If you’re between the ages of 24 and 39, you’re a Millennial. You might have been used to being the nation’s generation of youngsters, but you might be shocked to learn that you are now America’s financial powerhouse. Different service providers, news agencies, blogs, family members, friends — you name it, and they are probably offering you financial tips in one way or another. This can cause anyone to feel paralyzed from the information overload. That’s here at Trust & Will, why we’ve narrowed down the best financial advice for millennials. You might be surprised to find some things on our list that have probably never occurred to you.
Top 5 Financial Planning Tips for Millennials
You should count your lucky stars that time is still on your side. If you’ve been feeling guilty about student loans, credit card debt, or a general feeling of not having control over your finances, don’t worry. You still have time to take the reins and start planning your finances with intention. We all wish financial literacy was a subject taught in school, and it’s critical to get informed before making decisions about your money. Below are the top 5 financial planning tips for your generation:
Set Clear Goals
Once you’ve read some articles on what constitutes good overall financial health and what it takes to get there, it’s time to set some goals. SMART is a recommended framework for setting goals that you can actually stick to and accomplish. SMART stands for: specific, measurable, attainable, realistic, time-bound. By setting incremental, realistic goals, you are more likely to have success. When you achieve these smaller goals, you’ll have a great sense of accomplishment and satisfaction, which will help you stay motivated when you embark on your next set of goals. Perhaps your first goal would be improving your credit score.
Understand Your Credit Score
Much of America’s financial system runs on credit, so your credit-worthiness matters immensely. Your credit score is used to determine whether or not you qualify for loans, such as home loans, school loans, and car loans. Further, your credit score will determine the interest rate when you do qualify to take out loans. The better your score, the more financial leverage you’ll have, and the lower your interest rates will be.
In order to build credit, you’ll need to stay on top of your credit card and outstanding loan debt. Be careful not to close your credit card accounts, which will actually hurt your score. You can improve your credit score by paying your credit card bills on time, and keeping your balances low.
If you have a lot of credit card debt, then make it a priority to pay it off. If you have a high debt-to-income ratio, your cash flow will consistently get tied up in debt repayment. When this is the case, you’ll have an extremely hard time saving and investing your money to grow wealth.
Paying off your credit card debt is a great opportunity to practice SMART goal-setting.
Prioritize Your Estate Plan
Have you ever heard of the terms Trust, or Will? If you have, you probably have brushed them off, thinking they are for the old and wealthy. Contrary to popular belief, setting up an estate plan should be made a priority, no matter your income level or age.
By setting up an estate plan, you’re making sure that your hard-earned investments and assets are protected. Not only that, estate plans can also be thought of as an emergency plan. In case anything were to unexpectedly happen to you, having a proper plan in place will ensure that your wishes will be carried out. Companies like Trust & Will make estate planning a breeze; it’s all online, affordable and easy to set up your estate. Anything can happen to any of us at any time; you are never too young to set up protection.
Simplify Your Budget
There are a lot of ways to save up money, but in this case, simple is best. The more complicated you make it, the hard of a time you’ll have sticking to your SMART goals. There are plenty of apps out there that will make budgeting easy and automated so that you can stick to your financial plan.
Another way to simplify your monthly budget is to set up automatic transfers. You can indicate to your bank how much, and how often you want money to be withdrawn from your checking to your savings account. Experts recommend saving 10 percent of your paycheck each month.
If your employer offers a 401(k) plan, definitely take advantage. Your HR department can help you set up automatic payroll deductions, where your monthly contribution will go into your account pre-tax. In some cases, your contribution might even help knock you down a tax bracket, giving you even more savings. Many employers also offer 401(k) matching, which means they will entirely match the amount you contribute to your account. Definitely take advantage of this benefit, or else you would be giving away free money.
Diversify Your Savings and Investments
Saving up a nest egg is great, but unfortunately it’s not the best way to grow your health. Most savings accounts are associated with minuscule growth rates that will feel glacial in pace. Your savings should be tucked away for emergencies and other funds, such as for travel.
If you want to improve your financial health significantly, you’ll need to start investing. Although you’ll be taking on some risk, there are plenty of ways to invest your money safely. Start by researching various types of investment strategies to get a better understanding of your options.
Many savvy investors will place their money in an array of investments. This is called diversification, and it is an act of spreading out your risk. If one of your investments loses value, you’ll be protected because you didn’t place all your eggs in one basket. By getting started early, your money will grow over time with compound interest, even when you weather market fluctuations from time to time.
If you’ve been avoiding financial planning because you’re afraid of what you will see, know that there is no shame if you are burdened by loans or debt. The first step is to face your fears and get an understanding of your current financial circumstances. Then, set up some goals and start implementing the 5 finance tips we’ve recommended to get yourself in a better financial place. Remember, using the SMART framework is a great way to get started and tackle any financial skeletons you might have in your wallet.
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If you’re a millennial who has yet to create at least their Will (or you have one that needs to be updated) there’s no better day than today!