Budgeting Your Money: 5 Budgeting Tips for Millennials
Budgeting Your Money: 5 Budgeting Tips for Millennials
Most millennials feel comfortable creating personal budgets, according to a survey of over 500 Americans. While the millennial generation faces hardship with an uncertain job market and economy, they’re finding solutions through budgeting tips and tricks.
“Living in Los Angeles as a millennial can be fun. And expensive.”
The costs of social gatherings, uncomfortable rideshares, and overpriced rent takes its toll – especially when financial freedom seems always one step away.
The Washington Post coins millennials like Goodiel as “the unluckiest generation in U.S. history.” As the coronavirus pandemic impacted the economy in March and April, employment for millennials plummeted by 16% – faster than other generations.
According to Pew Research Center, millennials are the largest group in the U.S. workforce, meaning that their lives are more likely to be disturbed by economic instability. While millennials are better educated, starting families later, and make up a majority of America’s voting-eligible population, they face more disadvantages than other generations after living through two economic recessions during their prime earning years.
Millennials, however, are smart about their money and how they save. Many manage mounting student loan debt while tackling other pricey decisions such as car payments and travel experiences. Millennials are budget-savvy and make more calculated moves when it comes to budgeting and spending.
The Manifest found that nearly two-thirds of millennials feel comfortable creating personal budgets and consult outside sources to understand the benefits of budgeting.
In comparison, 36% of millennials feel uncomfortable creating their own personal budgets.
If you’re a millennial that’s ready to make smarter budgeting decisions but are unsure where to start, you’ve come to the right place.
We surveyed 502 Americans about their budgeting habits. Focusing on the millennial generation, this guide provides budgeting tips and tricks for consumers looking to build a strategic plan for the future.
- 64% of millennials feel comfortable developing their own budgets. Across different generations, millennial comfort creating personal budgets is the highest.
- Millennials spent most of their paychecks on housing (66%), educational expenses (9%), and health insurance (6%) in June, showcasing that they’re smart with their spending habits.
- Staying within a budget can be difficult. Only 11% of millennials follow their budget.
- Thirty-eight percent of millennials find Excel and worksheets the most effective resources for their budgeting, and only 20% use apps to make their budgeting decisions.
- As a result of the COVID-19 pandemic, 27% of millennials are saving more money from their paychecks.
- Nearly 50% of millennials made less than $50,000 last year. With uncertainty in the job market, millennials must make practical budgeting decisions.
- Each month, 27% of millennials make a new budget for themselves. This shows that millennials are thinking critically about their expenses, making changes to benefit them in the future.
5 Budgeting Tips and Tricks for Millennials
- Track Your Spending
- Use Your Budget to Increase Savings
- Set a Budget, Even Without a Fixed Income
- Create Spending Limits So You Can Make Charitable Donations
- Have Flexible Budgeting Goals
1. Track Your Spending
Think back to seven months ago. Your spending habits were probably completely different.
Your budget may have included a summer trip to Italy, bachelorette or bachelor parties, and concert tickets to see your favorite artists.
Now, you’re likely spending more on books that will transport you to imaginary exotic locales, puzzles as a form of entertainment, and music subscription services.
In June, millennials were practical with their paychecks, spending a majority of it for housing, including utilities and rent (66%), education (9%), and health insurance (6%).
While those priorities are in line with other generations, only 11% of millennials stay within their defined budget.
Despite feeling comfortable creating budgets, millennials get off track when it comes to following a budget.
Warren Wong runs a newsletter that inspires people to shift their mindsets and take control of their lives.
Wong finds that the fear of missing out is his biggest obstacle with budgeting.
“I think that, too often, we get overwhelmed with the media and what we see on Instagram,” Wong said. “We see our friends doing all these cool things and that makes us feel like we’re missing out.”
To combat his frivolous purchases on Amazon, Wong sits on impulses by splitting his paycheck between his budget and investments.
Yaya Zhang, owner of Own Your Future, a business blog for millennials and Gen Zers, stays within her personal budget 95% of the time.
“I set a principle-based budget instead of number-based,” Zhang said. “The principle is to always live as far beneath my means as possible, and the numbers each month vary.”
