Powerful Money Habits for Millennials

Tom Corley boats - crop

According to various studies, the first crop of Millennials (those born between 1982 and 2004) who have entered the workforce are ahead of the curve when it comes to savings and spending than that of their parents. A 2014 Transamerica study found that 70 percent of Millennials in the work force were already saving for retirement either through employer-sponsored plans, such as 401(k)s or similar plans and they also found that these Millennials began saving at the unprecedented age of 22. According to the Financial Trade-Offs study, commissioned by Ameriprise Financial, Millennials are significantly more likely than both Boomers and Gen Xers to be consciously cutting back on discretionary expenses.

This is good news and a good trend if it continues. To ensure that it does continue I’d like to share some powerful money habits I uncovered in my five-year study on the daily habits of wealthy individuals. These money habits were instrumental in helping transform 177 ordinary individuals into self-made millionaires.

The Bucket System Savings Strategy

There are three steps to the Bucket System:

Step #1 – Allocating Savings by Category

  • Bucket #1 = Retirement Savings Bucket – This includes 401(k) plans, IRAs and other retirement plans or retirement-specific products (i.e. annuities).
  • Bucket #2 = Specific Expense Bucket – This includes a separate checking account, savings account, money market account or education savings account (i.e. 529 Plan) for major future expenses such as education costs for you or a child, wedding costs, costs associated with the birth of a child, home down payment, etc.
  • Bucket #3 = Unexpected Expense Bucket – This includes a separate checking account, savings account or money market account for expenses such as wedding gifts, medical costs, sudden loss of income (unemployment, medical issues or birth of a child), etc.
  • Bucket #4 = Cyclical Expense Bucket – This includes a separate checking account, savings account or money market account for birthday gifts, holiday expenses (Christmas, New Year’s), vacation costs, back to school costs, etc.

This will require that you set up at least one retirement account and three different bank accounts (one for each bucket). If you’re saving for education costs for you or your child, you will need to set up one 529 plan for you or your child.

Step #2 – Establishing Savings Goals

In order to make the Bucket System work, you need to establish the overall amount of savings you are able to set aside each pay period. For example, 10% of your net pay check. Then you need to allocate this 10% into each bucket as follows:

  • 5% (50% of overall savings) into Bucket #1
  • 2% (20% of overall savings) into Bucket #2
  • 1.5% (15% of overall savings ) into Bucket #3 and
  • 1.5% (15% of overall savings) into Bucket #4

Step #3 – Automating the Savings Process

This is where the rubber meets the road – implementation. Automatically direct each of the above savings amounts into each bucket’s separate account via automatic withdrawal from your net pay. You will need to instruct your payroll company to set up the automatic funding for each of the four bucket accounts. The payroll company will then automatically send each specific savings bucket amount to the custodial account or bank account that will be accumulating these amounts for you.

That’s it. Pretty simple, right? “But I don’t make enough to save,” you say. Or, “I’m just not sure if I’m saving enough and on the right track” (If you’re unsure how you’re doing financially, there are many ways to find out, like this net worth calculator). Well, I’m here to help, so let me share with you some strategies from my Rich Habits study that will help you find the money to implement the Bucket System:

  1. Track Spending – I like to call this spending awareness. Knowing where your money is going gives you control over your finances. You may find you are paying for things you are not using, such as club memberships or subscriptions.
  2. Periodically Audit Expenses – Many expenses can change over time. Insurance costs often change. They can go up or down over time. Make sure you are paying the lowest insurance rates for homeowners, auto and life insurance. Cable and Internet costs can increase without you being aware of it. Calling your cable or Internet provider to secure the lowest fees available should be an annual process. Periodically shop cell phone plans. Increased competition in the cell phone industry is driving down monthly rates. Make sure you are not paying more than you have to.
  3. Purchase Good Quality Used Cars – New cars lose value as soon as they come off the lot. Buying good quality used cars allows you to take advantage of this loss in value anomaly prevalent in the auto industry. 44% of the rich in my study purchased good quality used cars. Typically these are cars coming off a lease. They may be two or three years old. At 125,000 miles most cars will require some annual repairs. Expect to incur about $1,500 a year in repair costs when you hold on to cars beyond this 125,000 mileage mark. That is still significantly less than you would spend on a loan or lease for a new car.
  4. Refinance Your Mortgage and Home Equity Loans – Are you paying the lowest rate possible on your mortgage? Do you have a home equity loan with a high rate of interest that you can roll into your new mortgage? Can you roll your student loans into your new mortgage?
  5. Use Coupons – Even the wealthy in my study engaged in this money savings habit. 30% of the rich used coupons to buy food. Why pay more than you have to on groceries or other expenses?
  6. Shop at Goodwill Stores – Many goodwill stores carry high quality clothing. You may have to spend a few extra bucks on tailoring, but it is well worth the additional cost. Don’t let your ego get in the way. 30% of the rich people in my study didn’t.
  7. Downsize Your Home or Apartment – For most, a home or apartment is the most expensive part of the spending budget. Downsizing into a less expensive home or apartment will save you thousands of dollars in interest, taxes and repairs every year. Keeping your housing costs to below 30% of your monthly net pay should be the goal.
  8. Bargain Shop – Far too many make spontaneous purchases, paying much more than they otherwise would. That’s a Poverty Habit. Shopping for bargains and taking advantage of sales events is a smart money habit.
  9. Stick to BYOBs – There are many restaurants that do not sell alcohol, beer or wine and allow you to bring your own spirit of choice into their restaurant. Restaurants mark up liquor sales by as much as 100%.
  10. Vacation at Timeshares – Here’s the deal – those who sell timeshares significantly discount the cost of a 3-5 day vacation in order to get you into their timeshare. Your only obligation is to sit through a 2-3 hour sales pitch. Sure, it’s a nuisance but it can cut your vacation costs down by 50% or more. Is 2-3 hours of suffering through a sales pitch worth a $1,000?

