How to save for the future if you’re a millennial

How to save for the future if you’re a millennial

August 19, 2016
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Can millennials save for the future? It’s a question that I’ve heard numerous times in the past few years. And, when I ask it, I mostly get one answer: No. But I don’t believe this is true. Millennials can save for the future. In this article, I’ll show you how.

Understanding millennials

Before talking about how to save, I think it’s important to talk a little about millennials. I recently read an article on LinkedIn that said “millennials are delaying adulthood because of crushing student loan debt.” Although it was an interesting read, it wasn’t even half as interesting as one of the comments it got. The guy who wrote the comment, which was an article in itself, talked about millennials having a “victim mentality.”

So is this true? Do millennials have a victim mentality? I think they do. A lot of them have grown up in bubbles, protected from the outside world, thought that they deserve everything and that they are all special. That’s why many millennials feel like they should be CEOs, managers or even the President of the United States. And they want everything now. They don’t want to wait, they don’t want to start at the bottom. Unfortunately, wishing really hard for something doesn’t always work. When they fail, millennials are quick to play the blame game. It’s always someone else’s fault, not theirs.

Reality and great expectations don’t always work well together. In the case of millennials, when they’re finally out of their protective bubbles and they meet reality, especially the reality of their financial situations, they tend to become pessimistic.

Millennials don’t have really strong financial situations. According to a recent Experian analysis, their average credit score is 625, with average debt excluding mortgages at $26,485. Baby Boomers, on the other hand, have an average credit score of 709 and their debt excluding mortgages is only around $19,217.

It’s because of this that millennials abandon the idea of saving for the future. Instead, they focus on getting out of debt. This, unfortunately, prevents them from achieving true financial freedom.

Where there’s a will, there’s a way

Millennials are the “New Greatest Generation.” But while the Greatest Generation had to deal with challenges like the Great Depression and World War 2, millennials have to find their own path.

When it comes to finances, there’s just one thing that you need in order to reach your goals, and that’s discipline. With discipline, a millennial can both pay debts and save for the future. Here are four examples of how discipline can help millennials:

  1. Refinance your debt

If you refinance your student loans and other debts, you can get a smaller monthly payment and lower interest rates. This means that you’ll be able to pay your debts faster and save more each month. But be careful! Avoid using the extra money to buy unnecessary things. Always focus on your mission, to save. If you just swap one debt for another debt, then everything will be for nothing.

  1. Start as soon as possible

According to several studies, family and being a good parent are two of the most important things to millennials. If this is so, then you, the millennial, should start saving as soon as possible. The longer you save, the more money you’ll build over time.

If you start saving $250 each month when you’re 25, by the time you’re 65 you will have gathered about $120,000. And if that money grows at an annual rate of four percent, you’ll end up with around $290,000. If you start saving later, then you’ll have to put away more money each month to reach $120,000. And the amount you’ll end up with won’t even be close to $290,000, as you won’t be taking advantage of the power of time and compounding interest.

  1. Track your spending and always look for ways to save

It’s hard for young people to not want to go out and party or buy clothes and gifts. But, if you want to save for the future, you need to adjust your budget. In order to do this, you need to figure out where your money is going each month. So start keeping track of all your spending. Afterwards, you’ll be able to figure out ways to save. And, if you really want to improve your budget, you can always stop throwing money away on luxury items that you might not really need.

  1. Don’t let debt stop you from saving

Paying off your debt and saving money is hard, but possible. When you get your paycheck, pay for your necessities, then put a percentage in your savings account, and only afterwards use the money that’s left to buy luxury items or to go for lunch at a nice restaurant with friends.

Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

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