Millennials are often stereotyped as financially irresponsible, but in many cases, they’re doing the best they can with the information and economy they’ve been given. According to the 2015 Millennial Money Mindset Report by iQuantifi, 41% of Millennials want to increase their savings in the next 3-5 years. Based on their average debt load of $47,689 though, saving anything will be a struggle unless certain habits and mindsets are corrected.
If you fall into this demographic, the following are mindsets you may need to address to see financial progress in 2016.
1. Incurring Debt as a Means to an End
Millennials have picked up the cultural cue that debt is necessary to get by in life. Student loans are viewed as essential to gaining competitiveness in a tough job market — a short step away from justifying credit card debt to support your lifestyle while going to school. Some educational debt might be necessary, but experts recommend incurring no more than an entry level-salary in your chosen career path. Avoid excess student loans by exploring cheaper options such as:
- Attending a community college or online university
- Working while going to school part-time
- Work-study programs
Reduce your consumer debt by choosing cheaper entertainment, going on a spending freeze, or using shopping apps and discount programs to save on consumables. Most importantly, stop blindly spending. Make the decision to take control of your money. No one is at the mercy of their situation — there’s always something you can do to spend less, save more, and improve your financial outlook.
2. No “Plan B”
Going back to the report, 68% of millennials list saving for a vacation as an important financial goal, overlooking the more pressing need for an emergency fund beyond a credit card. Even if you’re a millennial who can only save a little at a time, it will eventually pay off — especially if you choose an option like a high-yield savings account. Set aside the equivalent of six months’ living expenses and designate it exclusively for financial emergencies
3. Failing to Plan for Retirement
Consumed with their current financial needs, millennials tend to put off planning for the distant future, neglecting easy options like payroll deductions into an employer-matched 401K. Even those who invest may be doing so too conservatively for their age bracket and miss out on the advantages of compound interest. In this case, investment education is vital.
4. Failing to Plan for the Immediate Future
Millennials hear a lot about planning for retirement, but there are also closer milestones to plan for. Marriage, starting a family, and home ownership tend to occur in the 20s and 30s, but many people do not plan for these expenses, creating more excuses to go into debt.
5. No Medical or Disability Insurance
Counting on their health and prime, millennials tend to shortchange medical coverage, especially short-term disability. Even if you’re healthy, avoid tempting fate by maintaining, at the very least, a high-deductible insurance plan.
6. Getting Stuck in a “Dead-End” Job
In spite of all these concerns, what do millennials consider their biggest financial challenge? — Not making enough money. Increasing your income can instantly cure many financial problems, as long as the mindsets that created them are corrected. If you’re a millennial who has addressed the previous concerns in your own finances and income is your main concern, it might be time to shop the job market for something that not only pays better, but has more potential for long-term growth. There are plenty of other opportunities out there if you’re willing to do the research.
You’re the Future — Do Something About It!
Millennials are expected to overtake baby boomers as the largest living generation in 2016, and hold the keys of the future. Decide that this is the year you’ll overcome old stereotypes, take control of your spending, and start planning for your financial future.
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