Personal finance can often feel overwhelming, especially for Millennials and Gen Z individuals dealing with student loans, the high cost of living, and housing market challenges. But just as any challenge can be overcome through skill development and persistence, so can your finances.
Here are five steps you can take to improve your financial situation, ranging from basic strategies to more advanced tips.
1. Create a Budget
Start by understanding where your money goes. You might be surprised by how much you spend on things like coffee. Once you know your expenses, you can rein in unnecessary spending and put money toward debt repayment or savings. Use online tools like the Government of Canada’s budget planner or similar tools from the U.S. Federal Trade Commission or the U.K. Money and Pensions Service to help create a realistic budget that aligns with your financial goals.
2. Boost Your Income
It’s tough to cut costs when essentials like food and housing are rising, but boosting your income can help. One way is to ask for a raise. Make sure to present quantifiable evidence of your work performance and rehearse your request with a mentor. If you’re unsuccessful, use the experience to improve your chances next time. You can also leverage a new job offer to negotiate a raise in your current position or, if needed, move to a new job.
3. Build Your Pension
While defined-benefit pensions (which guarantee a steady income in retirement) are less common today, it’s still essential to build your retirement savings. Check if your employer offers a defined contribution pension plan. If not, set up an automatic monthly contribution to an investment account via a robo-advisor. Consider investing in a diversified stock index or ETFs for long-term growth.
4. Steady Does It
Consistency is key. Once you’ve established automatic contributions, avoid the temptation to trade frequently based on market fluctuations. A buy-and-hold approach tends to outperform active traders in the long term. Even small monthly contributions will add up over time, and you’ll develop good financial habits as you see your account balance grow.
5. Imagine the Future
It’s easy to put off saving for retirement when it seems far away, but research shows that picturing your future self can motivate you to make smart saving decisions. Imagine what your retirement life will look like—how you’ll spend your time, your physical appearance, and the kind of lifestyle you want. The clearer you can picture this, the more likely you are to plan for it.
If you find yourself overwhelmed, a fee-only financial advisor can help analyze your situation and offer personalized advice. With the right strategies and support, you’ll be on your way to a more secure financial future. Financial stability is a journey that takes effort, but with dedication, you can overcome any challenge.
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