Goodiel sets a monthly budget that factors rent, utilities, insurance, car payments, food, and debt. After that, she has a category for miscellaneous expenses such as entertainment and clothing.
One purpose of a budget is to keep track of your spending. But where should new budgeters begin?
First, take a trip to the past. Collect all of your account statements and see where your recurring payments are going. Rent payments are important, but ordering Thai food every Friday night is not.
Once that is done, categorize your expenses. Identify fixed expenses that are the same each month, such as insurance or utilities, and find expenses that can be adjusted, like clothing.
If all of this is giving your brain a workout, try using a budgeting app. They’re a great resource for money management.
While nearly 40% of millennials (38%) use Excel or other worksheets for their budgeting, 20% swear by apps like You Need A Budget.
Budgeting apps can give users an overall picture of their spending habits. With push notifications and other alerts, the apps make it easier to track expenses. Some apps allow you to track bank accounts, link credit cards, and monitor withdrawals.
Goodiel uses her budgeting app for everything.
“I track everything I spend. If my grandma gives me $5, I add it to my app,” Goodiel said. “If I buy a slushie from 7/11 – in the app it goes.”
If I buy a slushie from 7/11 – in the app it goes.
If you find that Excel is more your speed, services such as NerdWallet provide free templates that are easy to set up.
These templates are easy to personalize and can quickly give users information on their specific budgeting situations
Once all the ground work is complete, it’s time to identify where there's room to change and save.
2. Use Your Budget to Increase Savings
A global pandemic certainly puts things into perspective. More than one-third of millennials (37%) felt financially unprepared for the coronavirus pandemic.
When COVID-19 first hit, Jon Matlock, a financial coach at The Good Steward Financial Coaching, and his wife worried about their income.
“We stashed away as much cash as we could and eliminated all unnecessary spending,” Matlock said. “We did away with eating out, entertainment, and fun money.”
Matlock and his wife both work at nonprofits, which have experienced significant effects because of the pandemic.
More than one-quarter of millennials (27%) are saving more from their paychecks as a result of the COVID-19 pandemic.
The pandemic has limited millennial spending by pausing student loan payments and decreasing travel. Nearly 40% of millennials moved back home as a result of the recession, cutting back the money they spend on housing.
Mason Miranda, a credit industry specialist at Credit Card Insider, suggests saving as much as 10% of your paycheck.
“To start organizing your budget, write down how much money you’re bringing in and how much is going out,” Miranda said.
To start organizing your budget, write down how much money you're bringing in and how much is going out.
While putting together your new and improved budget, think about the benefits of budgeting, which include less money spent on frivolous expenses and more money saved for long-term financial goals. Try putting 10% of your paycheck toward savings to start.
When your expenses are all laid out, consider which expenses you can stop. Is your gym membership going to waste? Do you need that candle subscription service?
One simple way to cut down on a necessary expense, like groceries, is to make a shopping list and avoid venturing to Whole Foods or Trader Joe’s with an empty stomach.
Of course, we should all have room in our budgets for fun, but try to have at least one month's salary saved before splurging on the latest Apple device.
3. Set a Budget, Even Without a Fixed Monthly Income
While the pandemic has seemingly stopped the world, the job market is still turning. As people lose their jobs, more people take up independent occupations and become part of the “gig economy.”
The gig economy refers to common temporary jobs with short-term commitments. Nearly 50% of millennials earn extra income in addition to their current employment through side hustles and engaging in the gig economy.
Last year, nearly 50% of millennials made less than $50,000.
More than 30% of millennials made between $25,000–$49,999.
“Even though I work for myself, my income is variable, and my work is freelance,” Azory said. “The hardest thing about starting a budget is not knowing what my income will be for any given month.”
Azoury plans his expenses each month because of his business. But he’s noticed that he orders takeout more frequently at the end of the month when invoices are due.
As a professional musician, James Bullard makes as much as he works. Because of the nature of his work, he tries to stay as close to his budget as possible, focusing on necessary expenses like food and rent, but that’s easier said than done.
