Millennials are no longer the youngest adults on the block; if you are between 24 and 39 years old as of 2022, you are a Millennial. However, this generation has struggled through recessions and important world events, facing challenges to establishing, maintaining and growing their wealth like they want to. If this sounds like you, the good news is that some simple financial strategies can revitalize how you handle your money-and how it works for you. Try out the following tips to refocus your financial efforts and refine how you use money.
Take Stock of Your Current Situation
Before you can make any decisions about the financial strategies that would work best for you, you need to understand your current situation. Sit down and figure out how much debt you have, how much income you are bringing in and the basics of your financial situation.
From there, you can begin to set goals. Are raises at work feasible, and if so, how can you pursue them? Would you like to achieve a big purchase in the future like a house, and how can you begin to set yourself up for success? Plan out your needs, wants and stretch goals so that you can work toward them in the next steps.
Reevaluate (or Create) Your Budget
Next, consider your budget. If you do not have a budget at all, the best time to get started is right now. If you do have a budget, compare it against your monthly expenditures and see if certain areas are being over- or under-utilized. Are you spending more than you are supposed to in a certain category? Are there some areas where you budgeted too much, and you can route that extra money to a different goal?
Now that you are a bit older, out of school and established in the workforce, it’s worth taking a second look at how you’ve been spending money so far. It is also good practice to start setting up automatic transfers if you can; doing so makes saving easier and adds up over time.
Fine-Tune Your Credit Score
As a Millennial, you have now had some years to establish and build your credit score. Examine what is doing you harm and what is helping you in this area. Most Millennials have debt, and reducing your overall debt-to-income ratio can make you eligible for more opportunities. Similarly, keeping your credit card utilization low by paying off outstanding amounts will see your score rise over time.
This effect compounds; the better your credit, the better terms you will get on products in the future, saving you even more.
Utilize Savings and Investments Wisely
Depending on how long you have been in the workforce, you may now be able to start putting money away each month. While creating an emergency fund is a smart move, remember that keeping too much money stashed away in a basic account loses you money to inflation. While you are still young, you have a long time horizon for investment; it is less detrimental for Millennials to invest in fluctuating markets than it is for those closer to retirement. Consider your risk tolerance and remember that “safe” investments like bonds and CDs typically become more common the closer you get to the end of your working career.
Keep an Eye on Debt
According to a recent survey, almost 75% of Millennials are carrying some form of debt besides a mortgage. Odds are, you have at least a little debt to your name-and if you don’t, that’s great! You’re one step ahead already.
For those who do still have debt to pay, it is worth checking whether there are any penalties for paying early. Something as simple as changing your mortgage payment agreement to pay half of the mortgage payment twice a month (instead of as a lump sum once per month) can save you significantly on interest in the long run. If you do not yet have the means to make extra payments on your debt, try to budget so that you are at least covering the interest on the debts you do have to avoid owing more than you originally borrowed.
Trust the Pros to Help You Establish a Healthy Plan
Whether you are on the younger side of the Millennial age range or you are now nearing your 40s, it’s never too early to reconsider how you are managing your finances. The professionals at Inflection Advisors would be happy to sit down with you and offer guidance on how you can achieve your goals. While we don’t make decisions for you, we can bring our years of experience to help you make informed choices. Reach out to learn more or to schedule an appointment to get started.