Uncertainties are natural when it comes to money, especially when you’re young. So, how are millennials doing with financial management? Most in this group, born between 1981 and 1997, don’t feel financially secure now, but believe they will be in the future, according to a TD Ameritrade study. If you’re a millennial, what can you do to get and stay on track and reach your financial goals? The Pennsylvania Institute of Certified Public Accountants (PICPA) offers some sound advice.
Don’t Get Tangled in Debt
According to a recent survey by the American Institute of CPAs
, less than half of nonretired Americans are confident they will reach their retirement goals. To be better off during retirement, paying off debt should be a priority. Missed payments can lead to a lower credit rating, which can make it difficult to take out other loans—such as for a car or home—and will likely increase the interest rates you have to pay on other debt. Minimizing your overall outstanding debt is always a good idea. It can be tempting to put purchases on a credit card when you’re first starting out, but spending no more than what you can afford can help save money on interest payments and make it easier to reach your financial goals, especially if you also have a large student loan balance. If you are already struggling with large credit card balances, common techniques to overcome the debt include making minimum payments on all but the lowest balances and maximizing the payments to the lowest balances. This way, you will pay them off sooner and free up funds to pay the next lowest balance. Doing the same for the highest interest will minimize the amount spent on interest.
Don’t Miss Growth Opportunities
Even if you consider yourself a saver, it can be difficult to know the best way to invest to help your money grow. If you’re hiding it under your mattress or parking it in a low-interest-rate savings account, you could be missing out on the chance for potential investment growth opportunities. Of course, you should be fully informed about all the possible risks of an investment, including the chance for losses as well as profits. You also should consider your own comfort level—or risk tolerance—when making any investment. If you are setting aside money for long-term goals, such as retirement or a child’s college education, you’ll want to select an investment strategy that allows for potential growth. Your CPA can help you determine your goals and offer advice on the kinds of investments that will help you achieve them. Even with competing priorities like retirement and debt repayment, continuing to build up savings is beneficial. Not only is saving a good financial habit, but it also helps you keep the next unexpected expense from going on that credit card you’re working so hard to pay off.
Do Have an Emergency Fund
Millennials have grown up in a time of economic uncertainty. Are you financially prepared for job loss, illness, or other emergencies that could affect your financial life? CPAs generally recommend putting aside enough to cover three to six months of household expenses. If that sounds like a lot, remember, saving a few dollars a week will get you there eventually. Every little bit helps. The most important step is to get started.
Don’t Leave Money on the Table
If you’re out in the workforce, are you contributing to a tax-advantaged retirement plan
? If you aren’t, you’re missing out on the chance to potentially lower your taxes while building up your retirement account. If you’re eligible to contribute to an employer-sponsored retirement plan, are you chipping in enough to qualify for the maximum retirement contribution match from your employer? If not, you’re passing up free money that will help pump up your retirement nest egg even more!
Do Get Expert Help
As you chart your financial future, there’s no reason to go it alone. Your local CPA works with people at all stages of their financial lives, helping them make the best decisions for their unique needs. To find a CPA in your area or for more financial tips, visit www.picpa.org/moneyandlife