Broke Millennial

“Money doesn’t have to be scary or overwhelming—by taking small, thoughtful steps, anyone can create a secure financial future.”

1. Money Anxiety is Holding Millennials Back

Many people in their twenties and thirties find managing money overwhelming. This anxiety can prevent them from making bold career moves or pursuing passions.

Take Lizzie, a 23-year-old professional. Debt-free and single, she avoided checking her bank account and clung to a job she didn’t enjoy because financial stress seemed insurmountable. Her experience reflects a generation struggling to move past financial fear.

Without proper money management, people can spend years chasing stability without achieving their dreams. Replacing stress with actionable steps can unlock opportunities, from affording meaningful life experiences to building a family fund.

Examples

• Lizzie delayed quitting her unwanted job despite her financial freedom.
• Millennials frequently skip looking at finances altogether, hoping for the best.
• Small financial blocks often snowball, leading to missed life goals.

2. Uncover the Root of Your Money Habits

Our earliest exposures to money shape our values and decisions. Childhood dynamics, like whether money was openly discussed or treated as taboo, create lasting impressions.

For example, if money always felt scarce growing up, you might obsessively save or, conversely, feel compelled to spend with abandon. Recognizing how your upbringing shaped your habits is the first step toward adjusting unhealthy tendencies.

Reflective questions like “How did your parents handle money?” or “What feelings does money bring up for you today?” can guide you. Understanding these patterns lays a clear foundation for improving your financial mindset.

Examples

• Parents who vocally worried about finances might inadvertently instill fear in their children.
• Someone who grew up wealthier might not feel the urgency to budget diligently.
• Journaling about spending as a child can reveal whether you’re prone to impulsive or cautious financial habits.

3. Choose a Budgeting Style That Matches Your Life

To manage money well, pick a budgeting approach that aligns with your personality and goals. Two common styles include the cash diet and penny tracking.

A cash diet lets you use physical cash instead of cards, making overspending less tempting. Meanwhile, penny tracking involves meticulously logging expenses. Both methods encourage awareness but work differently depending on your habits.

Experiment to see which system works for you. For example, if you discover high spending on bottled water, like one of Erin’s friends, redirect that money to more useful purposes instead.

Examples

• Cash-only spending helps guard against overspending on impulse purchases.
• Penny tracking revealed a friend was wasting $100 per month on Starbucks bottled water.
• Writing down transactions inspires long-term accountability.

4. Adjust Budget Percentages Based on Realistic Goals

Most money experts suggest dividing your budget into fixed costs, financial goals, and flexible spending. A 50-20-30 distribution is ideal (50% for necessities, 20% for goals, 30% for everyday expenses).

However, this may be impractical in high-cost cities or on lower salaries. The goal, then, is to slowly move toward these percentages as earnings grow. Tailoring percentages today builds a bridge to future stability.

Take Dwight as an example. While living in NYC, he allocated 60% of his budget to essentials but adjusted to save 20% when income increased. The process is incremental, but the progress is significant.

Examples

• Dwight designated 60% of his take-home pay to fixed costs initially.
• His eventual raise let him realign percentages closer to recommendations.
• Tracking percentages helps avoid overcommitted spending in specific areas.

5. Maximize Interest by Banking Online

Brick-and-mortar banks often provide dismally low annual interest rates, like 0.01%. Online banks offer much better returns without physical branch costs.

For example, parking $2,000 in a traditional account might net a measly $0.20 annually. In contrast, moving that same sum to an online bank with a 1% APY would yield $20. This simple switch significantly increases savings growth.

Before switching banks, compare interest rates, fees, and customer reviews to ensure it meets your needs. Free and better interest? Win-win.

Examples

• Traditional savings accounts give poor interest returns on funds like emergency savings.
• Online banks, operating more efficiently, offer competitive APYs (annual percentage yields).
• Googling comparisons or reviews helps you find optimal options.

6. Credit Cards Are Powerful Tools—If Used Wisely

Credit cards aren’t inherently bad; in fact, paying off their full balance every month boosts your credit score.

Imagine credit cards as short-term loans. Paying your monthly total avoids interest fees. However, only paying minimums traps users in high-interest debt. Interest rates can hit 20% or more annually, snowballing to unmanageable amounts.

Disciplined use builds your financial reputation while avoiding costly mistakes. Keep spending below your payback ability, and remember that responsible use takes consistent effort.

Examples

• Prompt repayment prevents credit card interest from draining finances.
• Building a solid credit score eases future borrowing for assets like homes.
• Ignoring payment minimums avoids a debt spiral.

7. Prioritize Savings to Avoid Debt

“Pay yourself first” by sending part of each paycheck directly into savings. Building this habit ensures emergencies don’t derail your finances.

Emergencies happen. Whether paying for car repairs or unexpected hospital bills, having savings prevents relying on high-interest solutions like credit cards. Start small, saving $10 per month, then gradually increase contributions.

Automating the process helps ensure consistent deposits, even in months when you’d otherwise forget or overspend.

Examples

• An emergency fund safeguards against expensive debt traps during crises.
• Regular deposits build financial safety nets gradually.
• HR or bank automation supports consistent saving behavior.

8. Match Emergency Fund Goals to Your Situation

A solid emergency fund is a safety net that prevents financial setbacks from spiraling into debt. However, its size depends on your circumstances.

Experts recommend six months’ expenses for debt-free individuals. Those living paycheck-to-paycheck might initially aim for $1,000 while freelancers benefit from saving up to nine months’ costs due to irregular income.

Regardless of size, the most important factor is accessibility. Ensure funds are stored in high-yield savings accounts—not locked in stocks or non-liquid assets.

Examples

• Single employees save differently than freelancers with fluctuating work.
• Dependents like children or a pet increase buffer fund necessities.
• Online savings accounts with at least 1% APY ensure emergency reserves grow.

9. Standing Firm in Social Money Situations

Peer pressure, like splitting uneven bills, can destabilize your budget. There’s no shame in advocating for financial fairness among friends.

If you ordered a cheap entree while others overindulged, a split bill might feel unfair. Standing firm or diplomatically proposing fairer breakdowns prevents excess strain.

Be confident when addressing money matters. Most friends will respect the courage to air concerns and may even allow you to manage the group’s bills in the future.

Examples

• Speaking up prevents absorbing unnecessary friend-group expenses.
• Evenly splitting bills despite ordering separately wastes budget margin.
• Diplomatically offering to mediate bills can reduce future friction confidently.

Takeaways

1. Start small by automatically saving $10 per paycheck—build both emergency funds and better savings habits over time.
2. Switch your savings to an online bank with competitive APYs (at least 1%) to maximize returns on dormant funds.
3. Experiment with different budgeting techniques—either a cash diet or tracking every penny—to discover which works best for you.