Millennials have experienced more difficulties in landing jobs and setting out on their own than previous generations. These setbacks can leave them focused more on their current finances than future success, but the two are entwined.
These important actions will help millennials get set for lifelong financial health.
Ditching the Debt
While it’s advantageous to pay off all forms of debt, credit cards should sit at the top of the list. This is because credit cards include revolving debt while things like student loans include installment debt. Revolving debt involves high interest and requires low payments, making it the one that gets many people into financial trouble.
For example, when you purchase something on a credit card, you almost instantly increase the final cost of that item. Unless you pay your balance in full on the next statement, you’ll begin racking up interest charges. Every month you make the minimum payment, you only pay a small portion of your total debt. A big chunk of that payment is going toward interest and other fees.
With that in mind, make sure to read through the terms and conditions before you sign up for a revolving account (credit card). Also, remember to pay off your credit card balance in full (if possible) so you can avoid high-interest debt. Millennials should focus on clearing their credit cards first, then use all the money they’ve freed up to ditch student loans, car payments, etc.
Sticking With a Budget
A budget is essential for long-term financial health. No matter how much money you have, you can’t make the best use of it if you’re not acutely aware of where it goes. If you’re not paying attention, you can easily spend hundreds of dollars a month on non-essentials like fast food or pricey entertainment. That’s not to say that you shouldn’t enjoy these things, but you should slow down enough to make mindful decisions about where you want your money to go.
The best app to help you handle your finances is the Mvelopes app. Mvelopes will help you create and manage your budget, plan for the future and ultimately get you out of any debt you may be in.
Setting Long-Term Financial Goals
Your budget will help you manage your day-to-day spending, but you need to have long-term goals in mind, too. These goals will guide your savings and investments.
Do you hope to buy a home once you’ve freed yourself from debt and saved enough for one?
Identify your long-term goals. Determine what they’ll cost and when you hope to achieve them. These two simple numbers will help you decide how much you need to save each month to meet your goals. As you’re setting your long-term goals, look beyond the next 20 to 30 years. Perhaps you’d like to retire in a luxury community like Fox Hill. Or you’d like to gift your grandchildren with a fat trust fund someday. It’s never too early to save for these long-term goals.
Investing in the Future
Job seekers probably aren’t thinking about their retirement plan when they interview for a position, but perhaps they should. It’s never too early to start investing in your retirement. Ideally, you’ll make contributions to your retirement through every job you hold. Investing in a 401(K) or IRA allows you to take advantage of tax-deferred earnings, while investing in a Roth IRA with after-tax assets typically have no tax impacts with each transaction. Many companies will match your contributions, helping you further pad that retirement fund.
Considering 46 percent of Americans have less than $10,000 saved for their retirement and 40 percent of baby boomer now plan to work until they die, it’d behoove you to think about retirement today so that you’re not stuck barely getting by tomorrow. Your future depends on it.
Taking the future into account now is important for preparing for lifelong success.