Getting your first salary is probably one of the best feelings ever. The feeling of not having to rely on allowances and finally make money with your own effort is out of this world. But what do you do with the money that you just earned? Well of course, whatever you like! This was my plan for my income.
Being a designer and software engineer my first few salaries grew considerably in the first two years of work. I had a few responsibilities (living with my parents till you’re married perks), where most I had to do was to pitch in for the dialog bill and give my mum some money so she can do some guilt-free shopping every month.
Having very few responsibilities when it comes to money and also being debt free at the beginning of it put me in a very special position to get into a very bad spending habit. 300 rupees on a fried rice during a normal workday? Yes, please. 5000 rupees on night outs over the weekend? Count me in. You can identify the pattern I was getting into, heck maybe you can even relate to it. All those daily costs add up to the point where you find yourself in the middle of the month, and you’re too afraid to look at your bank balance. To put the cherry on top, I wasn’t saving one bit. Simply because I didn’t understand why I needed to save. This was me, being a millennial, being financially irresponsible.
I wanted to be rich. As in I wanted financial freedom even in those days but I didn’t understand how to do it. I was getting to a point where I had some control over my spending/lifestyle habits. Afterward, I started reading and educating myself on financial literacy to find that I resonated with it quite well. I finally understood why I needed to save.
Now imagine this, you’re in your mid to late 40’s, married and got a couple of kids. The spending habits are still the same and let’s say that you’re still reactive to your environment and have not found any reason to save or learn about the topic of money. There are more responsibilities now and you find yourself in debt as well. You feel stuck, you might even hate your job at this point because it’s your only source of financial security. You are tied down. When this happens you are forced to learn and get in the driver’s seat of your financial life, I feel that it’s inevitable.
But what if you learned and stayed in control early on? Wouldn’t you be maximizing on all that the world has to offer? That’s the brilliance of being a millennial in my eyes, we have a great asset, we have time!
Being on this quest for a while now, I’ve put together 6 tips to get you started, these are habits that I live by and it’s helped me grow massively. If you have no clue about what you’re doing with your salary you’ve come to the right place. The tips also come with an action plan to make your life even easier.
Here are 6 money tips for Sri Lankan Millennials.
- Pay yourself first
The golden rule. If you peek into the world of personal finance, you’re going to come across it somewhere. You’re going to read or hear it so many times you’d probably get sick of it. Because it’s that important! If you’re just getting started in the real world, saving may seem impossible. You have bills, day to day expenses and maybe a few trips to majestic city or ODEL. You’d like to save but like I said above, somewhere in the middle of the month you’re going to wonder where your money went or be too afraid to look. Most people save what’s left over — left over after bills and spending on things like Dolphin Kottu.
When you ‘pay yourself first’ you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electricity board, or even the government. Once you get into the swing of it, it can be a powerful motivator. Also, it is good to iterate that when you pay yourself first you are developing good financial habits. As most people spend their money the following way:
bills, fun, saving.
Unsurprisingly, there’s little to save at the end of the month. But if you bump saving to the front
savings, bills, fun
you’re able to set aside money before you justify reasons to spend it.
In simpler words, saving first and delicious Dolphin Kottu second and not the other way around.
- Basically, what you need to do is automate your savings. It takes out the thought process of having to save. When your salary or cheque lands in your account, set up a standing order or automated transfer to another account. An entirely separate account.
- If you can’t automate it, do it the old-fashioned way of doing it manually. Go to the bank and make the deposit. I feel better when I do it the old-fashioned way, taking a wad of cash and making a deposit makes me feel like I am doing something for my future and it feels good every time.
- My initial financial goal was to set up an emergency fund of about 600k, I am very close to achieving this target. I also have a growth account, a business account, and an investment account and also a fun account. I have a lot of accounts for different purposes, they form my ‘financial hub’. This concept is called money envelopes. Savings for different purposes. You could adopt this strategy or form one of your own as you go along.
- Eliminate wasteful spending and track your expenses
This is a tricky one and usually overlooked. Have YOU ever found yourself somewhere in the middle of the month and wondered where your salary went?
I have, and to be honest, it was mostly me being ignorant. Humans love being abundant, whether it be ordering more food than required or buying more than you need to drink at Friday nights out. We do things in abundance.
If you eliminate wasteful spending in such events you could thereby drop your cost of living per month considerably.
- Track expenses using technology! I use an app called Monefy to track my day to day expenses. It’s a 2-minute job at the end of the day or whenever you make a purchase, make a record of it on the app.
- Now, this only partly solves the problem of being ignorant and wondering where your money went. But being aware of what you’re spending on could help you cut those wasteful expenses.
- When you notice what you’re wasting, try and minimize it. For example my biggest expense was commuting (Pick Me and Uber), two common times that I’d take a taxi is to and from work, but when I identified that 20% of my monthly expense is for taxi’s I started taking a bus early in the morning and a train in the evening both of which are fast and effective for my route. I managed to drop this expense to 14%.
