The age of decadence by baby boomers has seemingly passed. Young people have a different perspective on life as they went from high school to dorm room to career than their parents. With careers not being what they used to be, a lifetime job is no longer available or wanted. How your parents scrimped and saved pennies in jars in order to do repairs or vacations with cash is also long gone. Today young people live without the same education about saving that their parents had. Part of the problem was the simple age of decadence in which they grew up in.
The reason the young are not saving as much as the older generations is compounded by their optimism or blind ignorance. There are many young people that do not have budgets, do not conduct a financial review of their finances and truly have no idea where their money goes every month. Part of this is due to the belief that they will always get a job or have their parents to fall back on.
This type of attitude is the first step to serious debt and is a common scenario seen by Low Income Loans Australia. They have seen a steep increase in young adults under the age of 25 looking for consolidation loans – Budgeting and creating an emergency fund is common advice they provide to those with no or poor financial skills.
Start Keeping Track
With a number of apps that can help you keep track of your expenses, with the right bank, app and mobile phone you literally do not have to do any work. Simply connect all three and purchase everything one month on this system and you will really see where all your money is going. This knowledge is the first step in changing from a spender to a saver. If you never know that you spend $60 on Starbucks a month or $40 on ATM fees, there will never be a reason to change your habits.
Its knowing where the pain is coming from that will help you switch your habits. Instead of hitting an ATM for cash at a fee rate of $2.50-$4 every time, you could switch to an online bank that gives access to ATMs for free.
Start Budgeting, Start Saving
The only way to become a great saver is to start tracking your money and putting money into piles. You find out what you need to live on for essentials; rent, groceries, transportation, utilities and clothing. Then you put aside money for entertainment and start reigning in anything that does not fit within this plan.
Lastly you start by saving $25 a pay check and put it into a separate savings account that is not accessible by ATM. This allows you to build a “rainy day fund” or a “Fed up fund.” In either case the money is only ever touched when one of your essential needs is threatened, not for entertainment or for treating yourself.
The best part about this strategy is that when you have saved 2 months’ pay, you can start looking at ways to invest the money short term and start actually making passive income.