Have you made your New Year’s Resolutions yet? Have you included financial resolutions?
Millennials Face Financial Challenges to Fulfilling New Year’s Resolutions
Many millennials have New Year’s Resolutions that include saving more, losing weight, becoming healthier, enjoying life, and spending more time with family and friends. In this, millennials are not much different than other age groups.
One thing that sets millennials apart, however, is the mountain of debt many carry as a result of student loans. Although you are the most educated generation ever, you are also among the most underemployed. This means that millennials have specific issues that affect your financial status and should affect your financial resolutions.
Fulfill Your Financial New Year’s Resolutions
How do you fulfill your resolutions? What, specifically, should you do? Is there any way to make it easier?
Mercer Savings Bank offers the following advice:
- Budget. Mint and Every Dollar are free apps designed to help with budgeting, but the real impetus must come from you. Economize by eating at home, conserving gas and finding free entertainment. Don’t take on more debt than you can handle (even if your student loan may already appear to fit that criterion).
- Start an emergency fund by saving your change, selling your junk, working a second job or having part of your paycheck deposited in a separate savings account.
- Save any way you can. Try Digit, an app that monitors your checking and savings accounts and transfers money from your checking to your savings every few days if you can afford it.
- Take advantage of payroll deductions by investing in a 401K through your employer. Your employer matches the amounts you contribute up to a certain amount. And although you are penalized 10% if you withdraw money from your account before the age of 59 ½, the money is nevertheless available in case of emergency.
- Invest in an IRA (Individual Retirement Account). Some employers offer this benefit, but you can open an IRA on your own. You can start an IRA with as little as a $100 deposit at many banks. Decide whether you prefer a traditional or a Roth IRA. A traditional IRA is tax-deductible on federal and state returns for the year you make the deposit but withdrawals in retirement are taxed. A Roth IRA has no tax benefits, but earnings and withdrawals are tax-free.
- Build up your savings before paying off debt. Enjoy the satisfaction of paying off debt in large chunks instead of dribbles.
- Use your credit card wisely. Pay off your credit card balance each month if possible. Pay on time. Do not max out your card. Consider automated payments to ensure your card is paid on time.
- Pay your bills on time to avoid damaging your credit. Bad credit will cost you in job opportunities, higher car and rent payments, and higher insurance rates.
- Create a strategy to pay off your student loan debt. Student loans are usually the biggest debt Millennials have…until you buy a house. Paying it as soon as possible minimizes interest payments. Check to see if student loan forgiveness programs are available and if consolidation will save you money.
- Consider a Health Savings Account (HSA) or a Flexible Savings Account (FSA) to save on future healthcare costs. HSAs are only available if your employer offers a high-deductible health plan or none at all. HSAs are also helpful if you change jobs or strike out on your own, but there are significant differences you should consider before choosing one or the other.
Too confusing? Too difficult?
Want sound financial advice about IRAs and other methods of saving?
Ask the experts at Mercer Savings for advice. We’ve been advising customers for more than 125 years. Our financial knowledge can help you fulfill your financial New Year’s resolutions.