No matter what anyone says, Millennials are so much more than their stereotype suggests. Despite being overwhelmed by student loans, they not only know how to manage debt, but work harder than most to make their dreams a reality. And with so many options available to them, it’s easy for Millennials to realize their goals. However, it’s also easy for some Millennials to get caught up in lifestyle inflation and make money mistakes that can haunt them for years to come. Avoid having to learn your lessons the hard way by following these money management tips!
Money Management Tips for Millennials
- Get out of debt. Ten years after college graduation, do you want to look back and regret the financial decisions you’ve made? Prevent getting into too much credit card debt by making more than the minimum payment and minimize spending. There are two great ways to pay down debt – the debt avalanche and debt snowball methods. The ‘debt avalanche’ method involves making larger payments to the debt with the highest interest rate. The ‘debt snowball’ method involves making larger payments to the debt with the smallest balance. Although the first method may be more effective, the debt snowball method is a psychological motivator for some.
- Avoid lifestyle inflation. During college, you lived frugally because you may not have had a job. But once you get your first job and start having adult responsibilities, you may feel like you need to “keep up with the Joneses.” You see everyone on social media taking lavish vacations or posting about material things. Well, if you do intend on keeping up with your peers, you may just end up in serious debt. It’s best to live below your means. The instant gratification that comes with the swipe of a credit card can land you in serious trouble, and keep you paying interest for years to come.
- Budget. Start budgeting your money so that you can make room for your student loan payments and other expenses. If you don’t know how to do this, use this budgeting worksheet. You might even want to contact a reputable financial planner to help with money management. However, make sure you don’t go broke paying your loans. Create a budget that makes sense for your finances and life.
- Save for retirement. Take advantage of 401(k) plans. It’s important that Millennials contribute at least six percent of their salary to a 401(k) plan (you should work your way up to 12-15% though). Many employers will match up to 50% of the annual contribution. If your employer does not offer a company match, skip the 401(k) and start with an IRA. If you are looking for more control over plan and investment costs, an IRA may be right for you. With an IRA, you can invest in a much wider variety of mutual funds than a 401(k).