Life today is more expensive than in the 80s and 90s. and with increasing unemployment, millennials are facing an uphill task as they try to get their financial affairs in order. In fact, they rank financial insecurity as their primary concern.
The high cost of living, credit card debt, and burdensome student loans continue to dim the light on financial independence for these recent graduates. This is evident in the Modern Wealth Survey done by Charles Schwab this year. The survey revealed that at least two-thirds of millennials live from one paycheck to the next. Another 36% say student loans are a huge obstacle to saving money. The report also revealed that social media has a profound effect on how millennials manage their money.
Close to 49% of millennials said they’d spend money on items and experiences based on social media trends. However, millennials can seek financial counseling now that credit unions, banks, and other financial institutions offer such services, says First Community Credit Union (FCCU) Vice President, Andrew Meese.
According to Meese, paying off debt, planning for the future, saving for a home, creating a budget, and gaining financial education are the top 5 concerns observed by financial counselors on young adults.
1- Crafting a Budget
After graduation comes the next phase of life. To emerge successful, creating a budget is critical if you want to steer clear of living from one paycheck to the next. However, some millennials say it’s difficult to live within a budget, but that’s not true at all.
According to money management experts, creating a budget is simple. All you need is to list your total monthly expenses and total monthly income. This should help you get a clear picture of your financial situation.
If you find it difficult, consider using online financial apps and budgeting tools such as My Money Map. These tools will help you analyze your finances including checking your balances and tracking spending habits.
Everyone should know how to create a budget. That’s not all, you also need to understand it. With this tool, you can create a spending plan that will ensure you live within your means. This will then result in financial independence.
2- Student Loan Debt
Colleges are churning out thousands of graduates every year. While this is a good thing, inadequate jobs in the market threaten the financial stability of these graduates as they look to kick off their next phase of their careers.
Student loan debt is one such financial threat. According to the Pew Research Center, student loan debt has doubled from 1998 – 2016. With such a burdensome loan on your shoulders, it’s difficult to attend to other financial obligations such as settling household bills. This can intimidate recent graduates who still don’t have experience living in the “outside” world.
For this reason, it’s best to seek the services of a financial counselor to help you evaluate your finances and draft a solid loan repayment plan to pay off the loan as fast as possible. Also, consider visiting the detailed website by the U.S. Department of Education’s Federal Student Aid for more information on how student loans work.
3- Understanding Credit Scores
Lenders will always scrutinize your credit score when you are applying for a loan with https://nation21loans.com or a credit card. They use this to establish creditworthiness and assess risk. If you have a high score, you’ll benefit from high credit limits and low interest rates. On the other hand, if you have a poor score or none altogether, you’ll have to contend with higher interest rates and low credit limits, that’s if you’re able to get a loan or credit card in the first place.
Therefore, the first step any college graduate must take is to establish a credit history. This will be your foundation for a solid credit report. To do this, you can start by purchasing small items using your credit card. Don’t forget to pay off any debt on time to maintain a stellar score.
Lenders report both good and bad credit behavior with the latter being devastating to your score and your future financial life. Even the slightest drop in your score can mean the difference between thousands of dollars in interest over loan’s lifespan.
How do you check your score? It’s easy. These days, sites such as Credit Karma, as well as other financial institutions, offer free access to customers who want to view their score. In fact, the law under the Fair Credit Reporting Act states that consumers have the right to access their report for free at least once a year.
The top three reporting agencies are TransUnion, Experian, and Equifax. If you encounter any error in your report, you should raise the issue with the agencies to avoid hurting your score.
4- The Fear of Missing Out (FOMO)
Technological advancements gave birth to social media, and while these platforms come with numerous benefits, there are also some cons that threaten today’s generation. One of the biggest threats is the pressure generated through these platforms. It could social or financial pressure.
In a recent survey done by Schwab dubbed the Modern Wealth Survey, close to a third of residents in Houston reported that their friends’ posts on social media greatly influenced their spending habits. The worst part is they went ahead with the plan, knowing well enough they can’t afford it. Millennials are hit the greatest by such pressures, and over half of the respondents were curious to know just how their friends acquired these items.
Financial experts recommend paying yourself first in the form of setting up an emergency fund. Save for retirement, for large purchases, a car or a vacation; live within your means, though, is the main piece of advice here.
5- Purchasing a Home
Many people use homes as a measure of success. It’s considered a major milestone in life and for good reason. Having a place, you call home is a great feeling, however, buying a home is expensive. In fact, probably the most expensive purchase you’ll ever make.
For first-time buyers, it’s even worse because they are new to the process that can be long and tedious. However, it doesn’t always have to be like this. You skip past the surprises by seeking financial advice on how to go through the process from setting a savings goal, getting pre-qualified, and later on understanding everything there is to home financing.
The cost of living will continue to go up, and this means people have to come up with creative ways of combating cash crunches. However, by mastering the basics discussed in this article, millennials will have a strong foundation to help them combat any financial problems in the future.