Don’t be Broke! A Millennial’s Guide to Managing Money

When I was 17 years old, I could not wait to be ‘an adult’. The idea of independence seemed so glamorous: having a full time job, an apartment, and a life outside of my family’s home was the green grass on the other side of our ‘white picket fence’. But one thing that I did not account for was how hard it would be to figure out how to manage my money.

Before I moved away from home, I had no concept of budgeting, saving, or investing in my future. I was spending emotionally rather than logically and had no long term financial goals. I realized how badly I needed to take control of my finances when I got a credit card bill for over $700 – all of which had been spent on going out with friends. After this shock of my own mismanagement, I took financial literacy classes, read books on investing, and began to actively plan for my future.

Money is like a powerful construction tool; if handled correctly, you can use it to make something stable and useful. However, it’s misuse can cause complete chaos and destruction in your life. Here are some actionable guidelines to help you take control of your money now instead of feeling controlled by it.

Paying off your Past: Loans

Taking out loans has become a part of the ‘American way’. Loans are not inherently bad and can actually be necessary for funding parts of your future – like when buying a house for example. However, the financial institutions in this country have started marketing loans as a necessary part of everyday life, downplaying the implications of loans by normalizing them. Why do they do this?

Any time you take out a loan, you have to pay back a portion of that loan plus extra (called interest) every month for a set amount of time. For example, if you take out a $3,000 loan with a 5% interest rate and have agreed to incrementally pay back your loan every month for 3 years, you will actually have paid $3,236.86 by the time your 3 years is up. This interest is a big part of how banks make their money – around $171 billion dollars a year to be exact.

So how can you take out the least amount of loans necessary, or pay off the loans you already have?

  1. Strategize: If you are considering taking out loans for a product or service, think about what it is you really need and how little of a loan you can take out to get it. For example, do you really need a new car? Why not get a used one? How much money can you contribute to the downpayment before having to cover the rest with loans? Really take time to strategize around what you will be able to afford and what will cause you the least amount of financial stress before committing to a loan. (And make sure you get a loan from a reputable source with the lowest interest rate you can find!)
  2. Find FREE money: This mostly applies to college students. There is FREE money out there for the taking! Instead of committing to a bunch of loans off the bat, DO YOUR RESEARCH. There are thousands of independent scholarships on sites like Fastweb, College Scholarships, and Scholarships that you can apply for to help you pay for college. There are scholarships for EVERYTHING. Are you a woman? A man? Non-binary? LGBTQ? A minority? Gifted in one area or another? Left handed? Do your research and you will find multiple, if not hundreds of scholarships that you are eligible to apply for. Find scholarships inside and outside of your university that cater to your demographic and skill sets and apply for all of them.
  3. Pay off loans quickly: Are you stressing because you already have a lot of loans with monthly payments piling up? Financial expert, Dave Ramsey reveals a strategy to help you pay off your loans called ‘the Snowball Effect’ in his course ‘Financial Peace University’. Check it out here.

Protecting Your Present: Credit Card vs Debit Card, Paying the Full Amount, Building Credit, Automatic Payments, Budgeting

Bills can be incredibly overwhelming – especially because we tend to have so many of them! It’s no wonder we forget to pay some and start accumulating overdraft fees or spend more than we have on unnecessary things. But this causes anxiety that can be prevented.

Here are five ways to stay on top of your finances today:

  1. Budget: Before you pay for anything, set a budget for yourself. What are the bills that you KNOW you need to pay every month? Rent, insurance, cell phone bills, etc.? Prioritize these first. Also include a percentage you want to set aside for savings (which we’ll cover more in the next section). Then include the other things you need, like groceries, gas, supplies and the like into your budget. Finally with the money you have left, allocate specific amounts into categories like entertainment, eating at restaurants, and buying cosmetics and clothing. Once you have a clear idea of how much money you have to spend in each category on the day to day, you will be less likely to overspend. Try this awesome, free resource to make your first budget – Quicken Budget Creator.
  2. Automatic Payments: Setting up automatic payments for my monthly bills has totally saved me financially. I tend to be a very forgetful person, so remembering to pay all of my monthly expenses was not really going to happen. However, the beautiful thing about technology is that most of our bills can be managed and paid online. If you are living in an apartment complex that has a site where you can pay your rent, set up automatic payments. Do the same for your cell phone bill, insurance and internet. Use your DEBIT card to do this. The reason? You know you have to pay these bills, so taking the money directly from your account will make sure they get paid and prevent you from overspending on other expenses. *NOTE – Do NOT set up automatic payments for your credit card bill. It’s important to look over your credit card bill before you pay it to make sure that there are no expenses you don’t recognize, and then pay the bill when everything checks out.
  3. Use your debit card or cash more often: A debit card is one that takes money directly from your account when you make a payment. A credit card is one that stores up a month of your transactions and then charges you the full amount at the end of the month. The more you can use a debit card and cash, the better. When we pay with cash, we understand we’re losing something, and will probably be more hesitant to spend carelessly. We tend to assign more value to physically giving something away rather than simply swiping a card. With a debit card, we are able to watch money leave our account with every purchase. We don’t see the actual effects of spending with a credit card until the end of the month, and by then it’s too late. Using cash and a debit card allows you to keep track of what you’re spending and will make you more conscious of the cost of what you buy at the time of the purchase.
  4. Building a good credit score: Having good credit is necessary to rent an apartment, apply for a loan, or qualify for some large purchases. Credit is basically a gage on how consistent you are at paying your bills on time. A good credit score gives companies selling to you the assurance that you will pay them for their services. Even though you want to use your debit card as much as possible, there should be certain things that you use your credit card for that you KNOW you will be able to pay off by the end of the month. For example, I travel on business quite often and get reimbursed by my company for my travel expenses. I use my credit card for ALL of those expenses. This way the money won’t be coming out of my account immediately, allowing me to receive reimbursement before having to pay my bill at the end of the month while simultaneously building my credit.
  5. Pay bills IN FULL: If you are at all able to, make SURE you pay your bills in full every month. Though it might feel like you’re saving money by paying the minimum amount on your credit card or other monthly bills, this prolonged payment adds interest and puts you in debt. Pay your bills in full as soon as you can to take that monthly burden off of your shoulders.

