There's a theory amongst Baby Boomers that Millennials are financially irresponsible, lazy, and entitled. Perhaps some of this is true, but the vast majority of Millennials like myself are trying their hardest to make ends meet, save enough money to have an emergency fund, pay off college loans, and perhaps have a bit extra to have fun. Saving for retirement and thinking about how we will ever afford to have children or help our parents as they age are real stressors for myself and many other Millennials.
Financial security is obviously a major goal. But what should we be prioritizing when there are so many things we need to save and prepare for? What long-term decisions can really help us become more fiscally independent? Here are the 5 most important things for college grads to keep in mind now to maintain and improve their financial health in the future.
Invest in the Right Home
The housing bubble has burst once in our lifetimes, and we are hyper-aware that foreclosure is a reality. But buying a home is still one of the best investments Millennials can make for long-term financial success. According to a recent article from U.S. News, 46 percent of renters ages 25 to 34 spend more than 30 percent of their incomes on rent.
How much money could we be saving if we were paying a mortgage instead of rent? In many cases, the cost of a mortgage is comparable or lower than rent prices, especially in suburban areas. The catch is that you must buy a home that is within your means instead of one that you will "grow into." The McMansion can and should wait. Consider space efficient, affordable options for your starter home.
Save for Retirement
Social Security seems anything but secure, and with more and more Millennials choosing non-traditional employment like freelancing and contract employment, retirement benefits are no longer a set-it-and-forget-it financial choice. CNBC Experts say that a shocking 40% of Millennials have to financial strategy in place for retirement.
Putting aside retirement until later in life is a huge mistake that many of us are making, and it will have a huge affect on our financial security later in life. Explore your retirement options, and set a plan into motion to save as much as you can. Even a small retirement fund is better than nothing, and if you invest your money wisely you could triple your fund by the time you reach an age where you might need it.
Proactively Paying off Student Loans
Paying the minimum payment n your student loans--especially if they have a high interest rate--is a huge mistake that countless college grads make. Just because you can pay $100 a month toward your student loan doesn't mean you should. As a rule, it's smart to explore how much you can afford to put toward your student debt each month, instead of just paying the minimum.
We have all read success stories of graduate who have hustled hard to pay off their student loans in record time, and it's actually not that hard to do if you are dedicated and make it a priority. Look into interest forgiveness programs, consolidating multiple loans, and any loan forgiveness employment opportunities that exist within your field.
Don't be Afraid of Investing
Understanding the stock market is extremely intimidating, but it's also an important component of growing your wealth. Which stocks should you invest in, when should you buy, and how do you know the best time to sell?
You could master the stock market yourself or pay a financial advisor or investment firm to do the dirty work for you, but there are also plenty of automated options like Acorns that take a small sum of money that you won't even notice is missing and invest it in diverse stocks. You don't have to be a financial whiz kid to see the benefits of investing, and with apps and programs that make it so easy, there's really no excuse not to be investing $50 a month toward future security.
Insurance Policies
Many Millennials don't realize the benefit of investing in better, slightly more expensive insurance options for their car, residence, and physical person. Insuring your belongings and self can pay off in the long run, especially if you are trying to save money by living in a less nice neighborhood, commuting longer distances, or simply skimping on your health insurance in hopes you won't have any serious complications.
Renters insurance or comprehensive home insurance are absolutely a solid investment, and can really protect you in an emergency. Health insurance, while expensive up-front, can save you from owing thousands in medical bills. Pay more for a quality policy, but also make sure you aren't over-paying for what you get.
The road to financial independence is long and ridden with potholes, and many college grads find themselves overwhelmed, not knowing what to do next or how to move forward. It can be frustrating to think about saving money and investing in the future when you aren't even entirely sure how to stay afloat today. But preparing for the future is so, so important. You can't bury your head in the sand and expect to deal with it all tomorrow. Consider these 5 steps toward financial independence now, and how you can slowly incorporate them to change the way you view your lifestyle and wealth management choices.