It’s official. We Millennials are better at managing our money than our parents and grandparents. Actually, 67% percent of young people follow a budget, compared to 55% of boomers. This is according to a survey from T. Rowe Price, which name the 18-to-34 year-old set the Money-Conscious Generation.
“When Millennials have the means to do the right thing, it appears that they often do,” Anne Coveney, a senior manager at T. Rowe Price
If you’re part of the percentage that follow a budget, congratulations. But if you’re among the third of the young people who is still not familiar with the B word, it’s time to get smart. Here are some ways to get you started.
The 50/20/30 formula
This basic formula is a good beginning to organize your spending into categories:
- 50 percent of your net income every month should go toward fixed expenses: rent, mortgage, housing costs, insurance payments, utilities, etc.
- 20 percent should go toward your financial goals of additional debt payments: emergency fund, new car, retirement…
- 30 percent can then be used on variable expenses like travel, movies, meals out, new shoes, you name it!
Of course, the first thing you might think is, “What if 50 percent doesn’t cover all my bills?” If that happens, take money from your “wants” to help your “needs”. The 30% (your day-to-day spending) is the most flexible and the easiest place to cut back.
Be the master of your budgets
Once you know how much money should be spent on each big group, the second step is to create and adjust budgets based on what you actually do. We’re talking about tracking your expenses here.
Apps like MoneyStrands will sync up with your checking and credit card accounts, making it easy to track how much you spend and in which categories, month-to-month or year-to-year.