Let’s face it. Generations X and Y are not known for their thrifty ways.
As the U.S. pushes on through economic recovery, a PricewaterhouseCoopers’ study says Gen X and Gen Y will lead the post-recession consumption because “Gen X is in the middle of a high-spending life stage and Gen Y has a greater willingness to spend, especially on new technologies.”
In theory this might be good. We’re helping drive the economy and by spending, we will increase the demand for jobs in the retail and service sectors. However, through conspicuous consumption we are doomed to make the same mistakes that got us into this economic predicament. And yes, with interest rates so low, saving is not attractive because savings accounts are not accumulating large returns.
But there are still ways to save in the long run.
1. Carry cash.
It’s easy to carry and swipe plastic. With that ease comes a lack of monitoring of expenses. By using cash, you’ll think twice about whether you need those $75 stilettos or another $25 meal out.
2. Set a schedule for transferring money to your Savings Account … and don’t touch it.
Try and save about three months of expenses by depositing between 5 and 10 percent of your paycheck into a savings account. Online banking has made it easier to transfer funds and you can even set a schedule. You’d be surprised what transferring $10 a week can do. It’s tempting to spend money when it’s just sitting there, and especially when it isn’t earning much interest, but don’t touch it. You’ll be glad you have it when you need it most.
3. Keep a budget diary. Like dieters who keep track of everything they eat, track your expenses for a month. This will help you determine where you can save money.
4. Take advantage of a 401k.
Since you’ve recently entered the workforce, it seems strange to start talking about retirement. Almost all employers offer a 401k that will match employee contributions. Also, when you change companies you can take your 401k with you. Another added benefit: The money you contribute to your 401k is not taxed until you start taking money out. And, if you try to withdraw money earlier than age 59-and-a-half, there is an excise tax, which is usually the equivalent of 10 percent of the amount withdrawn.
5. Save on the little things. Yes, three $2 grande coffees a day Monday through Friday, plus a Saturday morning cup, for an entire year is about $1,800 dollars, the equivalent to my monthly mortgage payment and assessment and then some, according to the Latte Factor Calculator. Start the morning with coffee from home and then buy a mid-afternoon cup. Bring your lunch instead of paying $8 for a meal—unless Jimmy John’s is offering $1 sandwiches. Carry a refillable water bottle instead of buying plastic bottles.