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 Society of Grownups, a personal finance education and planning company based in Brookline, Mass.
Sounds good, but how do you go about doing that? Carr and other millennial-generation money experts share their suggestions.
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,” said Carr.
You may pick an expense category that’s particularly meaningful to you and keep it top of mind. Maybe travel and experiencing other cultures becomes your “anchor expense,” said 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 said.
A budget doesn’t have to be a set-in-stone spreadsheet that you either conquer or are defeated by. Think of a budget as a guide, not a straitjacket, said Carr. If you spend too much in one category, cut back in another.
Of the many new mobile budgeting apps, Carr’s favorite is Level Money. She likes its high-level approach to budgeting, as well as its simplicity: It categorizes money into bills, saving, and everything else.
Put a price tag on your time.
Young people tend to devalue their time, said Paula Pant, a 32-year-old real estate entrepreneur and author of the blog, Afford Anything. “A lot of the typical frugality advice comes from that mindset of clutching onto pennies at the expense of your time.”
For a quick calculation of what your time is worth, chop three zeros off your salary and divide by two, says Pant. That’s 40 hours a week for 50 weeks, so 2,000 hours a year. If you make $60,000, your time is worth $30 an hour. If a do-it-yourself project takes less than an hour and saves more than $30, maybe it’s worth doing.
The real point, though, is a mind shift. Think about what you could do with that time, something that would have a more profound impact on your future, said Pant. The question to ask: “If I chase my tail rather than chase that promotion, what future career potential do I sacrifice?”
Payroll deductions into 401(k) retirement savings plans and other automatic deductions can put savings on autopilot. What you don’t see, you may not miss.
Try a savings app such as Digit, suggested Torabi. Its algorithm tracks your spending and income to figure out when you have excess money in your checking account. When it determines that you do, it transfers to savings amounts it thinks you won’t miss. Test your savings potential.
A lot of people think their income magically matches their expenses, said Pant. She challenges people to save 1 percent more next month, no matter what you’re saving now. Then add an additional 1 percent monthly over a year, or every few months.•