10 Things Millennials Should Know About Financial Planning
Help from a financial advisor may be just what millennials need in order to get on the right track with their spending.
When you become an adult, chances are that you start taking on a lot more responsibilities than you did when you were a kid. This means you acquire the need to be financially responsible. For some people, like millennials, this may be a rude wake-up call, but a necessary one, to say the least. There are things that all millennials should know or keep in mind when thinking about financial planning. Before we cover that, let’s go over what a millennial is.
What is a Millennial?
Millennial is the name of the generation of people born between 1981-1996, which makes them about 23-38 years old. They are a generation which is starting to get into the habit of making large and important financial decisions, including things like taking loans out to purchase a property and more. This group of people may feel like they are poorly educated on the process of financial planning and what it involves. Here are some things all millennials should know about financial planning:
1. Set Financial Goals
When you figure out what you want is when you will be able to establish a kind of financial freedom that you can live with. Without a goal, it will be hard for you to save your money or allocate your funds in a way that will benefit you in the future.
2. Set up an Emergency Fund
Emergencies happen, and most of all, they happen when we least expect them. It is crucial for you to have an emergency fund set up, just in case. A financial advisor may suggest having about 6-12 months of savings set aside for these kinds of situations, but they vary. Getting in contact with one about your specific situation will give you a better idea.
3. Stop Living Paycheck-to-Paycheck
Waiting for that next paycheck so you can pay your rent or mortgage is no fun. Chances are that there are ways you can cut costs in some way. Getting together with a financial planner or advisor can help you figure it out.
4. Write Out Your Expenses
Knowing how you are spending your money is important, and it is a way that you can cut back on unnecessary costs. Things like eating out too often can end up saving you a lot more than you think if you were to cut back on them.
5. Learn About Credit Scores and How They Can Impact You
If you haven’t heard about a credit score, it is time for you to look into it. This credit score can help you in more ways than one. It is how you will be able to qualify for a better mortgage loan, purchase a car, and more. It is a factor that impacts you both negatively and positively, so getting on top of it sooner is better.
6. Pay Off Student Debt
Many millennials have either graduated college or are still in school. Either way, student debt is something that is taking a toll on many of them. Developing a plan to set aside some of your regular income to pay off your student debt is a great place to start.
7. Avoid Credit Card Debt
As soon as you become 18 years old, you will likely start to receive offers for credit cards. Though developing your credit score early can be beneficial in some cases, it is not the right path for everyone to take. Avoiding credit card debt is an important step when it comes to financial planning and millennials. If you already have student debt, a credit card will just be another burden for you to have to struggle to pay off.
8. It’s Never Too Early to Save for Retirement
It may seem far, but it is closer than you think. Many millennials believe in the YOLO or “You Only Live Once” mindset, which leads them to spend as much as they can while they can. However, this can hurt them in the end. Investing in a retirement plan should begin with your first job. Your advisor can help you find one that works for you.
9. Invest Your Money
Not every investment is a good one, but making small investments at a young age can benefit you in the future. If you have an excess amount of money after paying off debt and saving, you can turn to investments. Your financial advisor will be able to help you plan this out before you take the dive.
10. Start Early
Starting early will help you in the long run, make you more financially responsible, and give you a sense of reassurance that you are doing well when it comes to your funds.
Millennials are young and have time to think about or change their financial planning process. It is important to get started and get on the right track as soon as possible. Working with financial advisors can provide you with that personalized care and advice that you need.