I am terrible with money.
When it comes to my spending habits, I have a major “YOLO” attitude; if buying something brings me joy in that moment, then I am all about it. My mentality has always been I work super hard for my money, and you can’t take it with you when you are gone, so why not spending, right?! WRONG.
Each month, I always make enough to pay all my expensive, but instead of, saving the rest, I find more things to buy. Between my daily iced coffees, frequent “just because” shopping sprees, and weekly happy hours with friends, my $$ does a Houdini-style disappearing act.
I make a decent living, so there is no reason why I shouldn’t have a nice sized savings account. My New Years Resolution is to save at least 10% of every paycheck. Declaring this on the blog, is my way of staying accountable.
I recently read these statistics from the AICPA and Ad Council on the spending habits of female millennials, and to say the least, they aren’t very reassuring:
· 40% still need money from mom, dad or other family members to make ends meet
· 42% used a credit card to cover necessities in the past year
· 34% were contacted by a bill collector in the past year
· 25% missed a credit card or other debt payment
Furthermore, a survey from AICPA and Ad Council, showed that about two-thirds of millennial women compare their financial situations to their friends’. Ernie Almonte, CPA, chair of the AICPA’s National Financial Literacy Commission explains the stats, “For the Facebook generation, pressure to compare and compete has never been greater. But status today is no substitute for security tomorrow. Long-term financial stability is more satisfying than any outfit you’ll wear, meal you’ll eat or gadget you’ll carry.” Yikes, I am totally guilty of that! To help offer solutions, they have created a new series of PSAs at Feed the Pig.
I have also enlisted the help of an expert to get some advice. We spoke with Erin of the blog, BrokeMillennial. If you don’t already check her out, definitely add her to your reading list. She has a weekly column called Frugal Find Fridays, which consists of some pretty epic advice that we can all easily incorporate.
1) I saw that you live in NYC, and are still able to save a decent amount of money. That is pretty impressive. What is your advice to girls that are trying to make it in expensive cities?
My first piece of advice is to always pay yourself by putting money into savings. Whenever you get a paycheck, immediately put some of it into your savings account. Even if you can only swing saving $5 of your paycheck, it is worth developing the habit early on in life. If saving is habitual, you won’t think twice when you have enough money to put away a couple hundred (or even thousand) dollars. Ideally, you should be putting 10-20% away for emergencies.
In addition, if your company offers an employer-matched 401(k), you should be contributing up to the matched amount. If you don’t, you are essentially throwing away free money.
2) What are 3 things that millennial girls should do to ensure financial security?
Start saving early. Millennials aren’t predicted to retire until 73 because of our average student loan debt. If you have any interest in not being a stereotype, then start contributing to a 401(k) or Roth IRA as soon as possible.
Set a budget, and subsequently evaluate the ROI (Return on Investment) of all purchases. That isn’t to say you shouldn’t indulge on the occasional latte or manicure, but decide if what you’re buying is really worth your money. Be careful of habitual purchases that can quickly add up, like eating out for lunch everyday.
Learn how to cook. That goes for men and women! Knowing how to cook means you are able to drastically reduce your food budget because you won’t be eating out so frequently.
3) How do you organize your finances? For example, do you just have a savings account? Or do you put money into a Roth IRA, 401K or other kind of financial account?
First, I do a weekly check in of all my accounts, and set a budget for the week. I don’t itemize everything, but I have a general idea of how much I can comfortably spend throughout the week (or month) after my bills, rent and groceries have been paid for.
When I get a paycheck, 10% has already been contributed into my Roth 401(k) and a small sum goes towards my pre-tax transit card to buy metro cards. 10% is high, because my company only matches to 5%. However, I made the decision to save as much as I can when I’m young and don’t have the financial burden of supporting a family. After that 401(k) contribution, I automatically put 15% into my savings account.
My next step is to put money away for rent and utility bills. Then, the remaining amount is what I can use for the the month.
In addition, I do have a mutual fund I am in the process of contributing to, but that comes out of savings and not my paycheck.
I understand that saving 25% of a paycheck can seem daunting to someone living an expensive city like New York. Taxes already take about that amount, so I essentially live off of 50% of my gross pay. The reason I am in the position to save so much is because I’m debt free. I selected my college based on scholarship offers, which is explained in this post. For those battling student loans, I encourage you to find the percentages that allow you to contribute to a 401(k), or in the absence of a 401(k), a Roth IRA, and a personal savings account.
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