“Try to save something while your salary is small; it’s impossible to save after you begin to earn more.” – Jack Benny
As someone in their 20s, we understand how challenging it can be to navigate an economy with high housing costs, rising grocery and medical bills, and various other expenses. The financial struggles of today can make future planning seem daunting.
The foremost reason to start putting your pennies back in the purse is obviously to ensure a comfortable and secure retirement. With inflation at 8.5% in July and an increasingly strained economy, it’s crucial to adopt effective budgeting strategies to secure a better future.
So, what can Gen Z and millennials do to save effectively during their 20s?:
Create a Budget
Having a budget is essential for managing expenses and avoiding overspending. Here are some budgeting methods to consider:
- Zero-Based Budget: This approach allocates every penny of your income, aiming to end with zero balance. This doesn’t mean spending all your money but directing any leftover funds towards retirement savings, debt repayment, or long-term investments.
- Pay Yourself First Budget: This method prioritizes savings by allocating a portion of your income to retirement funds, long-term savings, and debt repayment before addressing other expenses.
- Envelope System Budget: This system involves setting aside specific amounts of cash for different expenses in labeled envelopes. For example, you might allocate a certain amount for groceries and keep it in a designated envelope, which helps track and manage spending.
- 50/30/20 Budget: This popular method divides your income into three categories: 50% for needs (like bills and rent), 30% for wants, and 20% for savings.
Build An Emergency Fund
An emergency fund is crucial for covering unexpected expenses, such as a broken appliance or car repairs. Invest in a high-interest savings account to grow this fund over time.
Increase Your Income
Consider earning extra money through freelancing, part-time work, or turning hobbies into income streams. Doing what you enjoy while making money can be both rewarding and financially beneficial.
Cut Unnecessary Expenses
Manage your spending by canceling unused subscriptions, limiting dining out, preparing homemade meals, and seeking better deals on groceries. Keeping a close eye on your budget can help you save significantly.
Stay Consistent
Consistency is key to successful saving. Develop a habit of regular saving and set specific goals to stay on track. The more disciplined you are, the faster your savings will grow.
By implementing these strategies, you can navigate the financial challenges of today and build a secure future.
