Apparently, more than 30% of Gen Y are planning to retire between the ages of 31 and 40.
It’s an awesome goal to have, but you ain’t gonna achieve it without some serious money management (or a very rich relative).
If you’re Gen Y and hoping to retire early, you need to get your finances in order NOW. Here are our top money management tips to help you make better financial decisions and build good spending habits along the way.
- Ditch the creditWe’ll keep saying this until it sinks in: credit cards are not doing you any favours. Even if you pay off your cards every month so you don’t incur any charges, simply having one can change the way you shop. Studies have shown that people who use credit cards tend to shop more impulsively and pay less attention to prices – oops!
- Pay off your personal debtDo you know how much debt you have right now? If you add up your credit cards, personal loans, and even student debt, you might be in for a shock.Just making the minimum repayments each month is good for the lenders’ finances, but not for your own.
Getting your finances in order means paying off all your debt as quickly as you can, and that requires a plan. You might have to cut back a bit in the short term, but this discipline is worth it to know you’re in control of your money and putting it to good use.
- Make a spending planTied into your debt repayment plan should be a solid spending plan. You can’t save money unless you’re spending less than you earn.Having a spending plan will also highlight problem areas that you need to work on to develop more healthy spending habits – whether it’s making your own lunch to take to work or cutting back on your nights out.
But this doesn’t mean you’ll be stuck tracking your spending for the rest of your life. Think of it like training wheels on a bike; you don’t use them forever but they help you learn how to take control and gain independence. Once you’ve been following a spending plan for a while, you’ll find that good financial choices become second nature.
- Give yourself a buffer
Whatever your current financial situation, make sure your budget includes a contingency fund. You might feel financially secure now but you never know what’s around the corner. Your buffer will help soften the blow if you’re hit with a setback like unemployment or illness.As a general rule it’s a good idea to have 3 months’ income set aside, although this amount will vary according to factors such as your family situation.If you’re setting out on a new business venture, this contingency fund is particularly important.
- Have some goals to aim for
It’s much easier to stick to your spending and saving plan if you have some concrete goals to aim for.What will you do with your extra cash once you’re debt-free? Start your own business? Invest in something cool? Or first treat yourself to a holiday or those shoes you’ve been eyeing up for ages?Whatever your ultimate goals, keep them in mind so that when you’re about ready to give up on your careful money management, you’ll have something to keep you motivated.
- Don’t sell yourself short
However you make your money – through your own business or by working for a company – are you earning as much as you could be?You may not be in a position to ask for a raise right now, but you can seek guidance from a mentor and keep educating yourself to open up new opportunities in the future.
- Get insured Insurance: boring but super important. You know you need car insurance, but what about health and life insurance too? If you’re renting a property, is all your stuff insured?It may seem like a waste of money now, but illness, injury or loss of income can seriously set back your financial goals and affect your family’s quality of life.
Plus, you’ll sleep easier at night knowing you’re protected should anything unexpected happen.
If you’re already doing a couple of these things, good on you. But don’t stop there; there is always more you can do to help your money grow. The more you work at it now, the better off you should find yourself later in life. And who knows, maybe you will be ready to retire before you hit 40.