The Thing You Should Do Before Investing: Budgeting

Most millennials feel comfortable creating personal budgets, according to a survey of over 500 Americans. While the millennial generation faces hardship with an uncertain job market and economy, they are finding solutions through budgeting tips and tricks. If you're someone who is ready to make smarter budgeting decisions but are unsure where to start, you've come to the right place. 64% of millennials feel comfortable developing their own budgets. Across different generations, millennial comfort creating personal budgets is the highest.  Millennials spent most of their paychecks on housing (66%), educational expenses (9%), and health insurance (6%) in June, showcasing that they are smart with their spending habits.

Staying within a budget can be difficult, with only 11% of millennials following their budget. 38% of millennials find Excel and worksheets the most effective resources for their budgeting, and only 20% use apps to make their budgeting decisions. As a result of the COVID-19 pandemic, 27% of millennials are saving more money from their paychecks. Nearly 50% of millennials made less than $50,000 last year. With uncertainty in the job market, millennials must make practical budgeting decisions. Each month, 27% of millennials make a new budget for themselves. This shows that millennials are thinking critically about their expenses, making changes to benefit them in the future.

5 Budgeting Tips and Tricks for Millennials

1. Track Your Spending

Think back to seven months ago. Your spending habits were probably completely different. Your budget may have included a summer trip to Italy, bachelorette or bachelor parties, and concert tickets to see your favorite artists. Now, you're likely spending more on books that will transport you to imaginary exotic locales, puzzles as a form of entertainment, and music subscription services. Despite feeling comfortable creating budgets, millennials get off track when it comes to following a budget. One purpose of a budget is to keep track of your spending. But where should new budgeters begin?

First, take a trip to the past. Collect all of your account statements and see where your recurring payments are going. Rent payments are important, but ordering Thai food every Friday night is not. Once that is done, categorize your expenses. Identify fixed expenses that are the same each month, such as insurance or utilities, and find expenses that can be adjusted, like clothing. If all of this is giving your brain a workout, try using a budgeting app; they are a great resource for money management. Budgeting apps can give users an overall picture of their spending habits. With push notifications and other alerts, the apps make it easier to track expenses. Some apps allow you to track bank accounts, link credit cards, and monitor withdrawals. If you find that Excel is more your speed, services such as NerdWallet provide free templates that are easy to set up. These templates are easy to personalize and can quickly give users information on their specific budgeting situations. Once all the ground work is complete, it's time to identify where there's room to change and save.

2. Use Your Budget to Increase Savings

A global pandemic certainly puts things into perspective. More than one-third of millennials (37%) felt financially unprepared for the coronavirus pandemic. More than one-quarter of millennials (27%) are saving more from their paychecks as a result of the COVID-19 pandemic. The pandemic has limited millennial spending by pausing student loan payments and decreasing travel. Nearly 40% of millennials moved back home as a result of the recession, cutting back the money they spend on housing.

To start organizing your budget, write down how much money you're bringing in and how much is going out. While putting together your new and improved budget, think about the benefits of budgeting, which include less money spent on frivolous expenses and more money saved for long-term financial goals. Try putting 10% of your paycheck toward savings to start. When your expenses are all laid out, consider which expenses you can stop. Is your gym membership going to waste? Do you need that candle subscription service? One simple way to cut down on a necessary expense, like groceries, is to make a shopping list and avoid venturing to Whole Foods or Trader Joe's with an empty stomach. Of course, we should all have room in our budgets for fun, but try to have at least one month's salary saved before splurging on the latest Apple device.

3. Set a Budget, Even Without a Fixed Monthly Income

While the pandemic has seemingly stopped the world, the job market is still turning. As people lose their jobs, more people take up independent occupations and become part of the "gig economy." The gig economy refers to common temporary jobs with short-term commitments. Nearly 50% of millennials earn extra income in addition to their current employment through side hustles and engaging in the gig economy. Last year, nearly 50% of millennials made less than $50,000. More than 30% of millennials made between $25,000-$49,999.

4. Set Spending Limits So You Can Make Charitable Donations

With all of your necessities taken care of, start thinking about where your money can make an impact. As they spend less money on social experiences, nearly 3 out of 4 millennials donated money during the pandemic. We're living in an unpredictable time: along with the coronavirus pandemic, there's been an increase in exposure to the social injustices within the U.S. Millennials are finding different outlets to show their support beyond social media. Is it donating to a local political race? Is it through supporting a charity in need? Is it donating to bail funds?

These outlets for relief can become recurring payments each month - many organizations have that option for their donors. Not to mention that some charitable cash contributions are tax-deductible. Adding a new item to your budget might seem daunting, but think about the impact your money could have. Once your bad spending habits are replaced with the good, start setting your goals for the future.

5. Have Flexible Budget Goals

Your budget doesn't have to be set in stone. Our survey found that more than 1 in 4 millennials (27%) create a new budget for themselves once a month. No matter what your goal is, set it early. Make a chart or mark off days on your calendar for motivation.

It's good not only to think big when it comes to your budgeting goals but also to think smartly. Your budgeting journey isn't over once you have everything in place; that's just beginning.

Make sure you're factoring in your income and predict any challenges that may arise. Being prepared is the first step in executing your budgeting goals. As the millennial generation's future remains unpredictable, ensuring that you have realistic steps in place is the perfect antidote.

Ready, Set, Budget! As the economy continues to ebb and flow, the millennial generation remains impacted. Millennials need to accommodate growing change through revising and settling on a budget that will benefit them in the long term. Start by tracking your spending - list out your priorities and necessities. Think about what you can give up - cut back on expenses that can put a damper on your wallet. Find new areas to spend your finances on - think about how you can impact the world in this uncertain time. Set yourself up for success - critically think about your long-term and short-term goals for budgeting. Lastly, be realistic about your budget. It takes time to find what works for everyone; there isn't a one-size-fits-all solution. Once you have these budgeting tips and tricks under your belt, you'll be in a better position to make smarter investments.