Earlier this week, I had a chance to attend a seminar entitled "Adulting 101."
The concept was pretty simple: teaching millennials how to grow up and get their finances under control, all under the guise of a fun, casual wine tasting.
As we sampled everything from Malbec to Prosecco with sommelier Dave Stansfield, financial wizard Chantel Chapman was on hand to gently nudge us in the right direction toward money freedom. A lot of what she had to say hit home, and since I plan on getting pretty heavy-duty with my budget come November 1st, the timing was perfect.
Personally, I think figuring life things out is always better with a team, so I'm here to share the best tips I learned with you guys so that we can all get our bank accounts in order, together!
Whether you're in college and just figuring out this grown-up thing (and just starting to accumulate those beloved student loans), or you're in the workforce and living paycheck-to-paycheck, there's something in these tips for all of us. Shall we?
Let's Talk About Credit
You've Gotta Pay More Than The Minimum
Making the minimum payment on your credit card is doing you any favours whatsoever. The balance isn't changing, and you're just paying useless interest while your debt languishes at the exact same amount. Make a monthly effort to add significantly to the minimum, and try your best to pay it down to zero and keep it there.
Leave Your Credit Card At Home
A credit card is not an accessory, it's a tool. When used right, it can help you build your credit score, but used as a treat for crap you don't need, it's gonna burn you bad.
The smartest way to use your credit card is for automated payments, like your monthly Netflix or phone bill. Set it up to auto and then pay down the balance each month. You'll be building your credit by using it, but keeping your debt under control because you won't be spending on superfluous extravagances.
Stick To An Imagined Limit
Credit bureaus see a credit card at its limit as a big red flag. Chantel advises to set an alternative limit for yourself: 70% of the balance. For example, if your credit card's limit is $1,000, try to never go over $700. You'll still have that buffer zone for emergencies, but the debt won't be ringing alarms at the bank (and your payments will be smaller, too).
Settle Those Outstanding Debts
That parking ticket from 2011? Yeah, that one. Take care of it already, because it's hurting you. Same goes for that phone bill you never paid after you canceled the contract, or whatever other seemingly minor debt you've accumulated in the past.
Take care of these before they accrue interest and damage your credit. And once you've paid them down, make sure you contact the credit bureau to let them know it's taken care of and ensure it's removed from your file. You've got this thing under control!
Be A Better Budgeter
Live Like A Little Old Lady
Everyone's seen the little grandmas at the grocery store with their chequebook and pen and probably had a little chuckle, but they're on to something. If you've ever glanced at your online bank statement and wondered what the hell that $12.75 drugstore charge was (three bottles of conditioner on sale?), you need to be writing. down. every. purchase.
Keep track of what you're spending your money on, because chances are, once you see all those cheapie lipglosses, smoothies, cab fares, whatever it is, written down and adding up ... well, you'll realize that maybe you don't need all that stuff after all.
Set A Budget And Stick To It
This is something I personally need to get under control. When I add up what I'm making and subtract all my necessary expenses (rent, credit card payments, phone bill, groceries, student loan payment), I realize I should have around a grand left over every month. And yet, where does it all go?
If you're designating specific amounts to everything, and I mean everything, you'll be much more on top of things. Make a line item for the $5 you spend at the laundromat every week. If you absolutely love Dior mascara, set aside the cash for it every 3 months.
But make sure you know exactly where your money is going, and just how much you have to devote to every single item. As long as you're realistic with what you've got to spend, you'll breathe easier when the bank statement shows up.
Go On A Debit Diet, Make Cash Your Friend
ATM cards are just so convenient. Stick it in a machine, punch in your PIN, and ta-da, approved! You bought a thing. If you're anything like me, these little transactions probably happen many times day, and suddenly you've lost track of what you've spent and (gulp) what exactly the balance of your chequing account looks like.
Give the card a break and use it for withdrawals only. Set a weekly cash allowance, take that money out on Monday, and once it's gone, it's gone until the next Monday.
While it'll be sad at first to spend your last dime, it will get you thinking better about where your "pocket change" is going and help you to allocate funds better, and eventually you'll be ending the week with a decent billfold left over.
For The Love Of All Things Holy, Stop Eating Out So Much
This, ladies and gents, is my absolute worst offense. When I get busy, I shrug off grocery shopping as a nuisance and order take-out or dine in for nearly every meal.
On a daily basis, this means my morning coffee, breakfast, snacks, lunch and usually dinner are all purchased from restaurants. This is embarrassing, and it needs to change.
While I doubt everyone is as bad as me, getting into the habit of buying pre-made salads, late-night slices of pizza, and $2.50 daily Americanos is wasteful and irresponsible.
- Coffee can be made at home in a French press (or even a coffeemaker with a timer, if you want to sleep in) and brought to work in a travel tumbler.
- A healthy lunch can be thrown together with things like sliced raw veggies, a bit of hummus, a hardboiled egg, a Babybel and some mixed nuts. Get creative!
- Do you like fancy cocktails? Buy the ingredients and learn how to mix them yourself at home when getting together with friends and enjoy a proper Old Fashioned without the $11-per-glass cost. (I mean, realizing the local watering hole charges $5.50+tip for a $2.90 can of PBR is enough to make anyone want to stay home.)
- And when it comes to dinner? Even cheapie ramen can be glammed up with some crispy seaweed sheets, sauteed mushrooms and a few inexpensive herbs and hot sauce.
Cheap and delicious recipes abound online. Even if you cook just 3 dinners a night at home, you'll be saving around $200 a month. That's bonkers.
Throw that money in a high-interest savings account and watch it grow into over $2,500 by the end of the year. Take yourself on a trip, pay off a credit card or make a massive student loan payment. Just stop buying takeout coffees everyday, OK? (This is as much a mental note to me as it is to all of you.)
Set A Daily Spending Limit
Look at how much you make a month, subtract all of the previously mentioned budgetary needs (bills, savings, groceries, transportation) and realistically determine how much you can spend a day comfortably without living outside of your means.
Once you have that daily number, stick to it. Whether it's $5 or $50, don't go outside of that limit. Take it out in cash on Monday and break it up into daily amounts. If you spend less than your limit on any given day, carry the excess over into a separate account (or throw it in a jar) and feel free to use that for whatever you choose on the last day of the month — you deserve it!
And finally ... please don't spend more than you make. Just don't.
While social media offers up a heavy dose of FOMO that makes us think we have to keep up with our peers, it's just not worth it to waste valuable credit on a trendy dress or a meal at a popular restaurant we can't afford.
We're all at different stages in our lives, and we all have different limits. If we live within our means and make do with what we have, we'll come out of our 20s and 30s with less debt, great credit, and the opportunity to afford the things we really need and want: a car, a home, a college fund for our future kids, a comfy retirement fund.
It may seem scary or far-off to think about those things now, but time flies, folks, and Future You is going to thank Past You someday. Share your best financial tips in the comments!