Previously considered to be the generation with the greatest opportunity, millennials seem to have everything they need within their reach to succeed. However, just being part of the generation whose childhood took place under excellent financial forecasts does not necessarily mean that they will build a prosperous future, especially in today’s market. In fact, studies are emerging daily to disprove this ideal, stating instead, millennials are facing the most difficult business landscape in which to become successful. The truth is there are many factors that must be considered and addressed in order to achieve and maintain financial success. Here are five ways in which millennials can emerge financially stable amidst the current, treacherous economic landscape.
- Acknowledge overall debt
Credit cards are known to be a double edged sword, as people utilize cards to spend beyond their means and often fail to comprehend the interest rate attached to every purchase. However, the appeal of a credit card remains in the simple notion of purchasing the must-have product of the week without having to outright spend money on it. These conditions can lead to purchases that increase debt: the result being that people are not only risking the possibility of achieving and maintaining a good credit score, but are also facing anxiety and stress as a result of their debt.
Millennials can do little in the face of temptation due to aggressive advertising and marketing seen on a daily basis, however being realistic about their current debt can make a huge difference in the amount they continue to spend by credit. Instead of increasing your debt by constantly relying on credit cards to afford your monthly living expenses, start budgeting and be realistic about your debt. Keeping a spreadsheet with your monthly financial movements is a great start and can effectively change your spending habits on unnecessary purchases.
- Pay bills on time
One of the easiest ways a person can ruin their credit score is by failing to pay the minimum payment on time.
According to Bankrate, one of the biggest factors in determining your credit score is your payment history. For example, allowing a bill to fall behind by even 30 days can lower your credit score quickly, especially when taking into account late fees and increased interest rates. In a worst case-scenario, failing to pay your minimum payment for several months can result in the debt being transferred to a collection agency; an outcome in which you will be required to pay off your debt in full rather than in minimum increments.
In addition, insurance companies will look at your credit score and payment history when determining your insurance rates. Essentially, paying your bills on time can result in a great credit score, decreased interest rates, freedom in paying minimum payments, and lower insurance rates.
- Be mindful of credit limits
Often times your credit card provider will offer you an increased credit limit after a designated time period, which can certainly be tempting. Though there is nothing wrong with accepting an increased credit limit, experts suggest that in order to maintain a high credit score, it is important to use no more than 30 percent of your credit limit.
Essentially, utilising your credit limit to its maximum can actually hurt your credit score – and on the reverse side, it is difficult to maintain a good credit score while maintaining a low credit limit. The answer is to find a happy medium; keep your credit card accounts open (even if your debt has been paid off) and keep your credit card applications to a minimum in order to keep your credit score at its prime.
- Don’t wait to begin saving for retirement
Life isn’t just about spending money as it comes, but about preparing for what tomorrow may bring. Statistics Canada has found that in recent years, people are retiring later than usual; one reason for this is the increased cost associated with retirement.
One of the most practical strategies that financially successful people implement is putting away 20% of paycheque every pay period and investing it, whether it be in a savings account, RRSP’s, or even mutual funds. By treating a savings account as a bill that needs to be paid regularly, it is guaranteed that at least a portion of every paycheque is coming back to you sooner or later.
A savings calculator like this one can help determine how much should be put aside for retirement savings based on current income and projected financial needs later on in life.
Though the idea of saving for retirement at age 20 may seem unnecessary, the effort could be the difference between ‘struggling’ and ‘comfortable’ in retirement years.
- Seek assistance from a financial advisor
Finally, if feeling lost or insecure about finances and what to do next, consider seeking professional assistance. A financial advisor can help make decisions on investments, taxes and insurance. This is an opportunity to learn how to make smarter decisions regarding personal finances. They can also assist with intimidating feats such as mortgages, estate planning and retirement funds – all adjusted accordingly based on income and current lifestyle.
Use these tips to get in tip top shape financially and grow personal wealth.
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