Preparing for your future: Investing and Saving

It can be hard to think about your future when you’re just trying to survive the present. But putting aside money for tomorrow could be what gives you the freedom to pay for unexpected expenses and also retire at a decent age years from now. Here are the two things you can do to financially prepare yourself for the immediate and more distant future.

  1. Savings: If you don’t really save your money, you’re not alone. Over 57% of Americans have less than $1,000 saved. However this lack of financial security can put you in a precarious position. What if you get into an accident that your insurance doesn’t cover? What if you get a larger than normal bill that you weren’t expecting? Would you be able to scrounge up a thousand or more dollars out of thin air? To prepare for the worst, it’s important to save. Experts recommend two savings accounts: an Emergency Fund and a regular Savings Account.
    • An Emergency Fund account is for just that – emergencies. This is money that you don’t touch unless you absolutely need it to pay for something you weren’t prepared for. For example, I had an unexpected doctor’s visit last month where I had to use money from my Emergency Fund Account. Because I had that money set aside, I didn’t stress over how I was going to pay my other bills that month. What a relief!
    • A regular Savings Account is where you put away money to cover predetermined bigger investments, such as buying a car or even taking that vacation you’ve been planning for a while. By building the funds up incrementally, you won’t need to compromise your stability to make bigger purchases or personal investments.
      1. How to save? – Personally, I would have a really hard time saving if it wasn’t done for me automatically. During your budgeting, figure out a percentage of your paycheck that you can save. You should be aiming for at least 10% – but if your budget won’t allow that much, just do as much as you can (I put aside 8% of my income). Then split that percentage into two. If you get your paycheck direct deposited, talk to your manager about how you can set a half of your predetermined percentage (4% of my paycheck) to go into your emergency account, and the other half (the other 4%) to go into your savings account, with the remainder going to your checking. If you get paper checks, you can set up your bank account to where anything you deposit into your checking account will automatically distribute your percentages into your two savings accounts. And that’s it! Then you will have money set aside without even thinking about it. Life is too unpredictable to not have a security blanket.
  1. Investing: I don’t know about you, but the thought of investing has always been a scary one to me. It all seems so complicated and I just don’t feel like I have time to think about it. But my mind started to change after I made it a point to ask older adults one simple question: “If you could go back and do something differently when you were my age, what would it be?” Without fail, every single one of them said that they would have started investing earlier. Every. Single. One. So there must be something to it. The first thing you should do as soon as possible is set up a ROTH IRA. This is like a 401(k) account (where you save for your retirement and can’t take out the money until you are a certain age) – however a Roth account means that the government taxes the money you put in from your income, rather than taxing the money you take out. This is good!! For example, if you put $4,250 into your Roth IRA account, you will not be able to deduct this amount from your taxes up front. However, after 35 years, even if you put NO more money into your account, and it compounds at about 3.5% each year (which is very low), you will have a whopping $14,167 that you can take out without having to pay income tax on the money you withdraw. Mind you, you would normally invest a little money every month into different investments that will grow at an even greater rate per year, so this number can be much, much higher (Want to make some calculations yourself? See how much your investments could earn by using this free Compound Interest Calculator). Starting to invest NOW (or the minute you are financially able to) will set you up for a future where financial stress is not part of the equation

I would HIGHLY recommend reading Tony Robbins’ book about investing called ‘MONEY Master the Game: 7 Steps to Financial Freedom’. This critically acclaimed book will teach you how to start setting yourself up for your future today.

Managing your money is one of the most important things you can do to prepare yourself for a successful future. By not having debt hanging over your head, learning how to pay your bills using automatic payments, not relying on credit cards, and investing in your future, you can be confident that even if life gets tough, your healthy financial habits and the security blanket you created for yourself will be enough to help you make it through to the other side.

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*Editor’s note – The information about the Roth IRA Accounts was edited to reflect accurate information.

Originally published November 12th, 2017 on