Millennials, or those born in the years 1981 to 1996, now comprise one of the country’s most powerful financial demographics. They are also the generation set to inherit about $68 trillion of wealth within the coming years.
These said their ability to manage their own finances will play a big role in determining what the future might hold for the economy. Thus, it’s important that members of this group are set on the right financial path. Here are some essential pieces of advice they could follow to do so.
Maintain a Good Credit Score
People of all generations can benefit from the perks that having good credit scores bring. For one, these can lead one to get better interest rates when they borrow to buy a home or finance a car, which could then help them grow their wealth further.
The Debt & Income Factors
Another essential thing millennials should know about their personal finances is their debt-to-income ratio. To clarify, what counts as debt is the total amount of money one spends on paying debt and expenses while income is comprised of everything one earns including things like tax refunds and even stock investment earnings.
Millennials are also recommended to use apps like ‘My Debts’ and ‘Debt Tracker’ to help them with keeping up with this ratio.
Work With a Budget
Like businesses, households need to follow a budget to succeed. This would give individuals a ledger of financial checks and balances and help them keep track of all expenses including emergency ones such as medical bills or car repair expenses.
Prepare for Emergencies
Speaking of emergencies, millennials are recommended to have a fund that is earmarked exactly for these kinds of expenses. The standard amount should be about three months of salary and income on hand, although bumping this up to about half a year’s worth of income, is better.
Having this money cushion will help one get through short-term financial hardships relatively unscathed.
Think & Invest Long-term
Another responsible thing one’s money should go to is investing. This could be in the form of savings, a retirement fund, and other investment instruments.
Getting this habit started early on will reap one the best benefits in the future due to compounding interest. Employees who have a 401(k) plan with their company should take full advantage of the match contributions that their employer makes towards their retirement account.
Consider Getting Professional Help
Lastly, don’t underestimate the benefits of turning to finance experts and advisers for help when needed. They can be of great help even to people who are only in their 20s and 30s in their quest for financial security.
These professionals can also help millennials navigate through important stages in their life such as marriage, starting a family or buying a home.
