Financial health tips for millennials

Are you a millennial? This generation is quickly rising to dominance in Canada, representing a highly influential age range of 25 to 40 years and comprising more than a quarter of the population. As a millennial, your demographic is the architect of new trends throughout the country — from your values to the way you source your information and how you make spending and other decisions.

The common denominator among all generations, however, is financial health. While there is no single definition for financial health, achieving a sense of economic stability in concert with your particular set of values will help you sustain your physical, emotional, and financial wellbeing.

Naturally, this leads to the question of what you can do to improve your financial health. Let’s take a look.

Identify and prioritize your goals

This may feel very challenging, particularly as you may be juggling day to day commitments including post-secondary education, children, your first home, or your relationship. A significant turning point often occurs when your personal pendulum swings from being financially reactive to financially proactive about these commitments.

Start by thinking about the things that are important to you. Find a way to frame these priorities as SMART (specific, measurable, attainable, realistic, and timely) goals and commit them to record in some way (e.g. in a paper or digital journal). If you’re in a relationship, consider sharing your goals with your partner — even if you keep your day to day financial matters separate — for an added level of accountability and direction as you move forward.

Develop a budget

Start by tracking all your spending for one to two months to understand where your money is going and what you’re financially focused on right now. This is usually very enlightening.

Next, categorize your spending into discretionary (non-essential, optional) and non-discretionary (needs, not optional). Non-discretionary would include items such as your rent, utilities, vehicle loan and other debt repayments, and groceries (to an extent). You may be surprised to discover your expenses might be greater than your monthly take-home income — which means you need credit just to help you break even every month. This is not sustainable long term and will almost certainly cause a decline in your financial health.

There are many tools available to help you develop a budget, track your spending, and build your goals into your spending plan. These apps, spreadsheets, and tools can help you monitor your spending, ensure you’re living within your means and keeping on the path toward better financial health.

Create a savings plan

An essential part of any budget is to pay yourself first. Too often people wait to draw what is left after paying all other expenses only to discover they have nothing left to save.

Your savings plan is a function of your goals. Saving for the sake of saving without knowing what you’re working toward will have limited success. Something else far more immediate and concrete will invariably come up. Turn your savings plan into an expense. Make putting money away every bit as important as your non-discretionary expenses.

Keep your savings out of sight and out of mind — the more difficult it is to withdraw your money the less likely you are to make impulsive decisions that conflict with your goals. And be sure to reward yourself (with low-cost, high enjoyment incentives) as you hit certain savings milestones. This will help keep you motivated.

Understanding your debt

Not all debt is bad. An affordable mortgage, student loans, small business loans, etc. which help you build the life you want to live can be good decisions in the right circumstances. However, consumer debt with nothing to show for it is an indication you’re spending beyond your means. It likely has a higher interest cost associated with it too.

Consider whether credit cards, pay-day loans or lines of credit are keeping you from investing in your future and achieving your goals. Take stock of who you owe money to, the type(s) of debt you have and what strategies might help you pay it down in a reasonable timeframe. If your analysis has determined repaying your debt and achieving a balanced budget is impossible on the creditors’ terms, a MNP Licensed Insolvency Trustee offers Free Confidential Consultation and is equipped to discuss all your available options.

Build your financial IQ

There are numerous sources of financial information — from books, to podcasts, websites, and social media feeds. Unfortunately, you’ll often hear dissenting opinions of what to do and what not to do, so it can be hard to know who and what to believe.

Good financial health is closely tied to your confidence in the information you gather. The Financial Consumer Agency of Canada is a fantastic resource to start with as it offers plenty of high-quality information and allows you to search a wide variety of financial topics. In conjunction with this and other sources, consider seeking out a qualified advisor who can help you build and sustain your financial health.