Millennials, you’re great at saving. No wait, you’re lazy and entitled. Which is it? Much bandwidth has been given over to analyzing the financial situation of Millennials over the past several years. Financial writers love the topic and can’t seem to stop writing about it.
But there are some harsh truths out there about Millennials and money, which is probably why so many people seem stuck on the topic. Sadly, if there’s anything to be said about anyone born between 1980 and 1999, it’s that they are very likely to be characterized by one or all of the following:
- Deep in debt, especially student loans
- Have little or no savings
- Financially illiterate
- Underemployed, compared to Boomers and Gen-Xers when they were in their 30’s
What’s Wrong with Millennials?
Blame it on the Great Recession, which hit just as your generation was coming of age and entering the job market. But as a Millennial, aren’t you ready to shed the dark shadow of the Great Recession and move on?
If you nodded your head in a silent, resounding Yes!, then this guide is for you. You won’t learn everything you need to know about personal finance because we can’t fit an entire college course-worth of knowledge onto one page. However, you will learn the basics – enough to get you started.
That way, you can help bloggers get past wondering what’s wrong with Millennials and everyone can move forward.
The Guide, Part One: Start Educating Yourself
If you’re like many people of your generation, you missed out on a good financial education. Schools don’t really teach personal finance, and your parents might not be much better than you are when it comes to managing money.
As a result, just under a measly quarter of Millennials demonstrate even the most basic financial literacy, according to a PwC survey.¹
That means your job, as a Millennial, is to right that wrong by taking matters into your own hands. The best thing you can do for yourself is to read some books. Here’s a list of best-sellers to get you started:
• Your Money or Your Life by Vicki robin and Joe Dominguez
• The Millionaire Next Door by Thomas J. Stanley and William D. Danko
• Total Money Makeover by Dave Ramsey
• The Money Book for the Young, Fabulous & Broke by Suze Orman
The Dave Ramsey book is mainly about getting rid of debt while the first two titles on the list focus on trying to change readers’ attitudes about money and material possessions. Suze Orman’s book is a great introduction to the financial world.
Read all four books and you have a very good chance at making the kinds of behavioral changes that lead to a lifetime of wise (financial) decisions. You can read all the budgeting and saving tips you like, but without a fundamental change of heart about money, they won’t do you much good. Reading is how you make those changes.
If you really want to kick your education into overdrive, pay particular attention to The Millionaire Next Door, which talks about the effect of living an extravagant lifestyle and how living below your means can make you a millionaire.
Once you’ve read all these books, keep the conversation going inside your head by perusing personal finance blogs to reinforce your new knowledge. Never stop learning.
The Guide, Part Two: Establish These 5 Pillars of Financial Health
Now for some tactical advice. Until you’ve had time to read those books and let the new ideas sink in, you’ll just have to trust a bit that these next five moves are the right thing to do. Once you’ve read all about finance you’ll be able to comprehend why they’re smart moves to make.
But for now, just close your eyes and leap.
1. Pillar #1: Start an Emergency Fund.
Establish a savings account with at least a couple thousand dollars in it. Why? Because when you eventually get blindsided by big-ticket expenses that life throws your way, you’ll cover them without having to go into credit card debt. Credit card debt is one of your biggest enemies when you’re trying to be financially responsible and get somewhere with your goals.
2. Pillar #2: Get rid of Credit Card Debt.
This may seem like a no-brainer, but many Millennials have trouble prioritizing their financial goals. Is it more important to pay off credit card debt or start an emergency fund? Credit card debt comes with painfully high interest rates, so the sooner you pay that off, the sooner all your other financial moves will start having an impact. This is definitely a priority move.
3. Pillar #3: Get rid of other debt.
Student loans, mortgages… they all come with interest. Student loans should be taken care of before mortgages in most situations – especially student loans with a variable rate. You never know when the Feds might raise those rates, causing your monthly payments to skyrocket.
4. Pillar #4: Spend less than you earn.
This pillar is closely tied to the behavioral changes you’ll be making as a result of completing the books on the reading list outlined earlier. This is probably the toughest of the pillars to incorporate into your life because it involves millions of tiny, everyday decisions about spending and behavior.
5. Pillar #5: Invest.
Firstly, start putting money away in terms of savings. However, you need to make sure your savings are working for you. That’s why its key to get some training in investment or education so you know what you are doing. Some people think that investing is risky but actually it’s the wrong education that makes it risky. Check out sites like yahoo finance or publications like Investors Business Daily to get a basis on what sucecssful trading or investing strategies look like.
A Final Word
The Internet is chock full of advice on how to save money by economizing. There’s so-called “frugal living” at one end of the spectrum, and no-nonsense common sense about living within your means at the other end.
How you choose to cut spending and start saving is up to you. Only you know what works for you and your life. That’s why the first step in this Guide is reading books. By reading about the principles of personal finance and gaining a broad overview of how the world works, you can make your own decisions about how to save money.
Hope this has helped- now it’s time to go out there and give finance bloggers something else to write about- the financial comeback of the Millennial generation!
1. Millennials & Financial Literacy – The Struggle with Personal Finance. Retrieved 2/8/2017 from https://www.pwc.com/us/en/about-us/corporate-responsibility/assets/pwc-millennials-and-financial-literacy.pdf
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