Making enough money is just the start, so you have to manage it. Everyone from recent college graduates to people well established in their careers can reap the benefits of improving their personal financial literacy.
Everyone knows that money can be difficult. Getting enough is just the start, so you need to manage it. Millennials have their share of money regrets, including credit card debt, lack of financial planning, and of course, the biggest: college debt.
Today, many recent college graduates also carry heavy student loan debt into the next chapter of their lives. The national average for college debt is around $ 37,000 per borrower. Respondents to a recent CollegeFinance survey had graduated with an average student loan debt of $ 22,000, had $ 14,000 left to pay, and expected to complete repayment within six to seven years.
University debt affects more than your financial outlook. Overall, 27% of CollegeFinance respondents say their student loans made career changes difficult, including 36% of those who owed $ 51,000 or more. Three in ten say the same when they have taken a business risk, including 44% of those with $ 51,000 or more in unpaid student debt.
“Dealing with large student loans comes with additional stress levels,” says Ryan McPherson, director of coaching at SmartPath. “This can be magnified if the income of the recent graduate falls short of his required debt payments. A higher debt burden can mean that graduates take longer to save emergency funds and house down payments. “
5 tips to be smarter with money
Of course, it’s not just young people who could benefit from a little more awareness in the area of personal finance. “Overall, Americans could use additional money management training for different life events, for example, managing student loans, buying a house, preparing kids financially, paying taxes, and planning for retirement. “, explains McPherson.
“Employers have the opportunity to help solve this problem by integrating financial wellness into their benefit programs to help educate their employees on money management skills,” he says. But workers shouldn’t wait for their employers to take the first steps towards better financial literacy. McPherson offers five quick tips that college graduates – and the rest of us – can immediately implement to create a better financial future:
- Spend less than you earn. Seriously. “It’s the foundation of all long-term financial success,” says McPherson. Of course, to spend less than what you earn you will need to keep track of the double digits. Budgeting software like Mint, YouNeedABudget, and others can help you stay on top of your money.
- If your employer offers a match at retirement, contribute enough to get the match full. “It’s free money, don’t miss it,” McPherson says. Even if you are just starting your career, it’s never too early to start saving for retirement.
- Pay off your credit cards in full each statement cycle to avoid paying interest. “You don’t have to make the credit card company rich,” says McPherson. “It’s surprisingly easy for a $ 2,000 to $ 3,000 credit card balance to turn into a $ 6,000 to $ 9,000 problem. Compound interest (which works great with investing) is becoming your enemy with credit card balances.
- Set up an emergency fund. Yes, surprise expenses will occur. “Start with one month of spending, then increase spending up to three to six months over time,” advises McPherson. Again, budgeting tools can inform your planning by helping you determine what an average month looks like. You’ll also be able to anticipate lump-sum expenses that only occur once or twice a year, so when that bill arrives, it’s not a surprise or an emergency.
- If you have student loans, come up with a strategy. “Will you seek forgiveness or will you try to pay off your loans as soon as possible? McPherson asks. “These loans will not take care of themselves. Establish a repayment strategy and make it work for you.
Resources to become more financially savvy
When it comes to personal finance, knowledge is power. “Start by reading as much as you can,” says McPherson, who recommends blogs like NerdWallet, Financial Samurai, Mr. Money Mustache, The Penny Hoarder, and Millennial Money. “These cover the basics like creating a budget and smart ways to pay off credit card debt, and go all the way to advanced topics like investing in rental real estate. “
McPherson also has a few book recommendations, including The psychology of money, Fuel: the most important number in your financial life (written by the CEO / co-founder of SmartPath) and The Behavior Gap: Easy Ways To Stop Doing Dumb Things With Money.
“Some topics in these resources will interest you and others will be terribly boring,” says McPherson. “It’s okay, as long as you understand the basics. Dive deeper into what strikes you.
SmartPath also offers a free online resource called Money Moves Quiz where anyone can answer 15 questions about their current finances and receive an action plan tailored to their individual situation.
Invest in yourself
The pandemic has created additional challenges for young workers who not only experienced higher unemployment rates, but also missed out on mentoring, networking and office training opportunities during closures. “While it doesn’t immediately appear to be a financial challenge, it could impact career growth and opportunities for some,” notes McPherson.
Despite these challenges, CollegeFinance found that around 6 in 10 people continued to make payments during the interest freeze period, of which 86% were able to make progress in repaying their loans.
People will continue to experience financial stress even after the pandemic is over. “It’s a scary time for new graduates to enter the ‘real world’, so it’s more important than ever for employers to provide financial wellness resources and support past open enrollments,” says McPherson. This can benefit both the employer and the employees, as surveys indicate that more employees would stay with their employer longer if they offered financial welfare benefits.
Money can be difficult, but there are many tools and sources of knowledge to make it a little easier. No matter what stage you are at in your career, it always pays to invest time in your finances and, ultimately, in yourself.