interest rates,” Newman added. “By focusing on paying off these debts pronto, you’re not just saving yourself a heap of money on those pesky interest charges, but you’re also giving your credit score a much-needed boost.”
Newman recommends making chipping away at this debt a priority. She said, “It’s like giving yourself a financial spring cleaning!”
Beware of Constant Swiping
Martin Gasparian, attorney and owner of the law firm, Maison Law, recommends Millennials pay close attention to their habit of using credit and how easy it is to do.
“I have had so many clients with debilitating credit card debt, and I believe it is because it is just so easy to purchase something when the funds are not immediately deducted in real-time,” said Gasparian.
This can lead to a bad habit and false sense of finances Gasparian warns.
“Millennials should be careful with such plastic means and direct their savings to other sustained investments and not credit card interest rates.”
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Explore Different Investment Options
Instead of just saving your money in a bank account, Standberry says Millennials should explore different investment options that can potentially give them higher returns.
These could include stocks, mutual funds, real estate or even starting your own business.
“It’s important to do thorough research and seek advice from financial experts before making any investments, so you have a better understanding of the risks and potential returns involved,” said Standberry.
“Diversifying your investment portfolio is also key to mitigating risk and maximizing returns.”
Maintain a Healthy Savings Rate
According to Brandon J. Galici, certified financial planner and owner of Galici Financial, for millennials to be successful at building wealth, they need to save/invest 10%-20% of their gross income.
Galici explained, “This will help them take advantage of compound interest as they still have many years before retirement.”
If your savings rate isn’t currently healthy, Galici offers a simple way to increase it without drastically cutting your current lifestyle.
“Start by increasing your savings rate by 1%. Here’s an example: If you make $75,000 per year, saving 1% would be $750. Broken down even further, that’s only around $63 per month or $31 per paycheck. Very doable!”
Once you’ve done this for a few months, he says to challenge yourself to increase it by another 1% (and make sure that you automate it).
“If millennials do these things, they will not only be building wealth for their future but will be able to feel confident with their current lifestyle as well.”
This article originally appeared on GOBankingRates.com: 7 Genius Things Millennials Must Do With Their Monthly Expenses To Build Wealth
