This was originally published on Monday, October 10 ,2016 in the Pacific Daily News. Click here to subscribe to the PDN.
There are many differences between the generations, and the same holds true to financial concerns. According to an article on CreditCards.com, baby boomers were most concerned about retirement while millennials are more concerned about student loans.
Millennials are facing some distinctive financial challenges. The cost of living has increased. What cost $10 in 1944 now costs $136 in 2016. Many college graduates are starting at entry-level, minimum-wage jobs. College tuition and student debt is higher than ever before.
Millennials have been accustomed to banking differently — most never step inside a bank except to set up the account. They are part of the instant generation and not accustomed to having to wait too long for most things.
Unfortunately, wealth and financial health has not evolved as quickly. So what can a millennial do to get on track? Here are a few tips.
Getting out of debt. Credit is easy to come by these days especially for young adults that are just starting off. Credit is given by banks on college campuses and offered through the mail and online. Many millennials are struggling to pay off debt due to the ease of obtaining credit. According to a study published by Forbes.com, “54 percent of millennials are worried about their ability to repay their student loans.”
To avoid falling into a financial credit trap, set a limit for yourself. Take a deep look at what you really can afford. Concentrate on paying off your debts as soon as possible. Time is on your side and the time to buckle down is when you have less responsibilities. Put the extra money you receive like bonuses, tax refunds and holiday gifts toward your debt. Consolidating your loans may be a solution because you reduce multiple payments to multiple accounts to just one payment to one account.
Spending plan. Budget conjures up negative feelings, like the word “diet.” Don’t think of yourself as not allowed to have fun with your money, but instead as choosing to spend your money in moderation. Millennials are very tech savvy and are fortunate enough to know how to use apps and software that make tracking their spending less daunting. They also rely on real-time banking. Some apps use the information from your bank to make tracing their spending effortless.
Millennials should think about the 50-20-30 rule. Put 50 percent of your take-home pay for your necessities. These necessities are roof over their head, food, utilities and other day-to-day expenses. About 20 percent can go to your financial responsibilities. These are paying off debts, savings and an emergency fund. The last 30 percent can be used for your wants, such as dinners out, new clothes and other fun recreational activities.
Emergency fund. Just as the name suggests, this account is for emergencies only — medical bills, car repairs, house repairs and other unforeseen circumstances that will set your budget back. According to Forbes, 50 percent of Millennials polled do not have $2,000 in an emergency fund to cover an unexpected situation. Many experts suggest that a solid emergency fund should cover four to six months of your expenses. Building an emergency fund may mean a few months of living below your means, but when an emergency arises you’ll be prepared.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like him to cover, email him at firstname.lastname@example.org and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.