Here's How Millennials Should Manage Their Money

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Think Smart if You Want to Save Your Dollars

We learn as children and young adults that managing money is no easy task, and that it comes with a great responsibility. In this new era, where the digital and the physical worlds merge into one, it is almost impossible to keep track of everything there is to know about the art of money and finance. Spending money, once you have it, is no science; it is relatively easy to pay your bills, purchase a new coat, go on vacation, or buy the new Google Pixel 2. Making an informed decision about your finances based on your unique situation takes some more thought and care, and it is definitely not something that everyone is gifted with. Many people make elementary mistakes when dealing with their physical or virtual money, but a couple of Google searches will keep you on the right track, away from financial disasters. Here are some smart choices that you need to be making in order to avoid money headache.

Save for Emergencies

Many of us know how it is living from paycheck to paycheck – there’s no shame in that. Millennials especially are being dealt a bad hand; we are expected to take care of the crippling debt from our college days and everyday bills with salaries that cannot meet these needs. However, consider this: being in a situation where you desperately need money, but don’t have it, can hurt you in more ways than one. If you don’t put money aside toward your emergency fund, which you can slowly build, you might end up in a situation where you’re forced to apply for a loan, borrow money from questionable sources, or max out your credit cards. Paying off a loan is extremely difficult if you’re struggling financially to begin with, and even though saving is equally challenging in the first place, especially if you don’t make much, it is crucial to have something to fall back on in a time of need. This way, you won’t have to risk having to sell your car, move to a smaller place, or get yet another credit card.

Never Make Late Payments

Bills and fees are already too complicated, and high enough as they are. However, once you miss your payments, you’re in for a series of additional fees which can slowly but surely add up. Consider all your monthly payments – car loan, mortgage, HOA payments, rent, phone bill, credit cards, internet, and more, and then take into account all the due dates, which possibly vary. Surely, it can be quite challenging to keep up and pay everything on time. If you let the number of bills overwhelm you and confuse you, you’ll be in for even more fees. Trust me, it doesn’t feel good to see late fees pile up on your payments, especially when you’re tight on money already. That’s why it’s crucial to have alerts and reminders: maybe set up a recurring reminder in your Google Calendar, or print out a checklist of all your bills and magnet it onto your fridge. Whatever works, just make your payments on time. The money you save on late fees can be significant; use it towards a date at the movies, or treat yourself to a new piece of clothing or gadget. Keep in mind that bad credit history doesn’t only mean that you’re paying late fees left and right, it means that your credit score is badly affected, which may prevent you from having a prosperous future.

Save For Retirement

Retirement seems too far away for many of us, but that doesn’t mean that we shouldn’t be thinking about it already. The sooner you start saving for your retirement, the more you will earn in interest. If your company hasn’t already given you a 401k presentation or information booklet, reach out and find out what is offered to you as an employee. It might be tempting to take the money you earn and buy a new car or go on vacation, but you don’t want to be struggling in your old age. Also, if you barely make it to the higher tax bracket, it is a good idea to contribute more to your retirement plan, which will deduct from your taxable income and drop it into the lower tax bracket.

Don’t Overspend

We’ve all experienced an impulse buy here and there. Yet, in case it happens often, to the point that it hurts your finances and prevents you from paying your bills, it’s a problem that needs to be addressed. Take it slowly, and put thought into every purchase. Do you need another pair of running shoes if you already have 10? Don’t purchase boxes or cans of food that you can’t finish – don’t be wasteful. Don’t invest into a car if you’re unsure if you can make future payments. And if you really just can’t stop shopping, take baby steps. Before going into a store, do research and see if you can get a hold of coupons or cash back offers. That way you can save some money, and still afford things that you truly need. It is so important to plan ahead, whether you’re financially comfortable or not. If you plan to purchase something in the future, or go somewhere in a couple of months, you need to stop yourself from buying something that’s not valuable or necessary. Prioritizing is crucial to budgeting.

Don’t Be Neglectful

It is very easy to not pay attention to what is going on in our bank accounts. All we need from them is our money, and once we’re done making payments, many of us don’t make the time to check if any suspicious activity is going on. If you’re not careful about your money and personal information, you could easily fall victim to scammers and fraudulent activity, which can cause you a lot more headache than checking your bank account activity regularly. Never log into your bank account via an open wireless network, even if you think your data is encrypted. It is advised to change your passwords from time to time, and make the new ones strong too. Never communicate your Social Security number via e-mail or by phone – be smart and alert!

Buy Health Insurance

I understand that buying health insurance is no easy endeavor – it is very expensive. Apart from obvious downsides of not being covered, like the inability to have regular checkups or coverage in case something happens, not having insurance also comes at a cost. Obviously, it is extremely expensive to go to the doctor and have a procedure done without insurance, but also consider penalties for not being insured. This penalty is fancily labeled the individual shared responsibility payment: if you decide to go uninsured for more than 3 months, you’ll be paying 2.5% of household income or $695 per adult/$347 per child, whichever is greater. You will pay this fee for every month you, your spouse, or your tax dependents do not have health insurance, and you will pay it when you file your federal tax return for the year you don’t have coverage. Do you still think it’s worth it not to look into health insurance plans?

Report Your Income to IRS

This is supposed to be a given – every sensible and responsible citizen should be paying their taxes regularly. If you fail to file a tax return, or fail to pay taxes by the deadline, you will face penalties. For example, if you filed your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty was $205 or, if you owed less than $205, 100 percent of the unpaid tax. The penalty can otherwise be as much as 5% of your unpaid taxes each month, with a maximum of 25%. Late payment penalty is generally 5% of your unpaid taxes monthly, but can also built up to 25%. Moral of the story: even if you can’t pay – file! Don’t play with Uncle Sam.

Keep Your Future Children in Mind

If you are someone who plans to have children in the future, it is important to realize that your current financial decisions can affect your children greatly. Deciding to have a child shouldn’t be impulsive, and you definitely need to put it off if you can’t afford to take care of another human being. It is never too early to start saving for your children’s college, because by the looks of it, it won’t be getting any cheaper. Opening a separate savings account for a college fund is a good idea. This will give your children security, but also teach them how to be responsible with money.

Communicate with Your Partner

Not just about your relationship, but the money also. It is difficult to discuss your finances with other people, as it’s very personal, but your partner should be familiar with your financial situation if you want to have a healthy relationship. If you live together, it is important to communicate how much you can contribute toward rent, mortgage, or bills according to your respective incomes. Figure out what works best for you by talking it out and making a structured plan of who pays what and how much. If you happen to be currently unemployed, ask your partner for emotional, and if necessary, financial support, but also do your best to get back on your feet and contribute. Even the biggest of loves can be tainted by money problems, so be open, communicative and proactive!

Managing money is not easy, especially if you’re young. There are so many things we’d rather think or worry about than saving, planning our future, or tracking our bank account. As we’re so dependent on money – it’s a capitalist world – it is essential to keep track of everything that’s going on with your finances. By being responsible, aware, and smart, you will achieve financial independence and reach your goals more quickly, thus enjoying the benefits of a well-organized, balanced, and fulfilling life.