Are you a millennial swimming in student loan debt? Or maybe you just want to splurge on that new car but you’re not sure if it is worth the price?
More than previous generations, millennials are being hit hard by financial issues like student loan debt, inflated cost of living, and needing to save more for life milestones like buying a house. I chatted with Veronica Karas, Vice President Financial Advisor at CAPTRUST and author of Money Matters, on some basic financial tips for the everyday millennial.
How to tackle student loans
Karas advises avoiding student loans as much as possible, even though she knows it is pretty hard to avoid for most people who want to further their education.
“It is so important to understand how the loan you’re taking works and what the repayment options are before agreeing to take it out,” she urges. “You want to make sure you get the right loan type for your particular potential career path and life situation.”
Okay, but we already have the loans. And a mediocre job. Any tips for paying off those loans without becoming dirt poor for the next 15 years?
Karas advises, “Find loan forgiveness programs and see if you qualify for any of them. Consider asking your employer if they would allow you to pay your loans pre-tax (many large companies have partnerships with loan servicing companies that may allow you to do this). Otherwise, get on a pay as you earn repayment plan so the loan payment is a reasonable percentage of your income.”
How to handle large, unexpected expenses
But what happens if my car won’t pass inspection and I NEED to buy a new car? Or what if I’m swimming in medical bills? What is the best way to handle large bills?
“I always tell people to pay themselves first,” shares Karas. “Figure out what you’re spending and make sure a portion of everything you earn goes into savings before it goes anywhere else! If you can’t make at least a 10 percent savings rate a reality, then you need to re-evaluate your life style, sell some extra shit, or find a way to get a new income stream. The reality is that everyone should be saving money from the first dollar they earn, but no one teaches us this. If you started saving money with your first job, you’d have less trouble making these things line up.”
How much should millennials save per paycheck?
Karas says we should be saving a minimum of 10 percent, but it depends when you started saving. If you started saving money when you were in your early twenties, then 10 percent will do it. If you start saving when you are 30, you’d want to put away at least 15 percent to make up for lost time (and interest).
So where are millennials going wrong when it comes to money?
“I think it’s become so easy to spend money that we don’t even know where our money goes any more,” muses Karas. “[Knowing where your money goes] is the first step to getting everything else in line.”
Millennials’ second biggest money mistake? Waiting too long to start investing.
“Make sure you’re contributing to your 401(k) or at least an IRA/Roth IRA. Invest your money and don’t let it sit in cash every chance you can—the younger [you start this], the better! The effects of compounding are astounding after a relatively short period of time. Stash it away and don’t liquidate it!”