You probably understand the importance of saving up for bad weather days regardless of the generation you were born in. An urgent requirement for a significant amount of money can strike at any point in time, and it is important to stay prepared for such an eventuality.
Even if such a requirement isn’t urgent, you likely have a list of things you want to buy at some point – a list that includes purchases like perhaps a luxury car, a house, or even your favorite laptop.
These wants cannot be fulfilled unless you work for weeks, months, or years toward saving up for them. As a millennial, you are likely in the middle of your professional career currently.
Whether you are in a lucrative job or looking to get a new one, you need to start planning and saving for major purchases that you intend to make in the future. Here is a quick gander at some of the steps you can take in order to achieve this.
1. Start Making Cuts
Many millennials, regardless of how much they are earning, will make the mistake of spending hand-to-mouth and not saving up at all. They take each month as it comes and keep spending on new, inconsequential items.
While this is great to provide some temporary place and happiness, it doesn’t bode well for your long-term goals.
If you are living paycheck-to-paycheck, stop doing so. Everyone has the capability to make cuts in their budget, whether minor or major. Each of these cuts will help you save up a little every month – savings that will compound into significant amounts over the years.
2. Have Emergency Funds
Everybody needs an emergency account for times when things go south. When creating such an emergency account, it is important to decide the amount of funds in this account since the cost of services keeps changing.
This will also depend on where you live and the prevailing costs of services such as health and insurance at your location.
In general, try to have at least a few months’ worths of salary saved for an unexpected rainy day. This will provide you with an important safety net in times of need since expenses are likely to be really high during such times.
3. Diversify Investments
For large investments such as buying a house, you often need the kind of money that requires a passive income.
Even if you are looking at home financing options and want to pay a fixed amount toward your loan every month, you might prefer it if this amount came through passive modes of making money.
These passive modes can include interest and returns from the market. While interest from a bank is fairly certain but low, returns from the market can be high but are also risky.
For this reason, it is essential that you diversify your investments among different modes to maximize returns and minimize risk. This strategy allows you to make a decent amount of passive income.
4. Low-Cost Funds
Regardless of the type of entertainment you consume, you are likely bombarded by ads of funds that are supposed to convert your money into many times the principal amount over a period of time.
However, the costs attached to the funds often mean that the actual profit you realize is minimal. As such, it is always essential to read the fine print before you invest in any type of fund.
Many funds have significant charges that are proportional to the amount that you invest. As you amount compounds, so do the charges. Hence, be on the lookout for low-cost funds that provide returns while charging a nominal fee only.
5. Do Not Get Fancy
Given today’s brand culture, it can be hard not to want to splurge on your favorite gadgets, clothes, or even restaurants.
However, when you have bigger targets in mind and bigger purchases you intend to make, splurging can be detrimental to your goals. Resultantly, it is best to limit small purchases that cost a significant amount.
Rather, you may want to look for more economical alternatives to your favorite brands. Maybe a different, cheaper gadget has similar features to the one you want to buy, or a smaller restaurant serves better food than a larger, big-name counterpart.
You might need to research your options, but it will always be worth the time.
6. Get To Know A Financial Planner
Given the hundreds of saving options you have, it can be hard to understand where to invest your money if you want the best returns. You might have to do a significant amount of reading if you wish to become a true expert regarding even your own personal finance.
As a mid-career professional, it is unlikely that you will have the time for a lot of reading and research. Hence, you would do well to establish a relationship with a financial planner.
Financial planners are experts in the fields of personal investment and can help you save up for big-ticket purchases. Your personal financial planner will provide you great options based on your personal circumstances and the amount of risk you are willing to take.
7. Defer Optional Purchases
Whether you are looking for dental financing options for an optional cosmetic surgery or a new renovation for your home – if you can defer it for later or do without it, do so.
When you are living your life with a spending mindset, you might often need to defer all the optional payments and purchases that you can
Deferring optional purchases also provides you with more funds to invest or save. The greater your invested sum, the greater your compounded returns will be.
As a millennial, it can be hard to stave off the temptation to go to town on your salary and spend it all on what you want.
But when looking at your larger goals, it is important to ignore such feelings and keep saving a fixed amount for your future. As the years pass by, you will finally have enough to achieve your targets!