- Get out of debt
There are two types of debt. Good and bad. The good kind is having a debt that could help you invest in a business or real estate. You can pay this back faster when you start making money from the venture. The bad kind is the ones where you make purchases on a credit card, pay only the minimum amount required and then pay the interest which is very high.
If you have credit card debt, it might cripple you for as long as you carry a balance. Paying off debt is a sure return on investment. When you invest money in the stock market, it can go up, but it could also go down. But paying off debt at 10% is a sure guarantee that 10% return of your money is available to you once it’s paid off.
- Sort out your debt by interest rate (highest to lowest) and start making extra payments on the debt that carries a higher interest rate.
- Usually, Sri Lankans get into debt later in life when you really want something but don’t have the funds to get it. I have listed this as the third tip but if you have high-interest debt, pay it off aggressively before saving or investing.
- Read our guide on everything you need to know about getting out of debt here.
- Start a side hustle and make earnings either actively or passively
When I say active income, this means that you’re trading your time for money. Kind of like your day job. You work for a month and after that month’s work, you earn a salary, that is active income. Passive income is different, you allocate a certain amount of effort in the beginning and you make earnings passively as time passes.
Passive income is definitely the harder way to make money and shouldn’t be treated lightly or as a get rich quick scheme. But in order to have everlasting wealth, you should look into making money passively.
If you want to make active side income:
Start freelancing your current skills or learn a whole new set of skills through learning platforms such as Udemy or Skillshare. I use Skillshare because it’s a subscription-based model (so I don’t have to pay for each course I take) and there’s a wide range of courses available.
If you want to make passive side income:
There are two age-old ways that some gurus might argue is the real way of making passive income and that is by acquiring monthly rental from renting out real estate or from the stock market. But it’s 2018 and there’s a lot of ways to make money online (MMO) as well as offline. Given below are some popular forms of passive side income.
- Affiliate marketing
- Starting a blog and selling Ebooks
- Writing a book
- Rent out a room on Airbnb
- Create an online store and using the drop shipping model
- Create an online course
- Create youtube videos
- License your photos or vectors on Shutterstock or other websites
- Renting your stuff (camera gear, strollers, bikes, vehicles etc.)
There are many ways to do this but you have to do your due diligence into each section and see how it’ll work for you. Read our guide on everything you need know about starting a side hustle in Sri Lanka.
- Start investing
So why invest? Imagine you are given some delicious seeds every 2 weeks and you eat those seeds every time you get them. Now imagine instead of eating all the seeds, you plant some of them. Now the seeds grow out to give you even more delicious seeds. This is basically the premise of investing, think of the seeds as money, where you put your money to work and it generates you more money.
Just like the seeds take time to grow, your money will take time to grow as well. But once you’ve reached a certain level you’ll have more than enough. This comes through patience and consistency. So make use of your millennial powers and start investing early!
I am currently learning how to invest through trading in stock markets. I mentioned above about passive income and how that it is a method of generating everlasting wealth. The other method is to become an investor. Taking your earnings and investing it is an amazing method of having your money work for you. The stock market is designed to go up. Over time this a great method to watch your wealth grow.
- There’s a couple of articles written on Jump on how to open an account to trade in the Sri Lankan stock market as well as how to pick stocks.
- I recommend signing up to some courses online and doing your due diligence. Once you’ve got the basics down then start a paper trading account (a simulator that allows you to trade with virtual money) and try to boost your confidence up before getting into the real thing.
- A simulator with virtual money can be very different from the real thing. So make sure you keep your emotions in check and learn proper risk management methods.
- Believe in yourself
When getting into this journey, you’re probably going to have some backlash from friends, family and significant others when taking over your financial future. Maybe they have certain lifestyle expectations from you when you want to change. And since you hold their opinion in high regard, you might believe them if they say some not so optimistic things about your change.
The dream in your heart might be bigger than the environment you find yourself in. Sometimes you have to get out of this environment to see your dream fulfilled. So be careful, believe in yourself and be prepared to succeed!
- Find someone who wants to make a similar change, or even surround yourself with like-minded individuals. You are the average of the 5 people you spend most of your time with because the people you spend the most time with shape who you are. They determine which conversations dominate your attention and eventually you start to think as they think and behave as they behave.
- If this happens to you, a better way to be prepared is to recognize that this might be happening to you. Learn not to be dissuaded and follow the path.
Lastly, I would say, if you really want to grow your wealth, building the habit of paying yourself first, eliminating unwanted expenses, getting out of debt, building a business and learning to invest is a surefire way of growing exponentially.
However, it takes time, patience and a strong belief system. As a millennial your greatest asset is time. Make sure you use it to your advantage!
Remember, it’s not always about harboring the things you know but to spread or give back what you know in order to help others. So send this article to someone who might find this useful or even comment down below about your personal strategies to improve wealth!
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