4 Financial Tips Every Millennial Should Know

With many millennials heavily in debt, from student loans to high-interest credit cards, keeping finances in order is crucial. If you’re a millennial, knowing how much you have, make, spend, and owe is essential to increase your financial confidence during difficult economic times.

In this article, we’ll guide you through four financial tips every millennial should know, and how these tips can help build your path to financial security as you work toward retirement.

Create an Emergency Fund

The best financial tip anyone can give you is to make sure you have at least three-to-six months of living expenses saved aside as your emergency fund. If possible, you should save a little more to cover additional costs, such as medical bills or childcare. If an unexpected expense does come up and you find it difficult to pay for it, you may be able to turn to a personal loan to help.

It can be more effective if you keep your emergency fund in a money market or a high-yield savings account to continue earning interest when the money is not being used. However, you may want to avoid putting too much into your emergency account as that cash might provide a higher return if invested elsewhere.

Leverage Secured Credit Cards

Many millennials with short or non-existing credit records find applying for a credit card nearly impossible. That’s when secured credit cards come into play. For a secured credit card, you’ll provide a security deposit upfront, the value of which will be equivalent to your approved credit limit.

You can use a secured credit card like a regular credit card to pay bills, fill your gas tank, or make everyday purchases. By practicing positive credit habits, the lender may convert a secure credit card to an unsecured card and refund your security deposit.

However, a secured credit card may still create more debt if misused. Therefore, you should make on-time payments each month, avoid overspending, and not use a lot of your available credit at any one time–typically it’s best to not use more than 30%.

Prioritize Paying Off Debts

If you’re in your 30s, you probably have a few debts on your shoulder, like student loans, car payments, or credit cards. While investing and putting aside savings are tempting, it’s best to prioritize paying off your debts first because your debt-to-income ratio (DTI) may hinder you from getting a loan or mortgage in the future.

Your DTI is your monthly debt payments divided by your gross monthly income. Lenders may use your DTI to measure your ability to manage new credit. Generally, the lower the DTI, the better, and it’s best to keep this number below 35%.

Establish and Contribute to a Retirement Account

As of 2022, 49.5% of millennials had a retirement account. If you haven’t started, now may be a good time to consider starting one. Below are a few retirement account options you can explore:

• 401(k): 401(k) is a workplace retirement saving and investment plan offered by your employer.
• Traditional IRA: Contributions to a traditional IRA can be pre- or after-tax. The growth is tax-deferred, so you don’t pay income tax until the money is withdrawn. However, any withdrawals will be taxed as current income after age 59.5.
• Roth IRA: For a Roth IRA, you contribute after-tax dollars, and your money will grow tax-free. A Roth IRA lets you make tax-free and penalty-free withdrawals after reaching 59.5 years of age.

If you’re uncertain what type of retirement account would benefit you the most, it’s best to speak to a retirement planning professional to weigh your options.

Your Financial Security Begins Today

Of course, there are many other financial tips you can put into practice, but if you are new to working on your finances, the four tips above will help you start off on the right foot.

Achieving financial security is not as challenging as many people think. It is all about having an action plan, knowing your financial situation, and holding yourself accountable for improving your finances. So, have faith — you can do it!

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of geeksaroundglobe.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.

Joshua White is a passionate and experienced website article writer with a keen eye for detail and a knack for crafting engaging content. With a background in journalism and digital marketing, Joshua brings a unique perspective to his writing, ensuring that each piece resonates with readers. His dedication to delivering high-quality, informative, and captivating articles has earned him a reputation for excellence in the industry. When he’s not writing, Joshua enjoys exploring new topics and staying up-to-date with the latest trends in content creation.

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