Personal finance advice has changed quite a bit in the past forty years. Costs have increased on virtually everything, while available consumer goods are all around us. Plus, many of us are in a rush and outsource basics such as cooking, cleaning, and even walking the dog.
Millennials must be mindful about where their paycheck ends up. More than half of millennials are living paycheck to paycheck and 35% are still receiving financial assistance from family members.
While higher paying jobs are more attainable than ever before, especially for those with college degrees, the cost of living has grown exponentially higher than salary increases. A study from Pew Research reveals that between 1984 and 2009, income increased by $1,300 (adjusted for inflation), but it’s still not enough to offset the massive surge in living costs.
Although millennial wages are among the lowest of all age groups, here are a few ways to make your dollar stretch:
- Set aside 50% for the essentials. Make sure you have enough money to cover the basics like housing, food, transportation, and clothing
- Set aside 20% to either invest or pay off debt.
- The last 30% is discretionary spending. Use it to go out to dinner, catch a movie, or go shopping.
Once these numbers are estimated, they will give you a better estimate of what you can afford and how you should be spending your money. If you decide to get a second job, following these guidelines can help you live in a better home, get out of debt faster, and still make some extra money to spend on hobbies and interests.
Check out this infographic to learn more about these principles in depth. Regardless of your income, having a sound financial plan is possible, and it’s probably easier than you thought. All it takes is a little hard work and sacrifice.
Guest blogger Tiffany McAdams is a freelance writer and graphic designer for InvestmentZen who has an obsession with financing – she just got her first investment rental property and is eagerly saving up for a second. She loves the outdoors, especially skiing and kayaking, and has a knack for interior decoration.