Millennials — your age is generally roundabout to have been born between 1981 and 1996 — face an incredible set of their own hurdles with respect to finding and sustaining financial stability. Specifically, you’re dealing with incredibly high records of student loan debt, skyrocketing living costs and historically low rates of homeownership which, coupled with the personality traits of your generation, can collectively make financial planning feel like arduous, never-ending work. Don’t fret, there’s good news. As long as you have the motivation to stick with short- to mid-term financial goals, you can achieve financial success.
Charting Your Course: Financial Planning Considerations for Millennials
Financial planning for millennials is an extremely broad subject. However, there are certain aspects that couldn’t be left out. Here are the five main points to consider: Budgeting For Debt Repayment: One thing that many millennials have in common is student loan debt. If you have such debt, you need to come up with a smart budget with the goal of paying off some or all of that debt. Try to set aside a fixed amount every month that you are able to dedicate to your loans. And if necessary, consider income-driven repayment plans for your loans. (See our blog post “Creating a realistic budget for millennials” for more information on budgeting.) Look for alternative saving routes: Our rising costs of living also means that a conventional savings goal such as a down payment on a house can seem to be so far down the road. Look for alternative saving routes, even if they are only temporary, such as one of the new high-yield savings accounts or perhaps employee-sponsored savings vehicles if they are offered by your employer. What would Miller have thought of automatic savings programmes now available from a number of banks that let you move part of your paycheck to an account designated for savings? This automatic savings approach makes saving effortless. Plant the seeds of your retirement: Debt should never be a deterrent to investing for retirement. If you start making small, regular investments early on, your nest egg can snowball over time, thanks to the magic of compound interest. As millennials, you have the advantage of a long investment horizon. Start with a well-diversified portfolio containing low-cost index funds, to capture long-term returns. Robo-advisors are an ideal choice for millennials who want low-cost, technology-mediated wealth management.
Building Wealth Despite Debt: Strategies for Balancing Goals
Just because you are paying down your student loan doesn’t mean you can’t also save for other goals as well. Here’s how. Debt: Should you do the debt avalanche or the debt snowball? Debt Avalanche (high-interest-rate first, regardless of balance.): Use this strategy if you are risk-averse (scared of losing money), generally frugal, or like to maintain a very diversified portfolio of investments. DEBT SNOWBALL (smallest-balance debt first, regardless of interest rate): Prone to doubt, needing a lift in your spirits, or compulsive? Use this strategy, even if you have to pay higher interest rates as the small balances come off and you accrue higher levels of debt. Want to find other good strategies for paying down debt? Then please visit our blog items on debt repayment strategies for millennials. Negotiating Lower Interest Rates Aggressive paydowns can save you serious cash over the life of your loans, so have a look through your paperwork, especially your loan service or servicer. If you’ve been making your payments on time every month and you’ve already paid your loans for a number of years, then you might as well call your loan servicer and negotiate lower interest rates on your student loans. There are plenty of loyalty programmes and refinancing options out there that will save you serious money over the life of your loans. Increase Income: Figure out how to increase your take-home pay by requesting a raise, seeking additional streams of income (a side hustle, if needed), and getting additional certifications to increase your earning potential. Any additional income can be utilized to pay off debt with increased velocity and accelerate your saving goals.
Beyond the Numbers: Prioritizing Financial Wellness
Plugging numbers into financial spreadsheets is only half the story. When it comes to your money, priorities and concerns move a mere line item on a page. Financial wellness means embracing the emotional, psychological side of money. Here’s how to get there. Dealing with Stress: Develop healthy ways to deal with financial stress – exercise, meditation, talk therapy, even a daily affirmation are all good options. Learn financial content: Every journey towards an elevated living standard starts with learning your ways around financial principles – knowledge of budgeting, investing, debt management and more. There are a plethora of websites and financial literacy courses out there that can turn you into a money savvy individual, ready to take on the responsibility of money management. Healthy financial habits are born of tiny, consistent actions Given consistent care, every seed grows, so a focus on healthy financial habits can likewise yield positive results. Habits will help you stay on track; for instance, regularly tracking your spending, setting financial goals such as a savings target, and regularly reviewing your budget will get you there. (You’ll find additional tips and ideas for managing your resources for the long term in our article ‘Building financial resilience for the long term’.)
Taking Control: Empowering Millennials to Build a Secure Future
While the reality of limited financial options for millennials looks different than it did for older parts of the workforce, that doesn’t mean that you have to be resigned to a life of eternal financial instability. Even those facing the toughest financial challenges can develop a framework that sets them on the path to financial security. Start small: by creating a realistic budget for yourself, providing a clear overview of your incoming and outgoing financial streams, and alternate ways to save or pay down debt, you can set the groundwork for your financial life. Financial health is a marathon, not a sprint, so keep your eyes firmly on your long-term goals, choose the healthy habits that make sense for your requirements, and find the motivation to stay engaged in your financial matters. No matter what your age or setbacks, with the right platform and mindset, you can overcome your financial obstacles and build yourself a rosier financial future.
