As a ‘millennial,’ I constantly find myself on the receiving end of financial advice that’s either way over my head (tax-loss harvesting?) or seemingly impossible (how can I save half of my income when half my income is rent?). Many personal finance articles don’t exactly take into account the unique position my generation is currently in. Allow me to paint a picture for you:
- More millennials have gone to college than prior generations: Almost a quarter of 18- to 34-year-olds hold a bachelor’s degree or higher — but this education has come at a price. A whopping 71% of bachelor’s degree recipients took out student loans, the median debt hovering near $27,000. And we’re feeling the burn of those loans, too: A recent survey by MyBankTracker found that 30% of recent graduates would consider selling a body part if it meant getting rid of their student debt.
- We’re living in cities: Millennials currently reside in urban areas at a rate higher than any other generation. With this shift comes a higher cost of living and, as a result, less disposable income.
- We’re making less money than in previous decades. Despite high education levels, 18- to 34-year-olds are making approximately $4,000 less annually than the same age group did in 2000. Combine that with debt and a high cost of living and you’ll find that the average millennial has a net worth of negative $3,472.
- We’re delaying home and car ownership, as well as marriage and childbirth. According to a study by Goldman Sachs, 60% of 18- to 35-year-olds are renting, and 26% are still living with their parents due to rising housing costs. More young people are postponing marriage and kids, too, often because they want to dig out of debt or live on their own first.
Given these factors, it’s no surprise millennials are having a hard time following traditional financial advice. After paying for rent, utilities, transportation, food, and the occasional night out, many aren't left with much breathing room in their bank accounts to put money aside for retirement or to build up an emergency fund.
But what exactly can 20-somethings do to start saving more -- or at all? I spoke with several 18- to 26-year-olds living in different cities across the country for tips on how they manage to make it work.
1. Get a roommate or move back home
“Find roommates,” says Margeaux (23, Philadelphia). “Don’t get a luxury apartment to yourself, even if they are really nice.”
Splitting rent and utilities is one of the biggest ways to save as a young person living in a city. A study by SmartAsset found that in high-rent cities like San Francisco, New York, and Boston, having a roommate saves you $700 or more every month.
Of course, living with roommates is a personal decision that may or may not be right for you for a variety of reasons. But at the end of the day, the financial benefit is undeniable.
Another avenue to consider in the first few years of working and saving is to move back home. Sure, it’s not the most glamorous option and isn’t available to everyone, but living with Mom and Dad temporarily can help ease the adjustment of making it on your own.
Liz (23, New York) describes living with her parents as allowing her a “buffer” to spend the money she earns more freely. This added level of comfort, however, can be dangerous. Staying in the nest longer can make learning to fly more difficult — “it definitely has not helped me become smarter financially,” remarks Liz.
If you live with your folks, consider paying something in rent or a portion of the utilities, or decide on a number with your parents and put that amount into a savings account every month. Not only will this help you get used to putting rent money aside consistently, but you’ll pile up some savings to help jumpstart your eventual move away from home.
2. Opt for a low-interest credit card
When used correctly, credit cards are valuable tools that can help you build credit and practice useful money management skills. Many rewards credit cards offer perks like points redeemable for travel or cash back, but making these cards work for you takes diligence and planning (not to mention, many of the better cards come with an annual fee).
For your first credit card, consider opting for “something that’s not going to rack up lots of interest,” says Sean (25, Seattle). “The perks aren’t worth it if you’re only using your credit card in case of emergencies.”
Find a low-interest credit card to meet your financial needs -- look for factors like a 0% APR period, no annual fee, and free credit score services.
Already carrying a high balance on an existing credit card? Look into a balance transfer card that can help you start saving on the credit card debt you already have, and use the 0% APR introductory period to make faster progress on a debt repayment plan.
Don’t forget, simply calling your credit card company and asking for a rate reduction can lower your interest rate. It’s worth a shot: The worst-case scenario is that they say no, and the best-case scenario can save you a lot in interest charges over time.
3. Skip the Starbucks
I get it, there’s just something about that white and green Starbucks cup... and that something is just an excellent marketing team. In truth, spending $4 or $5 a day on a latte is running you upwards of two grand a year.
Instead, “Invest in a decent coffee pot and make your own coffee at home," says Colby (24, Austin). "Don’t waste your money on overpriced things you can make yourself.”
