Adults from the Millennial generation have gotten a bad rap. Many older Americans look at them as entitled and unwilling to work. This is unfair. Many Millennials are innovators, and they are taking their finances more seriously than previous generations did. However, they are at a disadvantage when compared to their parents or grandparents. Previous generations went to college, but they had much lower student debt loads when they graduated. Additionally, the cost of homes and apartments has gone up in the recent past. In spite of these roadblocks, you can still build a secure financial future if you’re a Millennial.
Negotiate Your Salary
Popular personal Finance guru Ramit Sethi points out that it’s important to get some big wins to really succeed financially. One of biggest wins in the game of personal finance is negotiating a solid starting salary. There are some jobs that do not allow for much in the way of negotiation. For example, many jobs in education have a set salary schedule. The same goes for many union jobs. Most careers in the private sector will allow for some negotiation. Getting a higher salary when landing your first job is the key to making more later in your career. If you can start out at a salary that’s $5,000 higher than the minimum, you could expect to make at least $200,000 more over the course of a 40-year working career.
Build an Emergency Fund
Many financial experts recommend keeping between three and six months of your basic expenses on hand to take care of any emergencies that might come up. Common emergencies could include anything from a blown engine or transmission to an unexpected layoff. If you’ve just started your first job, you may wind up facing an unexpected emergency before you can build up enough savings. If you do run into unexpected financial strain that needs to be addressed right away, you may want to consider accessing money through credit cards or online direct lenders. However, over time, you should be working toward building up a healthy emergency fund. You should put aside a part of each paycheck toward your emergency fund until it reaches the desired level.
Save for Retirement
You’re never too young to start thinking about retirement. Unless you work for a school system or a government agency, it’s likely that you’ll have no pension waiting on you when you hit the normal retirement age. This means you’ll want to start saving on your own. Many employers offer a 401(k) plan, and these company-sponsored retirement plans area a great way to save automatically. Paying yourself first is the best way to make sure that you save some money each month. If you wait to pay yourself after paying off your bills, it’s likely there will be nothing left to save. On the other hand, if you save first, you’ll have to get creative to pay your bills. This might involve cutting back on expenses or earning some more money. If your employer does not offer a work-based retirement fund, you can still set up an automatic transfer into an IRA.
When considering how much you should save, 15% is a common recommendation. You might not be able to save that much now, but it’s a good target to build toward. Start by saving as little as 1%. After getting started, aim to increase it by a percent or two each year. You can also increase your savings rate with each raise. Just leave your spending alone, and you’ll have a little extra to put toward retirement. The earlier you can start, the more time you’ll have for compounding to work its magic. By starting your retirement savings as a young adult, you should have a healthy nest egg available to supplement your Social Security when it comes time to retire.
Pay Your Debts
To really reach a healthy level of financial security, you’ll want to make sure that you keep debt to a minimum. Paying off any student loans, credit cards or car loans is key to building wealth over the long term. Your debts carry interest charges, and every dollar of interest you have to pay is a dollar that you can’t use for other purposes. Once you spend a dollar, it’s gone forever. By cutting down on the amount you pay toward interest, you’ll have more available for saving and investing. This will allow your net worth to increase over time.
Even as a Millennial, it’s possible to build toward a secure financial future. Once you pay off your high-interest debt, you’ll be able to start putting some serious money toward a great retirement. It might take cutting your expenses or getting a side hustle to make more money, but the extra effort will be worth it. The future is up to you, and by putting these recommendations into practice, you’ll be able to enjoy it.