Millennial Money and Managing Finances
The United States is truly in a financial education crisis. At no point in our lives are we taught to manage our money. We’re not being taught in high school or college, and often times we’re not being taught by our parents either. Millennials go from not having any income in college and just focusing on education, to then having a full-time job with a full-time salary and uncertainty about how to manage those salaries. Most millennials want to get good at financial management and prepare for their financial future, but they don’t know how because they’ve never been taught. It’s a difficult thing to be new in the workforce and try to navigate things all on their own.
The Golden Number
The golden number is how much money you have leftover at the end of the month after you’ve spent everything that you need to spend. In other words, it’s your income, minus your expenses. Or, in essence, how much you have to set aside every month. When people try to find ways to increase their golden number, they usually start by finding things to cut back on, like going to Starbucks less or eating out less. And while this is a great thing to do, it is limited. You can’t negotiate your rent to a lower monthly payment, or set aside less money for taxes. There is a cap on how much you can restrict spending. The other way to increase your golden number is to increase your income, which is a great solution because there is no cap on how much money you can make. To really start saving more and increasing your golden number, it’s in your best interest to do both: increase your income and decrease your spending.
There are two different kinds of income. There is active, or earned income, and passive income. Active income is where you trade your time for your money. This could be something like getting a part-time job on the weekend, selling things online, etc. Passive income is when you earn money with little to no ongoing work. Examples of passive income include getting money from rental properties, royalties from creative projects, etc. When trying to increase your golden number by increasing your income, the first that you have to do is decide what kind of income you want to create more of. Decide what is more exciting, what’s easiest, and what’s the fastest, and make your decision based on that. You can also do more than one thing, you can add a passive income source and an active income source.
How To Avoid Millenial Shame
One of the biggest struggles facing the millennial generation specifically is that it has become even harder to keep up with the Joneses because of social media. It’s easier than ever to make judgments about other people’s financial situations, because of the greater exposure to the world at large. You’re not just competing with your immediate peer group, you’re competing with everyone that you follow and have access to on social media. In addition, there is more pressure than ever to spend more in order to keep up, or assert yourself as financially well off. There is a shame surrounding this “competition culture,” which can be very toxic and ultimately impact the way that you manage money. Set aside comparisons, and focus on yourself.