A recent survey revealed that 70 percent of millennials do not feel that high school or college prepared them to be able to handle their finances as an adult. But, we all know that understanding the basics of money management is vitally important in the world of adulting. Here are five financial tips for millennials to help get them on the road to financial stability.
This post is sponsored by CreditRepair.com. All opinions are mine alone and are honestly conveyed.
The spending habits of the millennial generation is quite different than their parents or grandparents. And while the economy, the job market, technology, and many other aspects of how we live life daily has changed, solid financial principles have not. Implement these financial tips to get your finances on track:
Set a budget
Creating a budget is the first step in getting a handle on your finances. This will help you to lay out all of your monthly bills and expenses that need to be paid. Next, figure out how much money you have coming in each month. And finally, determine out how much is left over—this is the discretionary money that can be used to pay for the wants in life.
Learn how to cook
What does learning how to cook have to do with handling finances? Actually, quite a bit. A 2017 study by Bankrate found that the average millennial dines out or gets carry out at least five times per week, 29 percent of millennials buy coffee out at least three times per week, and 52 percent go to a bar at least once during the week. While any one of those stops, in particular, may not be overly costly, adding up all of these expensive habits for the week is definitely hurting millennials’ budgets. Yes, it takes more time—and a bit of skill to learn—but cooking your own meals, and making your own coffee and mixed drinks, can save you a lot of money in the long run!
Do you suffer from the fear of missing out, also known as FOMO?
Your best friend just pre-ordered the newest iPhone, and all of a sudden your smartphone from last year seems so outdated, but you really can’t afford the upgrade right now. A group of friends that you like to hang out with invited you to go to dinner and a concert next month, but you know that little adventure will end up costing you several hundred dollars—and you really wanted to put that extra money toward student loans.
It can be hard to make mature money decisions that will put you in a better financial position, especially when it seems that everyone around you is having fun—and, of course, you want to be out there having fun too! But, you can’t allow your desire to be accepted by others control your spending habits. You must learn to prioritize your needs over your wants. Stop worrying about what others think. When it comes to your budget, you have to live within your own means, and constantly comparing your life to others is not a good habit. So instead, learn how to have fun on a budget—and invite your friend too!
Pay yourself first
Pay yourself when you get paid. It kind of sounds silly to pay yourself first, but when you think about it, it makes a lot of sense. As soon as you get paid, allocate a portion of that money toward savings and retirement. If you can, set this up to automatically come out of your paycheck and go directly into a different account—that way, you don’t have to worry about it hitting your checking account and getting spent.
- Set up a personal savings account for emergencies. It is a good idea to have a savings account large enough to cover three to six months of household expenses—just in case.
- Open a traditional or Roth IRA. Besides having an emergency savings account and being ready for the unknown, make sure to plan for the security of your financial future. Contributing to a traditional IRA can give you a bit of a tax break up front, while putting money into a Roth IRA will allow for tax-free growth on your investment.
- Participate in your employer-sponsored 401k plan. Don’t turn down free money! Most employers offer some sort of matching contribution when you are enrolled and contributing to the company’s 401k plan. So, for example, if you contribute one percent to the 401k plan and your employer matches that, then you are adding two percent of your income each month, but only having to contribute one. And that money is typically taken out of your paycheck pre-tax!
Clean up your credit
Do you pay your bills on time? Are there collection accounts, bad debts, or old items showing up on your credit report? If your credit is less than perfect, it may be costing you extra money each month.
How is it costing you money to have bad credit? Whenever you apply for a new credit card, auto loan, or home loan, the potential creditor takes a look at your credit score and assesses your credit-worthiness, based on your credit score. It is generally considered a good credit score if that number is 700 or above. But if your score is below that, even though you may get approved for the loan or line of credit, you may not be getting the best rate. And when you get a higher rate, it results in a higher payment… which results in a higher monthly budget.
So what steps can you take to increase your credit score?
- Make sure to pay your bills in a timely manner
- Pay down credit cards or other out-standing debts
- Settle collection accounts or bad debts that are still showing on your credit report
- Seek a credit repair professional. If you don’t know where or how to start, you may need the help of a professional who can work with you to identify ways to increase your credit score and assist you in taking the necessary steps throughout the credit repair process.