If cutting out money-draining habits is too hard, start out small and opt for a cheaper option. For example, ordering an iced Americano and adding milk is half the price of an iced latte, and tastes nearly identical. That’s a saving of $1,000 a year without making any big sacrifices!
4. Let the little things add up
“I’m a big believer in small savings adding up,” says Nick (25, Washington, D.C.). “Basic cable instead of the premium channels, turning off every light before I leave for work, not letting the water run if it doesn’t need to be used, showering at the gym instead of home, filling up my car when I’m in a cheaper area for gas, not getting guac’ on my Chipotle order... it all adds up.”
It might not always feel like you’re making leaps of progress financially, but remember that consistency is key. Small savings every day grow over time, and even more so if you’re putting the money you save in a high-yield savings account and letting the interest compound on itself.
You don’t have to drastically change your life: Listen to your dad and put on a sweater in the winter time instead of turning on your heat and racking up bigger energy bills, opt for generic brands whenever available (it really is the same thing), and don't fear leftovers.
I repeat: You don’t have to drastically change your life; just skip the guac’ and keep at it.
If you’re not creating breathing room in your budget on your own, try taking the 21st-century route and find an app that can do it for you. Here are a few to consider:
Digit monitors your spending habits and, when it determines you can safely afford it, transfers a small amount of money (typically between $5-$50 every few days) from your linked checking account to a special Digit savings account.
Worried about overdrafts? Don’t be. The company is so confident you won't miss the money they transfer that they have a no-overdraft guarantee. Plus, the app is free and FDIC-insured, so it won't hurt to try it out.
On every purchase you make with a linked checking account, Acorns rounds up to the nearest dollar and automatically invests the change into a diversified portfolio for you. You can customize your risk tolerance and adapt your investments based on personal preferences.
Acorns does charge a monthly fee of $1 for accounts under $5,000 and 0.25% for those exceeding $5,000. The app doesn’t charge you to make withdrawals or deposits, however, and never charges fees on accounts with a $0 balance. Acorns is also free for students if you sign up using your .edu email, so be sure to take advantage of that if you’re still in school! Check out our full review of the app.
Available both online and as an app, Mint helps you keep track of all your finances and create tailor-made budgets based on your income and spending habits.
Though this app won’t exactly save money for you, it can absolutely help you see where you money is going — an important first step toward saving. Mint also provides you with a free credit score as well as tips for improving your credit, a valuable resource for those just getting started.
6. Take public transportation
While taking an Uber around is certainly a more attractive option than the city bus, ask yourself if paying the premium for convenience is really worth it. Deborah (24, New York) says that as far as savings are concerned, “taking the subway is huge — at some point I was taking cabs everywhere and it was the biggest drain on my bank account.”
Sure, your commute may be longer (or shorter, depending on traffic), but if you can wake up earlier, you can save an average of $1,000 a month or more in a big city like New York or San Francisco simply by opting for public transit. Moreover, you can reap the added benefit of not having to search and pay for parking, spend money on gas, or risk getting a ticket.
Better yet, if you live in a relatively flat city, consider investing in a bicycle. You can usually find a reliable commuter bike on Craigslist or a solid new one at Wal-Mart or Target for under $200 — and it will pay for itself after a couple months of car-free living.
7. Brownbag Your Lunches
A Bloomberg study found that for the first time ever, young people are spending more on dining out than on groceries. Not only is eating away from home considered a social event, but time and convenience play a key role as well.
“After a long day at work, I’d rather not go grocery shopping and prepare lunch for the next day, so I eat out at a restaurant for lunch,” says Max (23, Vancouver), “I know it’s more expensive to eat out, but it’s my way of treating myself during the work day.”
So what can young people strapped for time do to save money on food?
Make it special. Rather than spending money out every day on a meal you can probably make yourself, designate a treat-yo’self day so you don’t burn out.
Instead of five days of $10 lunches (that, let’s face it, are getting old), take yourself out on Friday for $15 or $20 — you still save $30 for the week and enjoy your restaurant experience far more than if it was habitual.
I started doing this and surprised myself when after a few weeks, I stopped wanting to eat out on Fridays. The more I was getting used to cooking for myself and making meals I was excited about, the less appealing it seemed to drop $20 on that meal. Who knows, you may even surprise yourself with your creative culinary abilities!
Make the most out of it. When you do decide to eat out, make sure you’re getting the most for your dollar.
