10 Smart Money Habits For Millennials

  1. Spend less than you make

Making a habit of living on less than you make will help you reach your financial goals much quicker and easier. If you get used to this early, it will get you in the habit of saving more and spending less, allowing you to save for big purchases— such as a house or car — and put more money toward your retirement.

Spending less than you make will also help you avoid credit card debt. Using credit cards to build your credit can help prepare you for when it’s time to make one of those big purchases, but you have to make sure you’re doing it the right way. Here is a guide to understanding your credit score.

Spending less than you make requires you to pick and choose. Maybe you don’t go to every destination wedding, every group dinner or every girls’ night out. Or maybe you go to dinner, but eat before you go so you aren’t stuck with a big bill when everyone splits the check.You can have a social life without draining your wallet. Decide what’s most important to you and start saving for those things. In the long run, you’ll be glad you aren’t buried in credit card debt for tapas and hangovers you never wanted anyway.

  1. Track your spending

It’s really easy to lose track of how much you’re spending when you don’t pay attention. We’ve all had that moment near the end of the month when you go to check your bank account and you’re too afraid to look… But the good news is, if budgeting isn’t your forté, there are tons of free apps and websites that will manage your finances for you and keep you on track each month. They’ll also break down your spending habits for you, and that makes it a lot easier to see where you can cut back. If you get in the habit of really understanding your spending, budgeting for the near and distant future can be a lot easier.

  1. Save between 10% and 15% of your income

If you’re spending less than you make, then you should be able to start saving every month. Put some away in emergency savings — a fund you can easily access if a big unexpected expense comes up — and put the rest toward long-term goals and saving for your retirement.

The traditional rule of thumb for emergency savings is to have three to six months worth of living expenses in an account that’s easily accessible — for emergencies or situations like a job loss. When you aren’t making a whole lot of money, saving can be tough, but it’s always possible.

If you’re having trouble finding money in the budget to save, start with a small amount each month — maybe 1% – 5% — and work your way up.

  1. Reduce or eliminate monthly bills

Monthly bills can quickly eat away at your paychecks, so spend some time deciding which ones you need and which ones you can live without. When you take the time to pay attention and reduce your spending, you can drastically increase your monthly cash flow — simply by making just a few easy changes.

  1. Stop buying expensive coffee

That $2 (or often more) you spend on coffee every day adds up over time. If you’re buying coffee daily, making coffee at home can save you at least $50 – $60 per month — and a whole lot more over a year. There’s even a way to hack the expensive coffee machine you have at home and use cheaper brand coffee. 

  1. Don’t buy designer clothing at retail price

You never wear it as much as you think you will. There are so many ways now to buy designer clothing at discount prices, and seriously, no one will ever know (if you care) that you bought it on sale. Shopping at consignment shops can save you up to 90%, and that’s a lot of money back in your pocket. Check out sites like ThredUp, Gilt, Revolve and even the department store outlet sites can have some great deals.

If you like trying the clothes on first, and you’re up for a little digging, check out places like Marshalls, Nordstrom Rack and DSW for designer clothing at up to 60% savings.

  1. Start saving for retirement NOW

It’s so easy to think I’ll always have time to save later — but time is money, folks! The early you start saving, the more time your money has to grow — giving you a much bigger chunk of cash in the future.

And you don’t have to save a ton. Start with baby steps, increasing your contributions every month or even every six months — and the increases are so small that you won’t even notice the money missing!

When it comes to saving for retirement, your best bet is to have the money automatically deducted from your paycheck so you never even see it in your account. That way, you won’t miss it.

If you have a 401(k) at work, start saving money through automatic withdrawals each time you get paid. If your employer offers an employer match, that is essentially free money, so try to save enough to get that match.

If you haven’t started saving yet, it’s OK to start small. The best way to get started is to save $5 per month, then each month double your contribution. It may not sound like much now but it will have a big effect on bank account in the long run.

  1. Understand how to use credit cards

Using credit cards wisely can help you build up a strong credit score, which will save you a whole lot of money over time by getting you better interest rates on things like a car loan, mortgage and more.

“Get a small starter credit card account. Establish some on-time payment history,” says Bruce McClary, vice president of public relations for the National Foundation for Credit Counseling. “On-time payments are the single most important factor in a credit score, so you want to make sure you are making payments on time [and] don’t miss one.”

Bottom line: Use a credit card for small purchases that you know you can pay off before the due date. The single most important thing about using a credit card is making sure that you always pay it off IN FULL (to a balance of $0) and on time every month.

  1. Don’t spend all your money paying off student loans

If your student loans don’t have a high interest rate, spending all of your money to pay them off right now won’t save you a ton in the long run. It’s more important that you continue making your payments on time and put your extra money toward short-term and long-term savings.

‘There’s no need to rush with student loans. Save for retirement,” says Liz Weston, author of “Deal with Your Debt: Free Yourself from What You Owe.” “Hands down, there’s no better way to spend your money than putting it in a 401(k) or IRA.”

Plus, student loan debt isn’t considered bad debt — like credit card debt. So it’s more important that you continue making on-time payments, while you prioritize paying off credit card debt and growing your savings.

If you’re having trouble making your student loan payments, there are options to reduce the amount you owe each month — and even have your loans forgiven.

If you don’t qualify for any federal programs, you may want to consider refinancing your loans.

  1. Know how to protect your money & identity

Taking steps to protect your identity and your finances can save you a lot of trouble — and a whole lot of money— in the long run.

  • One of the best ways to protect yourself online is to never sign in to any website that has your financial or sensitive information using free Wi-Fi (there could be criminals watching and waiting to steal your info).
  • Always use different passwords for financial accounts that you don’t use for any other account.
  • Also, don’t hand out your Social Security number like it’s your phone number. Protect yourself by knowing where you should and shouldn’t give your Social Security number.