Financial advice straight from the Grownups

Keep your spending mindful and your savings mindless. That’s one key bit of financial advice for millennials from Karen Carr, a 27-year-old certified financial planner with the Society of Grownups, a personal finance education and planning company based in Brookline, Massachusetts.

Sounds good, but how do you go about doing that?

Almost half of millennials – a name given to those born between 1980 and 2000 – say they feel anxious or overwhelmed about their finances, according to a 2015 joint study from the Bank of America and USA Today Better Money Habits Millennial Report. And with 38 per cent of millennial debt attributed to credit card debt, according to October’s Experian Millennial Credit & Finance Survey, it’s easy to see why the young need some guidance. Here Ms Carr and other millen­nial-generation money experts share their suggestions on how savers early in their careers can enjoy the year ahead on a stronger financial footing.

Do a values check

First, think about whether the things you do and buy day-to-day reflect your values. “If they do, that’s going to make you happier overall, and you may find it makes it easier to save,” says Ms Carr. You may want to pick an expense category that’s particularly meaningful to you and keep it at the top of your mind. Maybe travel and experiencing other cultures becomes your “anchor expense”, says the personal finance author and So Money podcaster Farnoosh Torabi. To save for that, you’ll need to cut back on other expenses. Still, trade-offs will feel easier once you’ve identified a goal. Just keep staring at the pictures of beautiful (insert your dream country here) on your fridge door, smartphone and desk, she adds.

Don’t let a blown budget defeat you

A budget doesn’t have to be a set-in-stone spreadsheet that you either conquer or are defeated by every month. Think of a budget as a guide, not a straitjacket, says Ms Carr. If you spend too much in one category, cut back in another. Of the many new mobile budgeting apps available, from Mint to the UAE-created Wally, Ms Carr’s favourite is Level Money. She likes its high-level approach to budgeting, as well as its simplicity – it categorises money into bills, savings and everything else.

Put a price tag on your time

Young people tend to devalue their time, says Paula Pant, a 32-year-old real estate entrepreneur and the author of the blog Afford Anything. “A lot of the typical frugality advice comes from that mindset of clutching on to pennies at the expense of your time.”

For a quick calculation of what your time is worth, chop three zeroes off your salary and divide by two, suggests Ms Pant. That’s 40 hours a week for 50 weeks, so 2,000 hours a year. If you make Dh180,000 a year, your time is worth Dh90 an hour. If a do-it-yourself project takes less than an hour and saves more than Dh90, maybe it’s worth doing. The point is a mind shift. Think about what you could do with that time, something that would have a more profound effect on your future, says Ms Pant. The question to ask is: “If I chase my tail rather than chase that promotion, what future career potential do I sacrifice?”

Automate savings

Setting up a standing order to deduct a set amount at the start of each month to go towards a savings or retirement plan can put savings on autopilot. What you don’t see in your current account, you may not miss. Try a savings app such as Digit, suggests Ms Torabi. Its algorithm tracks your spending and income to figure out when you have excess money in your current account. When it determines that you do, it transfers to funds to savings.

Test your savings potential

A lot of people think their income magically matches their expenses, says Ms Pant. She challenges people to save 1 per cent more next month, no matter what you’re saving now. Then add an additional 1 per cent monthly over a year. “The benefit isn’t saving an extra US$50 a month,” she says. “It’s that you overcome that mental block of thinking you can’t save more than you already are.

Be creative about paying off debt

Paying off debt can be fun. Ethan Block, the founder and chief executive of Digit, advises freezing your credit card in a cup of water in your freezer. “Then start making payments to pay down your card,” he says. “So if you need them, you can access to them, but because the cards are frozen you won’t be able to access them for any impulse spending.”

* Bloomberg

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