The Situation:
Currently, most of us Gen Y folk either a) can’t find a job and were forced to move back home after college, b) are doing internships for little to no money, c) are working at a low paying job to get by as you begin to climb the career ladder, or d) went straight to grad school in order to avoid the economy.
The good news is that although the situation may look bleak, we are not the first (nor will we be the last) to start from the bottom and work our way up. Furthermore, we are generation of movers and shakers who are open to dialogue and not afraid of change.
Now for the bad news; as a whole Gen Y has cultivated terrible financial habits and is being faced with many hurdles that our parents didn’t have to deal with. Namely, employers cutting back on everything from retirement to healthcare, the inexistence of job security, paying off baby boomer debt, lower salaries with a higher cost of living, and a recession.
(If you want to read more about the financial traits of our generation and the challenges we are facing check out this article from USA Today.)
The Problem:
I know that I can speak for a lot of people when I say that I had horrible spending habits for quite some time. Spending habits, that even now after college, I am having a little trouble getting a handle on. In fact, as I look over the last week’s expenses I am pretty sure that Jamba Juice has received a nice piece of my last teaching paycheck. While this is a huge improvement over my previous expenses commonly known as bar tabs, clearly there is still room for improvement.
Now let’s talk about debt. While I personally have not accumulated debt and make sure to pay off my credit card every month, the same cannot be said for most of the Millennial Generation. According to Fidelity Investments, Gen Yers carry an average of 3 credit cards with 20% carrying a balance of $10,000 or more.
Clearly we need to start making some changes.
The Solution:
Obviously, us Gen Yers are being faced with a multi-faceted problem. There is not going to be one fix all cure for this mess that we find ourselves in. It will require some serious changes in our financial habits that will take time and patience to cultivate.
However, we have to start somewhere, and we can start by actually saving money.
5 Money Saving Tactics for Gen Y
1. Monitor your spending this week.
Do you hit up a Starbucks every day before work? Do you brown bag your lunch or find yourself eating out? How often are you running up a tab at the nearest bar? These kinds of habits are just a few of the major culprits in our inability to save money.
This coming week, try to pay attention to what you are spending your money on. I did this by walking around with a little notebook and writing down what I spent. At the end of the week, assess the damage to your bank account and see where you can make some changes.
Of course, you don’t have to completely give up on your the upside down caramel machiatto with skim milk and whipped cream. Maybe you can cut it down to a couple of week, or, if that is still too painful for you try simplifying your order (even that makes a difference).
2. Open Up High Yield Savings Accounts
We need our money to make money for us. Unfortunately, many of the brick and mortar banks have terrible interest rates for your accounts. I mean, 0.4% interest for a savings account, really? Then they have the audacity to charge you ridiculous fees.
Check out some web only savings accounts like Emigrant Direct or FNBO Direct. These banks usually have much higher interest rates than brick and mortar banks. They also have zero fees and allow you to open up several different accounts so that you can see exactly what you are saving for.
3. Cut your check up into percentages.
Our generation is full of part-timers, permalancers, entrepreneurs, freelancers, and interns. As a result, the amount of money we get in our checks may vary month to month.
The only way to really make sure you are saving enough money is to cut your check into percentages and allot money into the appropriate savings accounts. For example, 20% of every check I make goes into a high yield savings account that I will use in order to eventually move out. Another 10% goes into an emergency fund and 5% goes into a fund I will use to open an IRA.
Your percentages of course will depend on how much money you make and your expenses. For a detailed explanation of how this works I highly recommend picking up The Money Book for Freelancers, Part-Timers, and the Self-Employed. The tactics mentioned in this book are pretty much good for anyone.
That’s all for now. Keep a look out for tactics on how to tackle debt.
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Great tips. I fall into category b, where I am interning for no money because I can’t find any other job. It sucks because it means I can’t save money. We really inherited a crappy economy.
I was in category a for 6 months, which ended up forcing me to learn how to make money online. It ended up working out in my favor because even though I am currently in category c, I still make some extra income online.
They should just dub our generation as hustlers because that’s what we’re going to end up doing lol.