We all make bad spending choices from time to time, and millennials are no exception. According to Business Insider’s financial planners, there are two things millennials overspend regularly.
Fortunately, there are still some methods they share to help their younger clients limit their spending and get one step closer to wealth.
1. Spending on utilities
Team Hewins financial planner Clari Nolet says millennials are used to a culture of instant gratification. As a result, they tend to spend a lot on utilities, making things quick and easy.
For example, food delivery applications bring meals to your home and quickly. These services can be much more expensive than cooking at home or even preparing your vegetables and food. And they can cost you a lot of money in just a month.
Financial planners say you can spend money on these essential expenses, but it becomes a problem when it doesn’t fit within your budget or prevents you from reaching your financial goals.
Your emergency fund or savings should be your priority before considering how much you can or should spend on these extra services.
“I think most people, not just millennials, don’t have a budget and don’t know how much they spend. They have an estimate in mind. And if you ask someone what they spend, they can give you an answer, but if you go into the details, you’ll see that they’re fooling themselves. They’re usually spending more money than they think,” says Nolet planner.
She also recommends that everyone have financial goals so you know what you’re saving for. This will help you determine a discretionary spending budget for utilities once you’ve completed your priorities.
One of the first things to consider saving is an emergency fund that can cover your expenses in the event of a job loss or emergency. Due to the COVID-19 pandemic, you should first aim to save the equivalent of about 6 to 12 months of living expenses.
2. Spend on value items
The view of financial planner Asad Gourani from AG Wealth Management is less concerned with the day-to-day expenses of millennials. He is more focused on recurring and inflexible bills, such as mortgage or lease payments, buying a new car in installments. These types of expenses will be harder to cut out once you’ve bought them.
“After years of working almost exclusively with millennials, we’ve found that the big problem is that younger generations tend to spend more on experiences than previous generations, which is a very positive thing. as long as it’s within their reach,” Gourani told Insider. “But the problem often lies in uncalculated spending habits and lack of planning, especially for high-value items.”
Gourani’s approach is to work with clients to help change their mindset, so they’re less likely to feel constrained by budget constraints, but in reality, still not overspend.
This means you’ll need to develop a conscious spending plan that you’re comfortable with – and within your capabilities, and then automate payments, such as a home. accommodation, utilities, student loans, or preparing for future retirement.
The money left over after your top financial priorities lets you spend it comfortably without the “guilty” feeling.
They have to change?
Older millennials understand the importance of being smart in order to keep up.
According to Kimmel, some millennials may use websites like Reddit to assist them find methods to improve their lives if they feel they are falling behind on their life goals. Approximately a quarter of older millennials polled by CNBC Make It said school loans have hampered their ability to buy a home, save for emergencies, and plan for retirement.
She continues, “We see this on Reddit with a lot of the investing subreddits where millennials are actively seeking ways to make more money and to get caught up financially. Some of the ways [millennials] use social media are largely to become more educated and to figure out ways to hit financial goals in ways that weren’t possible previously.”
Keeping up with emerging technologies will also be vital to stay competitive in the employment market, as an increasing proportion of adults find themselves needing to work past 65 to retire comfortably, according to Kimmel.
Additionally, she claims that parenting children in a high-tech age requires parents to grasp the platforms their children use.
McCay notes, “Because I’m a parent and I have three little kids, I need to continue to learn these technologies because I need to see what they’re doing,.” Her oldest child has requested to create a TikTok account. “Millennials are in this interesting time where we started a lot of this stuff, and even though we may not want to continue, we have to because of our kids.”
Zitron believes there will be a generational transition in the future when a product is released, but he doesn’t feel it has happened yet. “I think the reason we’re not seeing more category creation is that what we want is here,” he says. “What we’re limited by is technology”./.