If you’re a millennial or know one, you’re probably aware of the unique financial challenges this generation faces. Many factors play a role, including student loan debt and competitive job markets, but there are also reasons for members of this generation to be optimistic about their futures. With solid money management skills, good financial planning, and smart choices with your discretionary spending, you can be well on your way to a financially stable future. Here are some basic financial tips for millennials.
Where are you know?
Taking a good look at your current financial reality is the best place to start when planning for your financial future. This can be a day-to-day consideration, like how much you spend on going out to eat or analyzing the return on investment (ROI) for your business over the past year. In order to take the first step, you have to find the trailhead. So, look at how your income, bills, discretionary expenses, existing debt, and investments balance out. Then you can come up with ways to balance them more effectively, such as hiring a credit repair company or simply cutting back on Starbucks runs.
Establish your financial goals.
Money has a way of disappearing if you don’t prioritize where it’s going and earmark it. To get started, here are a few questions to ask yourself.
- What do I need right now? (Tune-up on an aging vehicle)
- What do I want right now? (A new car, a hiking trip to the Grand Canyon)
- What comes first? How can I save for both simultaneously?
- What comes next? (A home closer to work, find a new job)
- What do I need and want long-term? (College for kids, a retirement fund)
- How can I prioritize? (Rank 1 to 10 of importance, create a spreadsheet)
- How do I decide how to save for each goal? (Separate bank accounts, hire a financial planner)
Build your budget.
You’ve targeted where your money is going and established your financial goals. Now it’s time to plan what you want to spend your money on going forward. Determine exactly how much you have leftover each month and take baby steps in directing the cash flow in a way to get a good foundation going for your financial goals.
A positive and impactful way to start out is to add to your retirement fund or emergency fund immediately. Moving forward, set aside enough each month for the goals most important to you and adjust discretionary spending accordingly.
Speaking of, set up an emergency fund.
It’s never too early or too late to establish an emergency fund. Financial setbacks happen, but an emergency fund can help keep a setback from escalating to a financial crisis. At the very least, it can keep you from going further into debt. Things to consider when deciding on how much you need in your emergency fund include health, job security, debt, and income. Then, designate a percentage of your income each month for each factor.
Careful with the credit cards!
Although credit cards are practically a necessity, that doesn’t mean they have to be overused. Do your homework concerning credit card companies and their policies.
- Read the terms and conditions.
- Know your interest rate and how it’s calculated.
- What are the hidden fees, like late and over-limit charges?
- Look for incentives or rewards that would be most beneficial for your situation.
In addition, know going-in how much you can put toward the balance each month to avoid overspending. It’s also best not to charge more than 35 percent of your credit limit unless there’s an emergency.
Face your existing debt.
No one wants to face their student loans head-on, but there’s really no other option. You’re not alone, however. 86 percent of millennials have substantial debt. Determine your repayment options and start making a dent as soon as possible. A credit repair company can help you expedite the process of cleaning up your credit and take a lot of the time and worry off of your shoulders.
New borrowing can create a devastating snowball effect.
Don’t fall into traps like over-rationalizing reasons you might need a new credit card or a new car loan. Ask yourself these questions first.
- Is it necessary?
- Is it the best possible deal?
- What will it cost me over time?
- Can I really afford another payment each month?
- Can I borrow when I’ve paid off a certain percentage of my existing debt instead?
- How will it change my quality of life?
Take advantage of current technology.
There’s an app for just about everything these days. That includes money management and ways to prioritize and calculate spending. Most have built-in calculators to simplify budgeting tasks. Some will work better for your financial future than others, so play around with a few before deciding on one.