People are done with carrying cash. Forty percent of people carry less than $20 in their wallet, and 9 percent don’t keep any money in their wallets. Cash forces you to experience the pain of paying, it makes the transaction more conscious and vivid in your mind. You’re able to see what you’re giving up immediately, making you more viscerally aware of the repercussions of your spending habits.
Regularly using your card for small purchases cuts down on the money you save, and not keeping track of small expenditures is an easy way to lose track of your money. Cutting down on spending is vital to maintaining sound financial footing.
Millennials spend differently from previous generations. While Gen-Xers and Baby Boomers have an aversion to spending $4 for a cup of coffee, 60 percent of millennials have no problem paying the cost, according to a report by Charles Schwab. Millennials are also more likely than both other generational groups to spend money on clothes they don’t need, on taxis and Ubers, and on the latest electronic gadget. One good sign for millennial spending habits is that members of our generation are more likely to write financial plans than past generations at our age.
The report shows that there are areas where millennials could divert spending to savings. However, that would mean they would likely miss out on social opportunities and time with friends — bad news for millennials. Sixty-nine percent of millennials experience FOMO, according to Eventbrite. Cutting out expenses will definitely lead to some serious FOMO.
As a group, Americans do a terrible job of saving — 69 percent have less than $1,000 in their savings account, according to a GOBankingRates survey. Millennials are doing worse than the average — 72 percent of “young millennials” ages 18 to 24 have less than $1,000 in their savings accounts, and 67 percent of “older millennials” ages 25 to 34 have less than $1,000 in their bank account.
Takeaway: Think long-term, not short-term, when cutting down on expenses
Cutting down on costs is difficult. No one is saying to cut out expenses for an entire year; just be more careful with your money. You may not have the newest iPhone, but you will be able to have money stored away in case you need it later. Having money saved up allows you stop living paycheck-to-paycheck and keeps you out of debt.
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