Living isn’t as cheap as it used to be. The cost of college tuition, housing, gasoline, and other goods have greatly outpaced wage increases, even if you account for inflation. But if everything is more expensive, the job market is tough, and it’s difficult to gain financial know-how, how on earth can you become financially stable when you’re just starting out?
While it might seem like a pipedream, by following these tips, you can get on your way to becoming financially stable.
1. Become financially literate
Knowledge is power. This is especially true in terms of your personal finance. If you are making money, but don’t have a plan to manage it, chances are that you are wasting significant effort and investment power.
The first step to becoming financially stable is, well, understanding what that really means. Many of us think that financially fit folks simply make enough to do everything they want and have some left over for savings. While making boatloads of money sounds great, it isn’t a prerequisite for becoming a financially stable millennial or student.
Financially fit folks plan how to meet their financial goals in realistic ways, save, invest, prepare for emergencies, budget, strategize how to pay debt, and organize their finances for the future. Most adults don’t know much about these topics. Fortunately, learning about personal finance is as easy as beginning to read articles like this and chatting with financial consultants.
2. Create a budget
One of the key foundations of financial stability is balancing spending with earnings. One strategy is to use the 50-30-20 rule to begin strategizing your spending and giving your money a purpose.
According to the 50-30-20 rule, about 50% of your income should be earmarked for essentials (i.e. essential groceries, but not coffee out with friends), 30% for fun and flexible spending (i.e. getaways, extra clothes, and other indulgences), and 20% for meeting your financial goals (i.e. paying off debt, saving, and investing). Balancing each of these categories is essential to meeting your needs in the present, providing for yourself in the future, and enjoying a good standard of living.
3. Prioritize income
While making boatloads of money isn’t necessary for becoming financially stable, prioritizing your income is still important.
Diversifying your income has loads of benefits, from protecting against job insecurity, safeguarding your savings, reducing financial risk, and even providing you an opportunity to develop a hobby into a money-maker. For many millennials, it isn’t realistic to expect that their entry-level job will enable them to meet all of their financial goals and maintain the lifestyle they want.
The “side-hustle” culture is extremely popular for workers of all ages and can allow you to create an additional stream of income for yourself. If you earmark your freelance income for a particular purpose, like paying off debt or building an emergency fund, you can begin to meet your financial goals faster or make extra cash to indulge yourself while staying on track with your budget.
4. Manage education-related costs
Whether you’re attending a community college, private or state school, or online classes, education is a major expense for millennials. While college can be a financial headache, it can also represent a financial opportunity if you take advantage of campus resources and knowledge, seek money-making and money-saving opportunities, and cultivate your financial literacy.
Consider the following tips to begin managing education-related expenses:
Use the classic tricks of the trade
Buy used books, live with roommates, freeride on student discounts, furnish your apartment and fill your closet with the help of GoodWill, rideshare, organize low-cost social activities, keep your grades up to qualify for merit-based incentives, and take advantage of free campus services and events (especially those that come with free food!).
Seek institutional support
Ask about and apply for internal and external scholarships and grants regularly (many universities and academic organizations have “hidden” funds in individual departments), look for work study opportunities, get a jumpstart on paying off loans, seek assistance and research or academic programs available to financially-struggling students.
Ask upperclassmen for their money-saving tips, meet with a financial aid adviser, ask professors for advice, and dedicate time to improving your financial literacy with on- and off-campus resources.
In terms of gaining financial stability, millennials have the odds stacked against them in many ways. Higher costs of living, the job market and education-related difficulties, and limited preparation for financial literacy have created an uphill battle.
However, building financial stability is within reach for millennials and students. Begin with these personal finance tips and you’ll be on your way to creating a financially stable life for yourself and your loved ones!