Broke Millennial summary

Money management isn’t rocket science. Sticking to a budget and saving for a rainy day is, after all, a pretty straightforward notion. Why, then, is it so hard to do? 

Well, just as “eat less” and “exercise more” are commonsense advice, this doesn’t automatically lead to good decisions when it comes to being healthy. That’s because compulsive behavior isn’t rational – there’s almost always a more deeply rooted issue involved. The only way to change is to unearth the reasons why you overindulge.

There’s no one-size-fits-all solution to taking control of your money. As we’ve seen, different people have different attitudes and hang-ups, and these can be traced back to their unique childhood experiences.

It’s no wonder, then, that one method will suit some people better than others. Take budgeting as an example. How you go about planning your monthly spend depends on what you hope to achieve. 

Generally speaking, your money pays for one of three things: fixed costs like rent, financial goals like saving for a house, and flexible spending on day-to-day living. In an ideal world, you’d give 50 percent of your net income to the first category, 20 percent to the second, and 30 percent to the third.

If you’re a millennial living in a major city, this might sound pretty unrealistic. Your rent alone probably claims half your salary – even before you think about utilities, loan repayments, or subway tickets.

The way banks display your account balance suggests that the money is just sitting there, patiently waiting for you to spend it. This makes intuitive sense. It’s your money, after all – where else would it be but in your account? 

In reality, the money you deposit in your account is used to make loans to other customers, and this allows banks to make huge profits. In return, the bank offers you interest in the form of an annual percentage yield, or APY.

Credit cards are an easy way to blow through your cash. Not only do you lose track of what you’re spending, but you also face a pile of bills with massive interest payments at the end of every month. 

That’s a pretty good reason to avoid credit cards altogether, right? Not quite.

What’s the single most effective change you can make when it comes to your financial behavior? Ask a personal finance expert that question, and you’ll likely hear these words: “Pay yourself first.” 

The phrase means that the first thing you should do with your paycheck is put a chunk of it into savings, rather than wait until the end of the month to see if there’s anything left. 

It doesn’t matter if it’s a student loan, consumer debt, or a mix of the two – when you’re in debt, you’re almost certain to get hit by an unexpected bill at one point or another. And if you’re poorly prepared for one financial crisis, you’ll be even more exposed to the next one. 

That’s why it’s so important to have an emergency fund to see you through to the next paycheck. It means you can avoid credit card debt and go right back to saving when things pick up again.