Contributed by: Emily Lucido
With a little bit of wit and a whole lot of information, Kali Hassinger, CFP® and Josh Bitel recently presented a webinar that provided young folks with a broad guide for how to start their financial lives off on the right foot. As we found out during the presentation, making smart choices early can make life easier in the long run.
Although Millennials have an average debt of 50% in just student loans, they are doing better than most people might think. About 80% have a budget and 72% are saving for retirement. If you are a Millennial and are reading and thinking, “I’m not saving for retirement and I don’t have a budget,” that’s okay! Even by taking small steps now, you can make a huge difference rather than waiting. There are a lot of different factors to think about when tackling financials in the “real world.” The first step is to get organized.
Spending vs. Saving
You can spend smarter by following these tips below:
- Stay Organized - which can include setting up account notifications & alerts
- These notifications can be set up for when you complete a transaction, or if your balance falls below a specific amount (you can set the minimum balance amount yourself)
- The notifications can also be good for detecting fraud
- Applications & Technology
- There are a ton of free apps out there that can help with any situation, just google your need and you can find something suitable for you
- Figuring out your Credit Score
- Credit Karma gives you free access to your credit score and is highly secure
- What determines your credit score?
~ Check out our blog that breaks down your credit score composition!
- When building credit and using credit cards, you want to make sure to use only around or below 30% of your available credit
- Watch for annual fees on credit cards; see if opening the card is worth the annual fee you will end up paying
- Set up auto pay on all your bills with your credit card to benefit with cash back and rewards
- To avoid ATM fees, go to the store and buy something small (like a pack of gum) and then get cash back on that purchase
- Student Loans
- Student loans are something you want to start paying down right away – and if you can make more than just the minimum payment, try to do that
- Make sure your payments are being allocated toward your highest interest loan
- A good resource to show you every student loan you have, whether federal or private is, Annualcreditreport.com
Saving is so important, and to start sooner makes such a big difference in the long run. These tip s help with how to smartly save money:
- Cash Savings
- In case of emergency it’s good to have six months of living expenses in a savings account
- Investing Early
- The graph below demonstrations how investing your savings early can really benefit you in the long run
- In the example below Chloe started investing from age 25 and almost reaches $2 million dollars by the age of 65, while we see Noah saves from age 25 (the same amount of money) and just let it sit in cash and only obtained about $653,000 by the age of 65.
- Retirement Savings
- Although retirement might seem far away, it is important to be forward thinking and plan ahead
- Employer plans are a great opportunity to save money if your company offers one - always remember to contribute at least the match if you can
- If your employer doesn’t offer a retirement plan you can still invest through a Roth IRA or Traditional IRA. Depending on your situation a Roth or an IRA could work for you.
- Taxes – some quick tips
- The more money you make, the more you pay in taxes!
- You can write off student loan interest of up to $2,500 per year
- TurboTax® is a great online resource for doing your taxes with a 100% accurate calculation guarantee
- Insurance is something that is so important – but something that can be overlooked when we are young
- Staying on your parents health coverage until age of 26 is great – but don’t just assume it’s the best option because you aren’t paying anything
- Remember to get renters insurance when living in an apartment – you never know when you might need it!
The last thing to remember is the 28/36 Rule. Your housing expenses should not exceed 28% of your gross monthly income while your total debt payments should not exceed 36%. Remember, the earlier you start saving the better – and any place you start at is good.
Take 30 minutes to view the webinar below and get the full details of Kali and Josh’s discussion. If you have any questions, please reach out to us -- we’re here to help!
Emily Lucido is a Client Service Associate at Center for Financial Planning, Inc.®
Any opinions are those of Emily Lucido and not necessarily those of Raymond James.