Everyone dreams of becoming financially stable. When you’re able to keep up with your monthly expenses and still save for a rainy day, you and your family can enjoy peace of mind, freedom from many financial problems, and the ability to enjoy a comfortable lifestyle.
Many African-American millennials prioritize enjoying the peak of their lives, causing them to spend money on unnecessary items. If you see yourself as one of these people, you should know that time may still be on your side, but it won’t be for much longer. Soon enough, you must learn to spend your money wisely to save for big purchases like your own home and plan for your retirement.
The most important rule of financial planning is to start now and start somewhere. Waiting too long requires you to save and invest a much larger amount of your money. To get started in becoming financially stable, here are some tips you can follow:
1. Prioritize your necessities
Living paycheck-to-paycheck happens when you spend most or all of your monthly income to cover your monthly expenses, leaving you no money left for your savings. While this is common among millennials, this is problematic if you have the misfortune of encountering difficulties such as an emergency, layoff, accident, or illness.
It’s challenging to address this financial concern especially if you have low income, but it’s completely doable. You can save right away without having to make more money by prioritizing your necessities and being mindful of your purchases.
To do this, learn how to differentiate your needs from wants. Figure out where you can cut down costs, even if it is by only a few dollars a week. The best way to do this is to track your expenses by using an app or listing them down. Afterward, set your goals and make necessary changes around your spending.
You might also want to consider hiring an African-American financial advisor whom you can trust. They understand your situation and know how to meet your financial goals.
2. Save money that covers 3-6 months worth of your expenses
A good rule of thumb for emergency savings is to save an amount that covers at least 3-6 months of your basic living expenses. The three-month recommendation is best for you if you have more secure employment, while the six-month guideline suits you if you earn variable incomes or have less stable employment.
Build your account during high-earning months to prepare you for low-income months. This will give you a cushion to fall back on in an emergency without worrying about encountering financial issues. To help you earn a higher interest rate than most traditional bank savings accounts, feel free to consult an experienced Black financial advisor to help you build a high-yield savings account.
3. Diversify your investments
As they say, don’t put all your eggs in one basket. Reduce your risk and minimize your losses by diversifying your investments into broad-based stock mutual funds. Meanwhile, don’t panic when the market falls. You are young, and this is an advantage. You have more time to recover from a drop in the market.
In financial planning, it’s always best to start sooner rather than later. Gain financial freedom by following the tips mentioned above and partnering with a reliable financial advisor. While there’s much more to financial security than prioritizing your necessities, working on an emergency fund, and diversifying your investments, it’s a great start that will put you on the road to success.
At blackwallet, we empower urban millennials like you and help you build wealth by sharing tips and strategies about Black financial literacy. Read our other articles to leverage your money.