Important Financial Advice for Millennials
As a general rule, young people tend to be far worse at the financial game than their older counterparts. Learning financial skills tends to be a trial and error learning curve for most of us. Having very little money tends to cause a disconnect between financial knowledge and the younger generations. Why take the time to learn finances when you barely have any?
The truth is, though, that young people are making big mistakes with their finances before they have a chance to learn some basic financial skills to help them through life.
With a just a few realizations about personal finance, young people can have a better grasp on their future financial status.
Think About Your Passions
The reality is that the main cause for financial hardship and immense debt in young people is the cost of college tuition. Student debt is a rising problem for our millennial generation and is the biggest non-mortgage debt burden in America. With this knowledge, the prospect of a college education in your future for traditional and nontraditional students needs to be a serious decision. If you decide to attend college you need to be aware of the debt you are accruing and the possibilities of repayment. But, truthfully, not all careers require a college education. Pay attention to your passion and decide on what career path is right for you before agreeing to be buried under a mountain of debt.
Photo Source: Federal Reserve and AIPCA
If the final decision for your future is to attend college, don’t let the conversation stop there. Decide on your plan of action once you start college. There is an obvious difference in what each major will do for your career as well as your financial status and ability to pay off your student loans to keep yourself out of debt. If you’re an artist, for instance, consider a business degree in addition to your art degree as it is more profitable to obtain. Pay attention to the degrees that will help a small business owner and which ones are the most profitable by researching and asking your student advisors. Accounting is one of the most profitable private business sectors in the United States and can be a relevant degree for those in the small business or math related fields. It’s easy to see debt repayment as a faraway issue, but getting the correct perspective on college debt early on is a great way to aid in your financial status before it becomes a problem.
Learning the art of delayed gratification is one of the most important aspects of financial stability. Understand that the best decisions you make financially almost never affect you right away. Make sacrifices that will profit you later in life and you’ll understand the beginning of smart financial planning. Retirement, for instance, is one aspect of millennial finance that is frequently overlooked due to this principal. But retirement is something that every young person should be planning for especially since social security might not exist for our generation. This might seem like a tomorrow problem, but retirement accounts are not something to worry about later. Take advantage of any retirement programs with your employer or start saving with a Roth IRA that isn’t taxed and you’ll thank yourself later.
Nurture Your Credit
Credit is the backbone of your financial situation. Without good credit you’ll have problems buying a car or a home or any other substantial loan at any point in your life. College students may not see the immediate need to nurture their credit, but it’s an absolute necessity later in life. Delayed gratification is a very important aspect of cradling your credit like a newborn. Credit cards can be the enemy for many millennials who are already struggling to stay on top of their finances and keep track of their credit. Fortunately, more millennials are staying away from credit cards than ever before. Credit cards can be an example of good debt and used to build credit but it can be a slippery slope for those that aren’t financially stable. The key is to pay every bill on time, stay away from credit cards if you are unsure of your financial status, and be mindful of how important your credit is to your future.
Be Budget Conscience
Budgeting is a learned skill that only gets better with time. Many young people have the mindset that they don’t need to or can’t budget because of their low income status. Realistically budgeting should be practiced no matter what in order to keep finances in order. You should budget savings into every paycheck as if it was a bill. Many suggest at least 10% of all income should go straight into a savings account. Manage your student loan debt repayment by budgeting for them in every paycheck. Discuss repayment options that work best for your financial situation. With every paycheck and every purchase, consider your budget before anything else and your finances will be under your control.
Personal finance is a tricky thing for many young people and, as a result, they tend to find themselves in sticky financial situations. The goal here is to help our younger generations learn valuable personal finance skills before they make the mistakes that teach you how to make smart financial decisions. The reality is that millennials are intelligent and tech savvy and have the tools needed to have successful financial situations as long as they realize how important their financial stability is to their future.