How to Build a Basic Budget
Budgeting, where you track your income and expenses to determine how much goes where, is the second most underrated financial move among Millennials.
The whole point is to pull you out of the short term paycheck cycle and begin thinking about how you can get your larger goals done.
By tracking your money over the months, you can make sure you have enough left over to save money for long term stuff (or just emergencies), helping you dodge debts along the way.
Download a free online tool (Mint is my recommendation)
Put in all your financial information (monthly income, bills, expenses, and debt)
Identify the necessary things you have to spend money on (groceries, gas, etc.)
Look at what’s left and make a decision on how much you should save (see below for more advice) and how much you should spend on optional purchases (entertainment, subscriptions, going out to eat, etc.)
Rinse and repeat each month -- be consistent and be honest
Why Saving Early Matters
(Aka me restating what everyone is always telling you*)
When it comes to saving (especially for retirement or home ownership), it’s not a question of how much but how long. Pick your minimum number and stick with it.
Don’t get stuck in the “maybe I can do more later” or “I don’t have enough to make a difference”. Start the habit now and grow it later. Research consistently proves that as the best strategy.
*I wouldn’t include this if it wasn’t the most underrated financial move among Millennials
**Please start saving
What does $20 a month look like by retirement?
Investment Vehicles
Single Stocks + Cryptocurrency
The riskiest of all options, there is almost no guarantee you even make make money at all. Most likely, you will go even with stocks and lose your hat with crypto (imagine the above illustration but you’re riding blindfolded through Bird Box). This is not recommended unless you completely understand that you are gambling and are using expendable funds (money that only exists at step 4 of the budgeting process above).
Mutual Funds + Index Funds
Mutual and Index funds hit the balance between generating a good return (average 11%) with a fair level of reliability. For reference, mutual and index funds are designed specifically to be safe: they take large collections of stocks (index funds take huuge collections of stocks), bundle them all together, and sell you a very small piece of everything. That way if one stock goes down, it’s only a tiny part of the whole. That’s not to say they’re without risks, since the entire stock market can definitely go south (see the United States in 1929), but this is a very solid option overall.
Savings Accounts, CDs, + Burying in Backyard
With low to no return rate (CDs are ~3%, Savings accounts depend on your bank, burying is -3% with inflation), these are the most resilient, durable options in town. The main reason to have money in your savings account is to keep your money accessible in case of emergencies. CDs are also good for when you still need to be able to pull everything out without waiting. Burying, on the other hand, is the best choice for doomsday preppers, Ron Swanson, and pirates.
Recommended Posts
Intro To Wine
Basic Cooking
My Favorite Resource:
(I am not compensated or affiliated)
Art by Gagestudio
