Many Millennials, who graduated during a time of job scarcity and enormous student debt, are more than a little skittish about financial matters. After all, in addition to their own challenges, many saw their parents’ generation struggle with layoffs, stock market losses, and the housing crisis. Still, there’s a lot that today’s 20-somethings can do to build a brighter financial future.
Commit to Saving
If you’re living paycheck to paycheck, saving may seem out of reach. But the first step is to make a budget, identifying where, exactly, all of your money’s going now and pinpointing the wallet sucks that are keeping you from saving. Make it a goal to save at least 10-15% of your income, and start by creating an emergency fund with 3-6 months of living expenses. If, after seriously scrutinizing your budget, you just don’t see room for saving, at least commit to saving any financial windfalls—like bonuses and tax refunds – and saving future salary increases.
Looking for Supplemental Income
For many young people who are just starting out, the best way to find money to save is to generate additional income with a side job. If your employer doesn’t prohibit it, you might take on a second job during your off-hours or earn extra cash Ubering or pet-sitting. Or, if you’re a crafty sort, you could try selling your wares on a site like Etsy.
Start Investing Early
Once you have a decent emergency fund, you should start thinking about retirement. Yes, retirement! If your employer offers a 401(k) plan, sign up as soon as you’re eligible because even small amounts set aside while you’re young will add up to a significant nest egg decades from now. And, if your employer offers 401(k) matching funds, be sure to contribute enough of your earnings to max out the match. Otherwise, you’re leaving money on the table.
Manage Your Debt
No discussion of Millennials’ finances would be complete without a word or two about student debt. If you’re carrying a heavy burden in federal loans, you may have options for restructuring your debt to make it more manageable. If your loans are with private lenders, you’ll have less flexibility, but focus first on paying off the loans with the highest interest rates. The same goes for credit card debt. New grads are often bombarded with credit card offers, so it’s easy to get in over your head. If that’s where you are, rip up any new offers and commit to whittling down your debt by refraining from new charges and always paying more than the monthly minimum.
Shape Up Your Credit Score
Being late with payments or, worse yet, defaulting on your credit obligations has a huge and negative impact on your credit score. This may not seem like a big deal if you’re not looking to buy a house or car anytime soon, but it isn’t just lenders who make decisions about you based on your credit score. A poor credit score can cause you to pay higher rates for car insurance in some states. Most landlords and many employers also check credit scores when evaluating candidates.
One way to spruce up your credit is through a secured loan. These loans require you to keep a set amount in a savings share or in a certificate of deposit. These funds secure the loan, so a credit report won’t be pulled when you apply. By making regular payments on your secured loan, you build up a positive payment history which will be reported to the credit bureaus.