Saving money is a process. Accumulating wealth is a process. It’s all one big process, this thing we call financial success. But if you don’t have a process or adopt good money habits you will never be able to save. It just won’t happen. When you develop good money habits you feel like you are finally in control of your life. It’s empowering.

 

 

 

 

Thomas C. Corley About Thomas C. Corley

Tom Corley understands the difference between being rich and poor: at age nine, his family went from being multi-millionaires to broke in just one night, due to a catastrophic fire that destroyed his Dad's thriving business. For fourteen years they struggled with poverty. There were eleven in Tom's family, and they lived in constant fear of losing their home.

Driven by the desire to unlock the secrets to success and failure, Tom spent five years studying the daily activities of 233 rich people and 128 poor people. He discovered there was an immense difference between the habits of the rich and the poor. During his research he identified over 300 daily activities that separated the “haves” from the “have nots.” Tom decided to write a book to share what he learned. That book, Rich Habits: The Daily Success Habits of Wealthy Individuals (1st Edition), went on to become an Amazon Bestseller in the United States forty times over a three year period. To give you some perspective, in order to be a true Amazon Bestseller in the United States, where you actually receive a specific Bestseller designation from Amazon, you need to be in the top 100 of all books sold by Amazon in the United States in a given day. Rich Habits did that for nearly thirty straight days, rising as high as #7, eclipsing such Bestselling authors such as Stephen Covey, Robert Kiyosaki and J.K. Rowlings. Imagine that - an unknown, first-time, self-published author selling more books than J.K. Rowlings!

Tom now travels the world, sharing his Rich Habits and motivating audiences at industry conferences, corporate events, universities, multi-level marketing group events, and global sales organizations’ presentations and finance conferences. He has even spoken on the same stage with famous entrepreneurs and personal development experts, such as Sir Richard Branson, Robin Sharma, Dr. Daniel Amen, and many others.

Tom has shared his insights on various national and international network, cable, and Internet television programs such as CBS Evening News, NBC News, Yahoo Financially Fit, Money.com, India TV, News.com Australia, and a host of others. He has been interviewed on many prestigious nationally syndicated radio shows, including the Dave Ramsey Show, Marketplace Money, and WABC.

Tom has been featured in numerous print magazines—such as Money magazine, Inc. Magazine, SUCCESS Magazine, Entrepreneur magazine, Fast Company magazine, More magazine, Epoca Magazine (Brazil’s largest weekly) and Kiplinger’s Personal Finance magazine—and various online publications, including USA Today, CNN, MSN Money, SUCCESS.com, Inc.com, and the Huffington Post. Tom is a frequent contributor to Business Insider, Credit.com, Bankrate.com and a few other media outlets.

National publicity has garnered international media attention for Tom and his Rich Habits research spanning 23 countries. Broadcast media, online publications, and television throughout Asia, the South Pacific, Europe, the United Kingdom, and Central and South America have shared his powerful message.

In an effort to help parents, grandparents, teachers and adults become success mentors to the younger generation, Tom released his second book, Rich Kids: How to Raise Our Children to be Happy and Successful in Life in 2014. This book was the self-help category winner of the 2015 New York Book Festival and Runner-up in the prestigious 2015 Writer’s Digest Self-Published Book Awards Contest. In 2016 Tom released his third book, Change Your Habits, Change Your Life. This book provides the latest science on habit change as well as more of Tom's unique research on the specific habits that helped transform 177 ordinary individuals into self-made millionaires.

Besides being an author, Tom is also a CPA, CFP, and hold a master’s degree in taxation. As president of Cerefice and Company, CPAs, Tom heads one of the premier financial firms in New Jersey.
 
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Comments

  1. Hi Thomas,
    I appreciate all of the good advice you send in your daily email. As an investment advisor, I know most of these tips, but you do come up with a few that I haven’t thought of! On number six for your list of ways to save, you suggest shopping at Goodwill Stores. Perhaps you could say, Thrift Stores.
    I am on the Advisory Board for The Salvation Army, which runs thrift stores to fund it’s many free programs for the needy. Goodwill Stores, while they are 501(c) (3), their business model is much different that The Salvation Army. The Goodwill sell franchises and pays it’s management staff very well.
    I feel that if people knew the difference between The Salvation Army and Goodwill, they would want to shop at a Salvation Army Family Store, rather than at a Goodwill Store. 🙂
    Thank you so much for all that you do to help people become successful! I wish you continued success.
    Sincerely,
    Kathleen Owens
    Investment Advisor
    Alta Pacific Wealth Management
    27201 Puerta Real, Suite 235
    Mission Viejo, CA 92691

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