Millennials thrust out from their parents’ nest and forced to fend for themselves often find themselves unprepared. Even with a solid starting salary, young people must navigate the confusing financial landscape of bills, loans, and cash flow. Financial literacy is not picked up without work. Further complicating the problem is the lack of personal finance education.
A 2016 study showed only 17 states require even one personal finance class before graduating high school.
Freedom Debt Relief has seen many smart, young people in financial trouble due to lack of financial literacy.They make avoidable mistakes that cost a lot of money in the long run. While we can afford to fail when we’re young, a millennial who manages his finances correctly from the start has a huge leg up. Freedom Debt Relief put together this guide to give personal finance advice to millennials.
Don’t Hide from Your Money
Like shoving dirty laundry under the bed, it’s natural for you to avoid the problem for another day. But ignoring your money will catch up to you. High interest rates on debt cost you your hard earned money. Nowadays, there are many different budgeting apps available that help you get an accurate picture of your finances. Even if you don’t like what you see at first, tracking your income and expense is necessary to find out where your money is going.
Find something you can cut from your budget that you won’t miss. A great option is to cut out cable TV. Use streaming platforms on the computer and put the saved money to better use.
No Fee Checking Accounts
No one should be wasting any money on bank fees. There are banks that offer free checking accounts with no charges for service and no minimum balance requirement. Online-only banks even offer accounts with 0 overdraft or ATM fees. This can save irresponsible users hundreds of dollars. There is no reason to stick with an inferior checking account. Switch now.
Set up Automatic Contributions to a Retirement Fund
By taking money out of your paycheck before you even see it, you are forcing yourself to save. Even if the amount is small, with your broad time horizon means that money could yield huge results. Compound interest turns a little money into a lot over a long period of time. Some employers offer a match on your retirement contributions up to a certain amount. Make sure you contribute that limit each month, otherwise you’re leaving free money on the table.
Don’t Take Advice From Your Parents
Well, at least not when it comes to asset allocation. Freedom Debt Relief has seen many portfolios of millennials that look similar to retirees. The broader your time horizon means you can and should take more risk with your investments. Millennials and soon-to-be retirees have very different financial needs and as such need to invest in very different ways.
Freedom Debt Relief recommends working with a financial advisor. Financial advisors are not just for those with a ton of money. Sound financial advice from an early age can set you up for life. Find someone willing to teach you the basics.
Use Credit Wisely
Credit cards can be your best friend or worst enemy. A responsible user is rewarded with cash back, sign up bonuses and low-interest rates on mortgage and car loans. An irresponsible user will pay sky-high interest rates that can be financially crippling. Freedom Debt Relief implores you to not carry a balance on your credit card. Pay your bill in full each month. By doing so, you build a credit history that allows lenders to trust you will repay them. The low interest rates they give as a result can save you tens of thousands of dollars in the long run.
The most important thing a young person can do is to become financially literate. Surrounding yourself with people who understand finances or getting a financial advisor are great options. Too many young people get themselves into trouble by not understanding the basic concepts of accounting. A young person who is financially savvy can tap into the power of compound interest and turn a little into a lot. Financially literacy will help you have a comfortable and early retirement. Invest in yourself.