Wouldn’t it be great to go out a lot without breaking the bank? Well, millennials are doing just that. A recent survey by TD Bank revealed that millennials go out the most when compared with Gen Xers and baby boomers, but they’re spending the least.
TD Bank’s national Consumer Spending Index took a look at the monthly spending habits of consumers as well as their preference when it came to making payments. Researchers found that although millennials make more discretionary purchases and go out twice as much as other age groups, they spend up to 27% less. In addition, millennials are relying less on credit than the other two generations. Instead, millennials are spending more with debit, cash, and checks than with credit cards.
American consumers shell out an average of $1,000 each month on discretionary items like eating out, buying clothes, and travel, and roughly $1,600 each month on bills such as rent or mortgage payments. This comes up to a grand total of $32,000 annually (excluding car payments, debt repayments, or healthcare). Millennials, however, spend about $26,000 annually, which is 27% less than Generation X and 23% less than baby boomers.
Millennials are doing a good job of being frugal, but Julie Pukas, head of U.S. bankcard and merchant solutions at TD Bank, said sometimes skipping the credit cards isn’t a good idea. Some millennials could be leaving valuable credit card rewards on the table. “Surprisingly, younger Americans are spending more with debit, cash, and checks than credit. These payment methods are certainly necessary, but without a balanced spend on credit consumers are passing up cash rewards and the opportunity to build their credit profile. For those who dine out, shop and go out frequently, strategically using credit for those purchases can impact your overall budget,” said Pukas.
- Millennials spent an average of $26,000 a year on discretionary purchases, such as eating out and travel. This is $6,000 less per year than the average consumer.
- Millennials tend to use cash, a debit card and checks for half of their monthly spending and charge just 30% of their purchases.
- Millennials love their coffee. The only category where millennials spent more money than Generation X and baby boomers is on coffee and fast food.
How you can spend less
The TD Bank study revealed that even though millennials made more purchases on retail goods and eating out than the two other generations in this study, their overall spending was lower. If your spending habits aren’t quite as good as the millennials in this study, how can you become more like them? Here’s how:
1. Keep tabs on spending
If you want to spend less, you’ll have to first take stock of how much money is going into and out of your household. Resolve to track your spending for at least 30 days. Write down everything you purchase, even if it’s something small like a pack of gum or bottled water. By the end of the month, you’ll be amazed to see that you were probably spending a lot more than you realized.
2. Set up a realistic budget
Now that you know how much money you’re spending, it’s time to sit down and draft a budget. Once you know how much money you have allotted for each area, resolve to stick to it. You may even want to carry your budget around with you so that you can reduce the temptation to overspend.
3. Get a savings buddy
Tell a close friend or family member about your goal to spend less money. With a money buddy, you’ll be more likely to stick to your goals because someone will be holding you accountable.