Skip getting drinks and stick to water. If you’re still a student (or still have your student ID), check for places that give student discounts on your meal. Check sites like Groupon and LivingSocial for dining deals in your area.
If you can’t give up going out cold-turkey, take small steps to be smarter about what you spend when you do.
8. Live life for yourself, not for your Instragram
“When I first moved to New York, I was a nervous wreck," says Emily* (24, New York). "I kept comparing myself to other recent grads from my college, and would get stressed out. ‘This person’s been published already!’ or ‘So-and-so has an apartment in Williamsburg (that their parents pay for!)’ or ‘This person’s already halfway done with their master’s degree in ___.’ I did what everyone told me to do, and it made me miserable.”
The heavy use of social media among young people makes it nearly impossible to avoid comparing yourself to others in your social sphere (or A-list celebrities and models for that matter). But Facebook profiles and Instragram accounts are curated to highlight the glamorous, and studies show that dwelling on friends' vacation photos and check-ins makes us feel worse.
Weighing your self-worth against others based on the limited information you have access to can be enough to send you on a destructive thought pattern — ‘How can this person afford to take a trip to Thailand? Am I not living my life to fullest? I should quit my job and travel, and figure out money when I get there.’
Instead of modeling your goals after someone else, decide what it is that you want, and set reasonable expectations for how to meet those goals.
If you’re looking to travel, for example, take time out, create a budget, plan a trip within your limits, and start saving for it. It might not happen this month, or this year, but creating and meeting goals will make you feel much better than staring at your phone and resenting others.
9. Know what you owe and budget for it
Creating an extreme bare-bones budget could mean going from 0 to 100... and burning out before you make any real progress. Instead, start out by being mindful of your spending habits and debts.
“Even if you have to go into debt, be aware of how much you owe, how much you're making, how much you're spending,” says Jordan (24, Los Angeles). “It can be a scary thing to look at, but it's better to know exactly what you're dealing with than to let it grow into a massive monster both in your head and in reality.”
Ian (23, Seattle), shares how he calculates his monthly budget on his current salary:
“I figure out exactly what my actual monthly income was, subtract my rent plus utilities, credit card payments, $60 a week for groceries, and about 20% for savings. Then I divide by both 4 and 31 to get a daily and weekly allotment," he says. "I try to consistently stay under my daily allotment during the week, so that I can spend more on weekends. If I find myself running low or going over, or am saving for something in particular (like a PlayStation 4, currently) I will try to take on extra shifts to raise the necessary funds.”
To create a basic budget, write down all your recurring monthly expenses along with all your projected expenses. For example, I create my grocery budget by figuring out how much I spent last month and seeing if I can reduce it by $10 or so dollars. Consistently doing so trims the excess fat off my spending and gradually gets me saving more -- without having to go cold turkey and cutting out the things I enjoy.
- Related: The Secret to Successful Budgeting
10. Get a side gig
Trying to live a life and save money on an entry-level salary is no easy task. If you can't find breathing room in your budget, consider taking on a side job. You can find a seasonal part-time job for the holidays to offset what you spend on presents, or try out one of these avenues depending on your availability and interests:
- Care.com: If you enjoy working with children, create a profile and start babysitting for extra cash flow. You don’t have to commit to anything consistent, just set your availability and see what’s out there! Sacrificing one weekend out of the month can earn you a hundred dollars or more.
- Rover.com: Much like Care.com, you have the freedom to set your own hours and choose how much you’d like to get paid... plus the added benefit of hanging out with dogs! If you’re great with animals and can find time in your week and room in your house to dog-sit, definitely consider giving Rover a try.
- Craigslist: Though you should exercise caution before agreeing to do a job for anyone, Craiglist can be a great option for part-time or even just one-time odd jobs. Just remember to never share personal information online.
- Poached.com: Have evenings and weekends off? Consider taking a part-time service job. Poached is an awesome resource for young people living in big cities with variable levels of experience. Upload a resume and you’ll have access to hundreds of openings in your area.
It might feel like the deck is stacked against you when you’re working a lot, making a little, and still trying to piece together some semblance of a social life.
To get yourself on the right track toward financial success, start small, be consistent -- and remain realistic. Challenge yourself with a budget, but don't set yourself up for failure. And acknowledge what living within your means really looks like: If you can’t afford to live in a major city just yet, consider moving to an area that’s friendlier to your wallet (or better yet, move to a place that pays you to be there).
Here are some more resources to help get yourself on firm financial footing: