4 Ways For Millennials To Be Financially Independent

Advisor December 20, 2017

As the modern technology becomes dominant in our world, the way millennials live has also changed. Gone are the days where we see our children playing on the streets interacting with other kids. Today, we see a 3-year old child holding his tablet playing video games. We see teenagers browsing on their social media accounts for a couple of hours a day and we see these working millennials obsessed with selfies, gadgets, and travel goals! While we emphasize the importance of socialization and doing the things that you want and that make you happy, our millennials nowadays often forget this one thing!

Most of them now forget to prepare for the future. They’re too indulged in living the present “You Only Live Once (YOLO)” life that they tend to neglect to prepare for their future. For them, it doesn’t matter if they bury themselves in debts and with no savings just as long as they get to enjoy life. Are you familiar with that saying “travel now and become broke later?” That’s exactly the motto of most millennials today. How can you break this curse for millennials to become financially independent? Here are the things you can do!

It’s Recommended to Create a Passive Income

Save At Least 20 Percent of your Salary

What is passive income, you ask? For those who don’t know, there are two kinds of income that we can produce in this world. The active and the passive income. The active income is the money or compensation you get after rendering a product or services. Most of us know how to make an active income, that’s why we’re working throughout our lives, right? However, we don’t know how to create a passive income. What is passive income? It’s a form of money or compensation which pays you over time. In other words, the money here is working for you now. Savings in a bank account is one way of passive income. But even we know that the interest rate barely moves and cover the inflation rate. So how can we create more passive income?

Spend Less Than What You Earn

The reason why most of us barely have any savings left is that of our lavish lifestyle. Normally, we save what was left of our pocket. If you want to be financially independent, you need to save a portion of your money before you get to spend the rest of it. That’s why the moment you receive your salary, automatically save a portion of it for your savings. We recommend you to save at least 20% of your salary to your savings. Then, you can budget the rest of your salary to your bills, payments, and day-to-day expenses. Never spend more than what you can afford.

Build Emergency Funds

Emergency Fund Can Help You Address Unexpected Scenarios Without Draining Your Savings

Now that you have your savings intact, don’t just put them all in your bank account. You must also build your emergency funds. Emergency funds are a fund that you can spend whenever there’s an emergency or unexpected circumstances happen. For example, if you lost your job, you still have money to support yourself while you’re looking for a new job. Or if not, if you ever get sick, you can still pay for your hospitalization without draining your savings. The recommended formula for your emergency funds is your salary for 6 months. Your emergency funds should be able to sustain you for 6 months if you lost your job.

Eliminate Debt

Pay All Your Debts As Much as Possible

One of the main reasons why we can’t save properly is because we have debts to pay. It eats out the money we’re supposed to place for our savings. While debts can be good when you really need money and you have no other means to get them, it can be detrimental to your financial freedom if you can’t pay it. That’s why we suggest you think thrice before getting a debt. Do you really need debt? Eliminate all the bad debts and make sure that you can pay your good debts (like mortgages) without affecting your savings.

Invest in Insurance and Investments

Protect Your Family by Investing in Insurance and Investments

Last but not least, invest in insurance and investments. Insurance can help support and protect your family in case something will happen to you. Insurance will help sustain your family in case you die too soon. But what if you live too long? Then, your investments (like mutual funds or investing in the stock market) will take care of you. Start investing in mutual funds or in stocks to help you build your wealth while you’re still young so you could live a comfortable life when you retire.