Money is a tricky subject for just about anyone, and research shows millennials worry about finances about seven times a day, on average. Money is stressful to think about even when your finances are going well, let alone when they aren’t. That’s why it’s important to build an active state of financial wellbeing that you can maintain over time.
But what is financial wellbeing, and why is financial wellbeing important? The Consumer Financial Protection Bureau conducts a lot of financial wellbeing research. They define it as “how well your current money situation is providing you with financial security and freedom of choice, today and for the future.” In other words, you understand your money situation and you are confident about your financial future. (They've got a great ten-question questionnaire you can take to measure your current financial wellbeing.)
Millennials are one of the groups with the lowest financial wellbeing score according to the CFPB, so if you take the quiz and score low, don’t worry! There are plenty of measures you can take to boost your financial wellbeing.
You need to keep in mind that financial wellness is a totally personal state of mind. It’s not about how much money you have - you could be making $1,000 a month and feel like you were confident in your financial future, or $10,000 a month and be worried about meeting your savings goals.
When you feel financially secure, it’s a huge boon to your mental health. You are in total control of your money, and you know you can handle whatever expected (and unexpected!) expenses life throws at you. By contrast, when you don’t have a sense of financial wellbeing, you feel insecure about your future. An example of financial wellbeing can be as basic as feeling free to go out to eat because you know you have your debt under control. Alternatively, if you have enough money but don’t feel safe spending it, you don’t have financial wellness.
The good news is no matter where you are on the financial wellbeing spectrum, there are steps you can take to build your financial wellbeing back up, no matter how much money you have.
1. Count on a reliable income
Step one is to secure a reliable income. It sounds basic, but it’s a fundamental part of financial wellness. Knowing when and how much money will come into your account is what you will build the rest of your financial wellbeing around.
If you already have a job, then you’re doing great. If you’re one of the 50% of American millennials with a side hustle, take an educated guess at your average monthly income and timing.
With this information, you can move on to step two.
2. Know thine enemy (AKA your expenses)
OK, expenses aren’t really your archnemesis. But a lot of people do find spending money to be stressful. The more you understand your spending habits, the more in control you’ll feel.
Over 60% of millennials are confident in their budgeting abilities according to a study conducted by The Manifest. If you’re in that number, that’s fantastic news. If not, consider using a resource like You Need a Budget to get started.
Knowing your expenses is critical to building financial wellbeing. Even unexpected expenses can be accounted and budgeted for, which goes a long way toward reducing your money stress.
Once you have a firm handle on your income and expenses, you can move on to step three of achieving financial wellness.
The first thing to keep in mind is to avoid debt where you can. Debt is expensive - especially credit card debt - so when possible, make cuts somewhere else to avoid going into debt.
Now might also be a good time to investigate how to reduce and consolidate debt. You can refinance multiple debts into a single monthly payment. This makes it less likely you’ll miss making the payment, and benefits from a potentially lower interest rate on the whole, too. Bankrate has a great resource to see what your debt consolidation options are.
Food is one of the item categories with the highest expected inflation rate, so it’s important to know how to save on groceries during inflation. When it comes to food shopping, it can be useful to try new stores or products. Certain foods might be cheaper at particular grocery stores, and you can look into choosing more frozen options. Fresh From the Freezer offers a few examples, such as broccoli (50% cheaper) and seafood (25% cheaper).
Planning meals in advance can reduce food waste and increase your savings, too. Americans waste nearly a third of the food they buy. If you can reduce that, you’re well on your way to fighting the costs of inflation.
Energy prices are rapidly hiking, so if you haven’t already, definitely schedule an energy audit. Many companies and local governments offer one for free - you can check this government resource to see if you find any near you. If not, the government offers some guidelines on how to conduct one yourself at home. There’s also some useful advice for how to reduce energy costs even if you’re fully optimized, such as how to spot “vampire load” appliances that use energy even when they’re not on.
There are tons of different things we spend money on each month - it’s hard to categorize them all! So we’ll finish off here by offering some best practices on how to be frugal with miscellaneous expenses in general.
The evergreen advice is to review and remove any unnecessary subscriptions or regular purchases, like Netflix, Spotify, or any of the other thousands of on-demand streaming services you signed up for once and forgot to cancel before the free trial ended.
You can also compare your internet and TV bills with competitors and switch if there are lower prices on offer. These vary by location, but you can get a decent idea of competitor prices using a site like reviews.org.
Finally, when you’re sitting down to remove unnecessary expenses, make sure to keep your long-term priorities in mind. For example, it may make financial sense to continue investing in the stock market, or towards your retirement fund. These investments are likely to continue appreciating in the long term. Even if you don’t continue putting money into these funds, think twice before you remove money.
Other expenses, such as house insurance or life insurance, might be worth maintaining as well since they offer financial protection in worst-case scenarios as well as peace of mind.
Ultimately, you know best, since it’s your budget.
Make your own inflation survival guide
Most experts agree: things will get worse before they get better. It’s time to hunker down and make sure you’re set for the coming months or years of higher prices.
If you’ve updated your budget for inflation to have a better idea of what to expect and conducted a frugality review to make sure you’ve minimized expenses where you can, then you’re as prepared as you can possibly be for the future.
Not to mention, you’ll also be in a stronger position when inflation begins to slow. Knowing how to budget for inflation is a great skill to have. Being smart with your money and understanding how to live frugally will always serve you well.