Somehow, the lazy days of summer have flown by, and now we are in the middle of fall. With only a month left in the year, there are actionable financial steps that young adults should take, both to get their short-term financial goals on track, but also to tee them up for long-term success. Now is the perfect time to review financial habits and complete a “check-up” of financial health. Below, let’s look at some of the common financial hurdles that as millennials we need to overcome, and simple strategies for getting on a positive path.
Gauge budget “temperature.” Budgeting is the foundation of financial planning and oftentimes, I see young professionals who don’t have a budget at all, and therefore can’t properly plan. Understand what’s going out and what’s coming in. Only then can you start working toward financial goals. Use apps, like Mint.com, to keep track of expenses, or create an excel document that clearly details where funds are going, and how much you will be able to budget toward savings.
Take your insurance pulse. A lot of millennials insure everything – computers, phones, cars, apartments, but the most obvious thing they are missing is insuring their lives or income. It’s a common misconception that millennials are “too young” for life insurance, or “don’t need life insurance until they are established and have a family.” Think of it like this — if you had a machine in your basement that spit out money, you’d insure that. In reality, we’re that machine – young professionals making an income, but then not insuring/protecting ourselves in case anything goes awry. Understand that life insurance is important if you have assets or liabilities, and that these policies bring so much more than just the death benefit. (Another life insurance tactic to keep in mind: Assets and liabilities are not the only elements for insurance to make sense for millennials. I have found with millennials that over funding a life insurance policy and using it as a savings strategy primarily rather than solely a life insurance plan is more appealing).
Avoid the bad debt headache. Debt is debt, right? Wrong! There is good debt – paying down a house or student loans, and there is bad debt – accumulating a high credit card bill jam-packed with items you don’t necessarily need. Understand the difference between the two, and also understand the ins and outs of interest rates. If you have a high interest rate, say on a car, it might make sense to refinance to get a lower rate, which could save you money through lower payments.
It’s critical to get your financial health on track today, as it will have a tremendous impact on tomorrow’s goals. Addressing some of the issues above now can mean the difference between retiring how you want, when you want, later in life. It can make it possible for you to leave the legacy you desire for your future family. Or, it could save you from living paycheck to paycheck with no cushion. To put it simply, if you don’t plan accordingly and take the pulse of your financial health frequently now, it could create bigger hurdles to overcome later in life.
The good news is, if you’re proactive and take action, time is on your side. So get in the know, get educated about finance, and understand that by putting effort into your financial future now, it will help to set you up for success down the road.