If you were born between 1981 to 1996, you can probably relate to the 54% of millennials who feel stressed and anxious about money. Coming out of the Great Recession just as you’re trying to figure out this whole #adulting thing can do that to you!
The economic downturn created a snowball effect that you might still be feeling in different areas of your life. Although financial decisions will always have to be made, there are a few ways to get a handle on big-picture issues right now. Here’s the best financial advice for millennials.
1. Revisit Your Student Loan Terms
As a college freshman, it was too easy to take out student loans without fully understanding what you’ve signed up for. According to a survey by Student Loan Hero, as many as 53% of student loan borrowers thought that their income was considered while on a Standard Repayment Plan, the default plan for federal loans.
But if you’re struggling with monthly student loan payments on top of basic essentials (e.g. rent, groceries and utilities), there are repayment options that can help. Talk to your lender to explore an Extended, Graduated or Income-Sensitive Repayment plan, or one of the four Income-Driven Repayment Plans available:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Keep in mind that these repayment programs extend your loan term from 10 years, to 20 to 25 years. This makes monthly payments more manageable if you’re living paycheck to paycheck, but it also means you’ll spend more money on interest charges over time.
2. Build an Emergency Fund
Hey, life happens — but life can feel like an extreme crisis if you’re among the 24% of millennials who report having zero personal savings. An emergency fund helps you stay above water during an unexpected expense (looking at you, busted car transmission).
Aiming for a $1,000 “Oh Sh*t! fund” is a good starter with the goal of ultimately saving three- to six-months worth of your expenses. Don’t worry if you can’t set aside a grand in one lump sum. If your employer offers direct deposit, see if you can automatically deposit a percentage of your paycheck in your savings account and send the rest to your checking.
You can also set up auto-transfers from your checking account to your savings account each payday so you’re still saving money in the background. Rounding up your everyday debit card purchases is another way to check this off your to-do list — banks like Bank of America and Chime have this option.
3. Take Care of Your Retirement
Unlike previous generations that relied on a sizable pension in retirement, millennials are struggling with reaching their retirement goals. In addition to the death of pension plans, more millennials aren’t working for traditional employers. Instead, 26% of millennials consider themselves part of the “gig economy” (e.g. driving for Lyft or Uber, freelancing, or short-term contract work).
If you don’t have access to a 401(k) through an employer, that doesn’t mean you’re stuck working into your retirement years (unless that’s your thing). No matter where you are in your professional career, starting late is better than never starting.
New apps on the market are making it easy and affordable to invest in your own retirement. Acorns, for example, is an app that allows you to round-up change from daily purchases to deposit into an Individual Retirement Account (IRA) which is easily tracked online or on your mobile device.
4. Get Ahead of Your Child’s Education
Helping your kids avoid the same mistakes you made while growing up isn’t guaranteed. But you can buffer how much they rely on student loans in the future. 27% of older millennials are already saving for their child’s education, but nearly half of millennials don’t know about 529 savings plans.
A 529 plan not only funds your kid’s private school or college education, but it’s also considered a tax-advantaged account which means any money it earns is tax-free when you need to use it.
5. Do Regular Money Check-Ins
With new life stages headed your way — starting a family, becoming a homeowner, switching career paths, or personal bucket-list items like traveling more — checking in with your finances at least every month helps keep you on track.
There are a lot of money management apps out there that easily work these check-ins into your busy schedule. Apps like Mint, YNAB and Wally give you a bird’s-eye view of your budgets, spending habits and monthly expenses so you’re better equipped to reach your financial goals. Even better — you have fast, on-the-go access to your dashboard through your mobile device.
Do Your Best With These Financial Tips for Millenials
Tackling these long-term money goals can sometimes feel paralyzing — you might catch yourself saying something like, “I can never get to all of this,” “Where do I even start?”, “Am I doing this right?”
Breathe. You’ll be OK.
Start with one goal that’s most important to you, go at your own pace and you’ll already be steps ahead of where you were yesterday.