Money Management for Millennials: Simple Steps for Creating Long-Term Wealth

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Wealth-building strategies matter a lot to millennials—and for a good reason. This generation was born between the early 1980s and the mid-1990s, so the oldest are now in their early forties and the youngest are nearing the end of their twenties, placing them in the prime of their working years.

Millennials face challenges in growing their careers, income, and investments while saving for important milestones like homeownership and family planning.

The Struggle is Real

There are lots of reasons why millennials are struggling financially. The Great Recession hit while they were students getting ready for the workforce, and the global pandemic struck as this group got settled into their careers. The cost of living and housing has surged during their adulthood, and now it’s coupled with high inflation. And student loans are one of the most common debts for millennials.

So it’s no surprise that many millennials want to know how to manage money wisely to create long-term wealth. The good news is that small habits can, over time, build big savings.

The Beauty of the Budget

Budgeting is a valuable skill for everyone. Start by actively tracking your income and expenses with a personal spending plan.

What is the 20/50/30 Rule?

You may have heard people talk about the 20/50/30 rule or some variation, such as the 50-30-20 rule or even the 50-40-10 rule. Regardless of the order or proportion of the numbers, it essentially works like this:

  • Reserve 50% of your income for necessities
  • Spend 30% of your income how you choose
  • Transfer 20% of your income to your savings

Limiting your recurring expenses to a maximum of half of your income is recommended. However, adjusting this rule based on your financial situation is essential.

Bearing that in mind, here are ten top millennial financial planning considerations.

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1. Start By Learning

Reading a few personal finance books is a great way to begin. It empowers you to put your financial well-being into perspective.

2. Pay Yourself First

That means you should immediately put some of that money into savings as soon as you get paid. It’s as simple as that, and it’s excellent advice.

3. Automate Savings

Contributing to savings should be seen the same as other regular expenses, such as monthly rent. To that end, automate them the same way so that a certain percentage is sent to your savings as soon as you get paid.

4. Emergency Funds

One of your savings accounts should be a dedicated emergency fund. You should build it up until you have enough money to cover at least three months of expenses.

5. Retirement-Ready Savings

You should also earmark some savings for retirement. The earlier you start the better because compound interest lets you earn interest on interest so that your money grows more over time. See if your employer offers a company-sponsored retirement plan.

6. Savings that Stack

As you allocate money for savings, there are many different options you can choose from; high-yield savings accounts accrue more interest, while certificates of deposit (CDs) grant you the greatest interest, but you can’t withdraw until the term expires. Growing your investment portfolio is another good way to generate wealth.

7. Buy With Purpose

Many millennials strive to support purpose-driven brands that align with their values. You can leverage this as a saving strategy, as it can motivate you to think more carefully before making a non-essential expenditure.

8. Don’t Bleed Money

Along with watching what you spend, beware of all the unassuming ways you may be spending money without really noticing. It’s time to opt out of memberships or subscriptions you rarely use.

9. Careful with Credit

Paying by credit card—and paying off that credit card in full every month—is good for growing credit history, but it can also make it easy to spend money. By paying with cash or a debit card and automating your savings, your checking account will give you a more realistic sense of your available finances.

10. Help is Accessible

When in doubt, seek a professional who specializes in financial advice for millennials. Our advisors here at Citadel are always happy to talk savings strategies with you, supporting you at any age and every stage.

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