“The hardest thing about starting a budget was figuring out how to stick to it with an unstable job,” Bullard said. “I need to reach a certain quota to make ends meet.”
Bullard used to worry about having a certain number of gigs to meet his goals but now realizes that performing isn’t the only way to make money as a musician.
Budgeting apps have been a helpful resource for Bullard, causing him to look back at his expenses.
4. Set Spending Limits So You Can Make Charitable Donations
With all of your necessities taken care of, start thinking about where your money can make an impact.
As they spend less money on social experiences, nearly 3 out of 4 millennials donated money during the pandemic.
We’re living in an unpredictable time: Along with the coronavirus pandemic, there’s been an increase in exposure to the social injustices within the U.S.
Millennials are finding different outlets to show their support beyond social media. Is it donating to a local political race? Is it through supporting a charity in need? Is it donating to bail funds?
These outlets for relief can become recurring payments each month – many organizations have that option for their donors. Not to mention that some charitable cash contributions are tax-deductible.
COVID-19 has had an impact on Zhang’s spending habits. She finds herself spending less on designer clothes and goods and more on charity.
“It’s made me appreciate how little I need and how much I can be grateful for what I do have,” Zhang said.
Adding a new item to your budget might seem daunting, but think about the impact your money could have.
Once your bad spending habits are replaced with the good, start setting your goals for the future.
5. Have Flexible Budget Goals
Your budget doesn’t have to be set in stone. Our survey found that more than 1 in 4 millennials (27%) create a new budget for themselves once a month.
Erin Reeder, founder of The Incremental Mama, a resource for mothers, is a mom to four kids.
Because of COVID-19, Erin and her husband weren’t spending more on gas, preschool tuition, and school lunches. They started investing in themselves again by paying off their grad school loans.
“I think the place to start with budgeting is getting crystal clear on your motivation. Do you want to save for a down payment or pay down a debt?,” Reeder said. “Budgeting takes willpower – it’s tough but easier when you’re motivated.”
Budgeting takes willpower – it's tough but easier when you're motivated.
The incentive to stay within your budget and save increases if you have a goal. Are you saving up for something big like a wedding or pet or something small to make your remote working station feel more like home?
No matter what your goal is, set it early. Make a chart or mark off days on your calendar for motivation.
Jonathan Hess, a financial coach, and his wife prefer to look ahead.
“Because we know our budget only requires 70% of our take-home pay, we can decide how we want to use that remaining 30% like saving for a vacation or a down payment on a nicer home,” Hess said.
It’s good not only to think big when it comes to your budgeting goals but also to think smartly.
Your budgeting journey isn’t over once you have everything in place – it’s just beginning.
“When you start, keep it simple,” Miranda said. “By keeping it simple, you’ll make the daily, weekly, and monthly habits of tracking your spending less of a nuisance.”
Make sure you’re factoring in your income and predict any challenges that may arise. Being prepared is the first step in executing your budgeting goals.
As the millennial generation’s future remains unpredictable, ensuring that you have realistic steps in place is the perfect antidote.
Ready, Set, Budget!
As the economy continues to ebb and flow, the millennial generation remains impacted. Millennials need to accommodate growing change through revising and settling on a budget that will benefit them in the long term.
- Start by tracking your spending – list out your priorities and necessities.
- Think about what you can give up – cut back on expenses that can put a damper on your wallet.
- Find new areas to spend your finances on – think about how you can impact the world in this uncertain time.
- Set yourself up for success - critically think about your long-term and short-term goals for budgeting.
Lastly, be realistic about your budget. It takes time to find what works for everyone. There isn’t a one-size-fits-all solution.
Once you have these budgeting tips and tricks under your belt, you’ll be in a better position to make smarter investments.
About the Survey
The Manifest surveyed 502 people across the U.S. from July 7-July 11, 2020.
41% of respondents were female; 44% were male, and 15 % didn’t specify their gender.
Baby boomers and older make up 32% of respondents; Generation Xers make up 28%; millennials make up 22%, and Generation Z makes up 4%. 14% of respondents didn’t reveal their age.
Respondents are from the South (33%), Midwest (32%), West (23%), and Northeast (11%).