Millennials are financially savvy. You have to be. You may be a highly educated generation, but thanks to the nation’s economy, you make less than your parents did at your age.
Thanks to that same economy, you have higher levels of student loan debt and unemployment, and lower levels of wealth and personal income than GenXers and Baby Boomers had at the same life stage, Pew Research Center notes.
But you’re triumphing over adversity: In 2013, you filed a third of all tax returns and earned 1 out of every 6 dollars in income. And your income is certain to grow as you become more established in your professions.
Because the economy is so very different from how it was when your parents were getting started, their advice sometimes doesn’t apply. So you’ve had to figure out things on your own.
But beware of common mistakes that may set back your progress!
Avoid common financial mistakes.
- Start Saving Now. Bank accounts and most certificates of deposit (CDs) compound interest, which can really pay off in the future.
- Start Investing Now. Stock market investments can grow over time and are ideal investments for younger people who can weather a downturn.
- Take advantage of employer-sponsored retirement plans. If your company matches your contributions, you are leaving money on the table if you don’t invest in an IRA or 401K. And although they’re called retirement plans, those funds are accessible—although with penalties—for emergencies.
- Have emergency funds. It’s not easy to save up three to nine months of expenses for an emergency fund. And it’s even more difficult not to spend it (although investing it may help). But the first time you have a real emergency, you’ll appreciate it. Money Under 30 has a calculator that may help you determine the best amount to stash.
- Take advantage of health savings accounts (HSAs). Particularly in these times, when no one knows what’s going on with healthcare, save for every eventuality.
- Budget. It’s easy to budget when your income is high and your outgo is low. However, once you start a family, you have more and more bills. A budget is the only way to make sure everything gets paid.
- Live within your means. Sometimes, when your choice is time vs. money, it seems the more expensive choice is the better one. It isn’t.
- Pay off student loan debt first. Even though your student loans incur a lower interest rate than almost anything else, pay them off first. If you don’t pay and you don’t qualify for deferment or forbearance, interest continues to accrue. If you have a federal student loan, the loan holder can garnish your wages, take your tax refunds, ruin your credit, and send debt collectors after you.
- Watch your credit. Every single generation has fallen into its trap during its youth, so you’re not alone. Bad credit can prevent you from getting an apartment, financing a vehicle, and even getting that dream job.
Because you’ve had to make your own way, it’s sometimes difficult to ask advice. Nevertheless, there are reputable sources of information available. You can even hire a certified financial planner.
However, there’s a less expensive option in your town or nearby—your local bank representative. If you need more helpful tips and advice for your financial situation, contact us. We’ve been helping our neighbors for 125 years