It is tough to manage finances strategically when the future of the U.S. economy seems so uncertain in the midst of a crippling pandemic.
If you just hit 30 and you find yourself scrambling to cover costs and budget appropriately within your means don’t become too discouraged. A recent poll proves that most people squirrel away only 9% of their annual salary a year for retirement purposes. This is half the recommended percentage of 20% of your total salary typically doled out to a retirement fund according to most seasoned financial advisors, anyway.
Let’s take a look at the mitigating factors determining where our hard-earned money is going and how we can recognize some blind spots in our spending and saving habits to do better to prepare for a solvent future.
The reason why millennials are saving less and spending more
Pollster fielded a group of over 2,000 respondents aged mid-thirties or younger about where exactly their money goes at the end of each pay period. About 63% of participants admitted they don’t even have a savings account because there is not enough money left over at the end of the month considering other expenses paid out of pocket. What are the expenses bogging down most millennials these days?
- Student loans
- Streaming services
- High-speed internet
- Insurance and health-related bills related to COVID-19
The added financial squeeze imposed by the COVID-19 pandemic is forcing many young homeowners to put up for sale signs or cut back on other basic necessities to cut costs associated with homeownership according to a recent study. “A survey of 2,000 American homeowners found that 52% are constantly concerned about making their mortgage payment on time. 47% of the poll say they’re considering selling their home because they can’t afford their mortgage anymore.”
Furthermore, another reason most people don’t have steady savings until their mid-thirties,(or in general at the moment), is that during this pandemic folks are asking for loans from family and friends when in dire financial straits after losing work or faced with astronomical medical bills.
“31% have asked a family member for a loan during the pandemic. Another 22% have reached out to friends for help with their bills. Some homeowners have opted for the real longshot, as 19% of homeowners admit playing the lottery has helped ease their financial burden.”
There are things you can do to prepare for emergencies but the coronavirus crisis was one emergency that was not expected to last so long and have such a devastating blow to the job market, especially for gig-economy workers, and the United States economy. More than 23% of people surveyed in this poll reported losing their job or suffering losses by a severe reduction in hours and available projects to take on since the pandemic hit back in March.
Luckily, there are several growing remote work opportunities to look into but it takes some work and the willingness to adjust to a new way of life working from home. As long as you’re able to be your own boss, manage your time effectively, maintain a healthy work-life balance and become a bit more tech-savvy this time spent at home could be a chance to learn some new skills and build a nest egg to save for that retirement plan in the future.
Financial tune-ups in my control
While the economic fallout from COVID-19 is unavoidable there are self-checking activities you can do for yourself to keep yourself afloat financially. The poll mentioned prior found 15% of respondents reported healthier savings because they became self-aware of poor spending habits. Writing yourself a realistic budget with ample wiggle room is a good way to keep yourself from experiencing a financial emergency and begging your parents for money.
Sometimes, I am too proud to beg. There are budget applications you can download on your phone that links up with your banking information to make budgeting seamless, easy, and dare I say fun? Here are some of the best budgeting applications available at low to no cost.
- Truebill: Helps assist you in lowering bills, canceling unwanted subscriptions, and alerting you to other money-wasting habits.
- Digit: Enter in a financial goal and Digit assists in getting you there since the algorithm digitally analyzes your spending habits and shines a light on where you can cut corners to find big savings for a planned vacation or a big surgery.
- Stash: This application helps assist beginner investors with only 1 dollar you can invest in household name companies like Amazon. This is a place where you can learn more about investing in the stock market without putting too much money up front to start building healthy savings and investing habits today!
- Keeper Tax: This online tool assists folks, especially those working freelance gigs, to find where exactly they can write off taxes with the help of a digital bookkeeper to save some money come tax season.
- Worthy: This application is essentially a marketplace of ideas with a large community of expert financial advisors sharing their tips and tricks to success. If you’re interested in working smarter, not harder, look into this community and learn how to earn more for your future with investment tips and more.
What I learned
Don’t be so hard on yourself if your savings account is accumulating cobwebs this year. Consider 2020 a gap year to sort your finances, look at your spending habits, and create a realistic budget that sets you up for the prosperous future free of financial worry you’ve always dreamed of. According to the survey mentioned at the beginning of this piece the “average American doesn’t experience a “financial awakening” until the age of 33.” Relax, you have time.
There are things within your control such as being mindful of your spending habits and cutting back on amenities to really set yourself up for a no worry retirement plan and an ample safety net should any other future crises arise.