A recent study found that nearly half of Americans would not be able to come up with $400 in savings if they had an emergency or needed the funds. While it may be a sad statistic, I can tell you with absolute certainty that it's pretty spot on. As a Certified Financial Planner, I work with all sorts of people to help them better understand their finances and what I see time and time again are that we are a generation of under-savers and over-spenders.
Why is this happening?
There are two main reasons you can point to - student loan debt repayment and the recession in 2008 that has caused lasting effects on your job and paycheck.
Student loan debt now stands at $1.35 trillion dollars (and growing). When you're trying to pay off your student loans, it's difficult to figure out how to save money, and yet it's super important that you do. If you spend all your time paying off student loan debt, you can jeopardize critical retirement sayings years and then spend the rest of your working years trying to play catch up. If student loan debt is keeping you from saving, there are lots of payment options that might help you reduce your loan payment and allow for saving money.
The recession of 2008 and 2009 hit many of us hard. If you were lucky enough to keep your job this might not be the case, but the unemployment rate of 18% for young people in 2010 quite possibly had a dramatic impact on your level of savings. Those who lost their job in the recession might’ve delayed milestones like getting married, buying a house or starting a family. Many millennials moved back in with their parents just to make ends meet.
With that said, saving money is something that we all know we should do, no matter how much student loans, credit card debt, or other factors complicate things, but many people struggle to figure out just how to save money. While it may seem simplistic – you just spend less money – when it comes to the active practice of saving money, it takes strategy, hard work and time to build a healthy savings habit. All of this is possible. The best place to look for savings is right under your nose in your bank account. If you take some time and figure out how much money you are spending on things like eating out, entertainment, shopping and more, you can quickly set some goals for yourself and create savings without having to earn more money.
When we talk about savings there are always a lot of questions that come to the surface like:
- How much of my income should I be saving?
- Where should I put my savings?
- Should I pay off debt or should I save money?
- What if I can’t save any money? (If that’s you, learning some budgeting tips will help)
- What exactly am I saving money for?
What the experts say
With all of these important questions looming, I sought out advice from some popular financial experts (including myself) to dish out money-saving tips on how you should start thinking about your budget.
Millennial Money Man, Bobby Hoyt
"The easiest tip I give my readers for saving money or paying off debt is to put their financial goal as line item number one on their budget. When I was paying off my student loans, I made my debt payment the first thing I did every two weeks when I got my paycheck – even before I thought about rent or any other monthly expenses. It sounds crazy to put those goals above your living expenses, but it forces you to focus on your saving or debt payoff goals above everything else that you use your money for that month!"
The Finance Bar, Marsha Barnes
"My top money saving tip is to become a master of your lifestyle. When I finally understood what I wanted for my life my spending and saving habits shifted. Ask yourself what do I view for my life (beyond things). As you master what you want for your life, you'll automatically notice what will appear to be a seamless transition to saving more. At that moment your "lifestyle" will begin to match your ‘financial lifestyle.’ Don't forget to ask the question. ‘What do I want for my life?’"
Whitney Hansen Coaching, Whitney Hansen
"Pretend you have a 20% tax imposed on your life and you have to save. If you set it up automatically, you will never miss saving. The problem stems from when we view saving as optional or a luxury. If it's an option, we won't do it. If you don't feel like you can save 20% of your income towards your future, then I would challenge you to get creative and find extra ways to save. Most of the time, I see people complain about not having any money for savings as they are sipping fancy drinks and on their iPhone. Try to make room in the budget for your future."
What do I think?
On my site, Your Millennial Money, I feature all sorts of money tips, however the most requested tips are always around the question, "How can I save more money?"
My advice? Before you can start saving money, you need to take a few steps back (which will propel you forward). Knowing your numbers is essential to building a strong savings account. What I mean is that you know exactly how much money you are spending each month and on what expenses. If I asked you, "how much money did you spend last month on eating out or groceries?" would you be able to tell me to the penny? When you know what you are spending it's easy to find ways to cut your expenses and set goals around your spending.
For instance, if you were budgeting $500 for groceries each month and you were spending $700, but had no idea that you were overspending, you could easily make changes and suddenly have $200 for savings. Rather than getting stuck in the mindset of never being able to save, try getting familiar with your numbers and I can guarantee you there will be at least some money there to devote to savings."
These tips all seem to revolve around a common theme - getting debt under control is super important and setting goals around your spending will, in the long run, help you master savings. With savings, it's all about starting somewhere with however much money you can pull together. For some people that might be $25 and for others that might be a much bigger sum of money. If you get into the habit of making savings a priority it becomes easier and easier every month, rather than a stressful event, and in no time you will begin to see your savings balance grow.
Image: Rob Pongsajapan