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Alternative Cash Solutions for Millennials Before Getting a Second Job

M Caton 2014
Maria Caton, CFP®, ChSNC®, AAMS®
Senior Vice President, Manager of Financial Planning Services
[email protected]
(585) 419-0670 x50666

According to a recent Bankrate report, more than 50% of millennials have a “side hustle.” Finding a way to earn extra cash to pay down debt or invest in your future may ultimately be a prudent strategy to help with limited cash flow. But before making that decision, it may make better sense to evaluate the foundation of your financial situation.

First and foremost, know where your money is going. Some people have a natural tendency to budget. It provides them with a sense of comfort knowing they are living within their means and whether they are on track to meet their goals. For others, budgeting is constricting, challenging and unnatural. Regardless, it is a necessary task for anyone who wants to create efficiencies in their cash flow management. There are ample resources available to help track expenditures for review, from spreadsheets to online tools such as Mint, PocketGuide, or Clarity Money. Many are free and aggregate all financial accounts to help organize and track your spending. Most importantly, it allows you to understand where your money is going so you can determine what expenditures are important and necessary and others that are non-essentials.

Adhere to the 50/30/20 rule. If you still are challenged with tracking your money, a simple way to budget is to adhere to the 50/30/20 rule. In a nutshell, 50% of takehome pay is allocated to needs, 30% to wants and 20% on savings or paying off debt. At the very least, it requires you to spend within your means and gets you thinking about your regular recurring expenses, or essentials, versus your wants, or non-essentials.

Utilize a credit card. If you are confident in your ability to spend only what is within your means and you have a strategy to pay off your debt or increase your savings, utilizing a credit card is preferential to using a debit card. Credit cards allow you to earn cash back, provide rewards on spending, and take advantage of perks that debit cards don’t offer. Additionally, they allow you to build credit and provide protection if your card is lost or stolen.

Financially re-evaluate housing costs. If you are in the fortunate position of owning a home, it may make sense to investigate refinancing. Generally, if you can reduce your interest rate by 2%, it can make a lot of sense. Other ways of reducing your housing costs can be downsizing or looking for a roommate. As a general rule, housing costs should never surpass 30% of your gross income. If you rent, this would include utilities. For homeowners, this would include mortgage interest, property taxes, and home maintenance.

Consider what cash benefits might be provided by your employer. If your employer offers an employer-sponsored retirement account, take advantage of it. In many plans, an employer will agree to match the funds you contribute up to certain amount. That match is virtually “free” money. You should always contribute enough to capture the match.

Specifically related to health, Employee Wellness Programs typically offer employees a discount on their insurance premium, paid time off, a contribution to an HSA (Health Savings Account) or HRA (Health Reimbursement Arrangement), or a lower co-pay or deductible as an incentive.

Lastly, many companies have augmented their Employee Benefits programs to encompass more than what has been historically offered. These can include the aforementioned health wellness programs but also include professional development opportunities and memberships, financial wellness programs, and discount programs.

Sometimes getting a second job is necessary to make ends meet. However, it should be considered only after a thorough review of your financial situation has occurred. Looking at all available resources and opportunities can often provide the bridge needed to avoid the additional job.

This material is provided for general information purposes only. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust or its affiliates, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.