With millennials increasingly finding themselves taking on adult responsibilities and facing financial obstacles, a growing number of financial experts are specifically targeting the group and offering advice for handling their financial future. Here are a few pieces of wisdom that are being passed on to millenials as they try to gain more financial independence.
Tip #1: Save, Save, Save
In general, the amount of money squirreled away into personal savings accounts increases during a recession. This is largely because concerns about financial instability inspire people to save their dollars rather than spend them freely. Yet, according to a 2014 Wells Fargo Study, only 55 percent of the 1,639 millennials surveyed said they had started to save for retirement. Among those who hadn’t started saving, most said they planned to start at 35. The study also found that female millennials were worse off than males, with men having saved twice as much as women. Most financial experts recommend saving between 10 to 20 percent of your income for retirement.
Tip #2: Reduce Your Debt
According to the 2014 Wells Fargo Study, 40 percent of millenials listed debt as a top concern. Yet, nearly half of those surveyed said more than half of their income goes toward paying off debt. Even worse, 56 percent reported living paycheck to paycheck. More specifically, the study found that millennial debt consumes the following percentages of their paycheck:
- Medical Debt – 5%
- Auto Loan Debt – 9%
- Student Loan Debt – 12%
- Mortgage Debt – 15%
- Credit Card Debt – 16%
As a result, many millennials are so busy paying off debt that they simply do not have money available to put into savings. Therefore, for many millennials, controlling spending in order to reduce debt is the first step toward saving for retirement.
Tip #3: Invest in the Market
Since many millennials witnessed the market crash and experienced its fallout, many are also reluctant to invest in the market. Unfortunately, this fear of investment is likely to work against many millennials because they will not invest their money aggressively enough to get the real benefits. Millennials need to get past their fear of investment and allow the market to help them better save and prepare for the future.
Tip #4: Consider Finances Before Saying “I Do”
Before getting married, millennials need to have serious conversations with their partners about their financial history and current financial situation. If one of you has a bad credit score, it will significantly impact your ability to purchase a home or obtain other loans after you are married. Discuss personal debts and assets before tying the knot and take the necessary action to avoid potential issues later.
Tip #5: Focus on a Career Rather Than a Degree
While getting an education is an important step toward building most careers, it is important to work toward obtaining the necessary skills and knowledge to perform your job. Rather than pursuing an advanced degree for the sake of earning a degree, consider what training and schooling will help you meet your career goals and invest your money and time in those programs instead.