What should I be doing financially as a Millennial?
Let’s define the age range of Millennials: a Millennial is anyone born between 1981 and 1996. At the time of this publication, that means people from 23 – 38 years old. First, I think we can agree that a 23-year-old is going to have slightly different priorities than someone who is 38, right? The person who is 23 may be focused on landing a decent job, paying down student loans, or establishing their credit. The 38-year-old may be focused on life insurance, saving for their kid’s college, or increasing the amount they are saving for retirement. No matter where an individual Millennial’s priorities lie, there are some matters that merit consideration for anyone in this generation. Here are three things you can consider if you fall into the Millennial classification.
Disclosure: If you are not a Millennial, these principles and practical steps are still worth considering for your financial future. Also, I am not one to believe that my generation (yes, I am a Millennial) should be categorized as all liking avocado toast, drowning in debt, or seeking participation trophies.
1. Get a handle on your overall debt situation.
Look at everything! This can be a very sobering experience for people who have to consider student loans, auto loans, credit cards, medical bills, bank loans, etc. The three things you need to look for when reading through these statements are total loan balance, interest being charged, and monthly payment. By getting organized, you’ll at least get a full picture of where everything is and what you are up against.
Next, you will want to start forming your plan. I think it is usually a good idea to get some victories early in this process. For example, if your The Home Depot credit card only has a $300 balance on it, just send the money in to pay it down to $0. This is something you can accomplish in a short amount of time, resulting in a quick victory in paying off debts. I do not support the idea of starting with the largest balance, student loans for example. Don’t misunderstand me, you should always pay your monthly payment but applying an extra $50 per month on $60,000 in student loans can lead to discouragement in month 8 of your plan. Incorporating some of these early victories can really keep the momentum going in the right direction for you.
Also see if you can negotiate or consolidate any of these debt payments. I am big fan of financial simplification. Instead of having 6 different statements come in for your student loans, see if you can consolidate them down to 1 or 2 statements.
2. Determine how much money you are spending every month.
Once you have come up with your plan for paying down your debt, you must figure out what amount you can actually apply toward this debt. To determine this amount, you must control how much money is being spent every month on your fixed and variable expenses. Fixed expenses are usually not hard to figure out, but the variable expenses cause the most struggle.
The method I like for beginners (someone who has never tracked their expenses) when it comes to tracking expenses is to write down everything you spent every day on everything, for one month. Disclosure: Tracking three months would give you a better average.
I know this can seem extreme or boring, the same way I view people who count calories. However, this will give you the type of control you need in order to feel confident about your everyday spending habits. Why is this important? Simple answer, if you are earning $5,000 a month and spending $5,300 a month, then the odds of you paying down debt or saving are not likely. Remember it is not how much you make it is how much you keep.
3. Focus on your obligations and responsibilities and commit to steady progress.
Most people would agree that they would rather talk about saving and investing for the future. The first two steps above are still necessary before we talk about your current obligations and responsibilities.
One of the first things to consider when looking at your obligations is determining what they are. Are you married or single, kids or no kids, behind on your bills or current? These are all important topics to think about before you start dreaming of running on a beach or skiing in the Rockies. As an example, if you are married with kids, I would argue that you should focus on risk management (life insurance, disability protection, fully funded emergency fund). Why? Because you have other people who depend on you and what you are providing.
If your goal is to save more, I encourage you to be specific and set a timeline for your savings objective. The key here is to take action, monitor your progress and be accountable. Aim for an amount that will challenge you but is also realistic. If you want to save an extra $500 a month but that is 25% of your monthly income, you’re probably not being realistic. Stay encouraged. Hard work and discipline will pay off in the long run.
Chris Vasquez, is a Financial Advisor with Lucien, Stirling & Gray Advisory Group, Inc. in Austin, Texas and is passionate about helping people achieve the financial life they want. Chris emphasizes that daily behavior with your finances is more important than knowing every detail about financial planning.
All content provided in this blog is supplied by Chris Vasquez and is for informational purposes only. Barclays takes no position as to the views, and makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.