Live within your means: the golden rule for millennials

Posted by Robin Powell on March 28, 2022

Live within your means: the golden rule for millennials



The millennial generation has been dealt something of a raw deal, financially speaking. The soaring cost of further education and of buying a house are prime examples. The fallout from COVID-19, the current global turbulence and rising inflation have not made things any easier. But that doesn’t mean that a better, more financially independent, future is unattainable for young people.

IONA BAIN is an expert in millennial money matters, editor of the Young Money Blog and author of the book Own It! , which helps young people to positively transform their prospects by embracing saving and investing and a responsible approach to spending. Here Iona explains why it’s so important for young people to live within their means — and what they can do keep their spending under control.


Why is it so important for young people to have a budget?

Young people need to have a budget because, without it, they’re flying blind and just can’t make effective financial decisions. “Budget” is a very misunderstood and maligned word. People hear it and think that budgeting sounds really boring and dry and complicated. But, really, budgeting is just about having an awareness of your finances. It’s understanding what’s coming in and going out, and then being able to make decisions that can improve your financial situation both now and in the future.


How should someone go about budgeting?

There are so many ways you can do it. Budgeting has been made so much easier in recent years by these new apps and digital-first banks which provide instant alerts when you spend money and visual tools that give you a really helpful overview of your money. They can be a huge help to any young person who tends to lose track of their contactless spending and online shopping.

Ultimately, the aim of budgeting is to achieve that nice balance between your income, your spending, your saving, your donating, and your investing. So schedule some time to look at your accounts once or twice a week, and then make some key decisions that will take you forward. It could be cutting back on spending, or opening a savings account, but just make a start.


When it comes to looking at your outgoings, what are the important areas to focus on?

I would recommend tackling what I call “the easy wins”. So make sure you’re on the best possible plan for your energy bills, your mobile and broadband contracts, and your insurance. You can either haggle with your existing provider, or switch to cheaper alternatives.

Then there are your food costs. Cooking at home with simple ingredients that you can put into multiple meals ⁠— that is the most effective way to save money. Ready meals, takeaways, and elaborate recipes are really going to drain your finances in the long run.


What about personal behaviour? How can young people keep on top of how behaviours can affect their outgoings?

There are two concepts that are particularly important ⁠— the convenience premium, and emotional expenditure. The convenience premium is where you’re spending money because you’re in a hurry and you’re not that well-organised. You can tackle that quite easily by giving yourself more time, clarifying your priorities, and just getting better organised.

The second concept of emotional expenditure is where you’re spending money because you’re bored, or you’re down in the dumps and you’re looking for a pick-me-up. That’s incredibly common and was especially noticeable during the COVID-19 lockdown. Lots of young people are really spending as a coping mechanism and, in that situation, you may want to keep a spending diary to become aware of some of the more unhealthy spending habits that you’ve got into. Then, you can take steps to tackle them ⁠— maybe by coming up with a list of free activities that you love, or scheduling a regular digital detox ⁠— which will be good for your finances and your mental health.


One particularly pervasive behavioural problem is “lifestyle creep”? What exactly is that, and what can people do to protect themselves against it?

Lifestyle creep is something that occurs when our income rises and our spending goes up to match it. So, our lifestyle becomes more luxurious, more high-maintenance, and items that we once thought of as treats then become run-of-the-mill.

Lifestyle creep is dangerous because it can squeeze out our ability to save for the long term, because we’re only concerned with upgrading our lifestyle in the here and now. It can also make us less grateful, less resilient, and more financially fragile.

So, the way we can combat lifestyle creep is to commit to that balance between spending, saving, and investing at all times. Then we need to think about the real cost of our lifestyle. We need to think about how many hours we worked to buy something, and then really ask ourselves: is it worth it? It may sound cheesy, but being grateful for what we already have ⁠— particularly the free things in life ⁠— really is the best tonic. Not just for our finances, but for our overall mental wellbeing as well.


You can read more of Iona’s work on the Young Money Blog, and learn more about her book Own It! here.



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Here are some other recent TEBI posts we think you will enjoy: 

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If you’re new to investing, TEBI founder Robin Powell and fellow financial blogger Ben Carlson have written a book that you really ought to read. It’s called Invest Your Way to Financial Freedom, and it’s published by Harriman House.

Primarily written for a UK audience, the book has no hidden sales agenda and is based on peer-reviewed academic evidence. It explains, in simple terms, how young investors can develop good habits, save a fortune in unnecessary fees, and achieve financial freedom many years earlier than they otherwise would.

You can either buy the book direct from the publisher or via Amazon:

For those in the UK, 

Buy the paperback via Harriman House here

Buy the paperback via Amazon here

Buy an audio version on Audible here

For those outside the UK,

Buy the Kindle version via Amazon here


© The Evidence-Based Investor MMXXII






Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.


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