5 Steps Towards Financial Independence for Millennials
If you’re in the millennial generation, or on the border of it, you’re probably well-versed in the notion that you got a raw deal financially.
This is a broad statement of course, and among the millions and millions of millennials some have it better than others. Broadly speaking, however, today’s young professionals have less job security, less know-how when it comes to investing and saving, and more incentive to go it alone.
To some extent this can actually lead to good things. For example, millennials have proven to be adept at figuring out their own employment situations even where traditional careers aren’t available. Much is made of the spirit of entrepreneurism in this generation, which as one write-up put it has its finger on the pulse of current and future business trends. This is just to say it’s not all bad for an entire generation.
In the meantime, however, there’s no denying that young adults today, by and large, are entering a different financial landscape. Entry-level jobs don’t pay much, savings opportunities can be ill-defined, banking systems are changing, and debts from education can be very high. So with all of this in mind, we wanted to write up some basic tips that can help millennials get closer to financial independence and security.
1. Use The Debt Snowball Method
This is a tried and true method that can help you get out of debt responsibly and efficiently. The basic idea is that you pay your debts from smallest to largest, regardless of interest rate (thus the snowball imagery, starting small and getting bigger). The idea is that you can get the smallest one out of the way first, and then use the money that was going toward those payments to compound your efforts toward the next one, and so on. Additionally, with each individual debt you knock off, you eliminate its interest (whereas if you try to pay down several at once, you’re letting the interest grow for all of them).
2. Cool It With The Lattes
Be honest: if you’re a millennial, you’re probably spending a little too much at Starbucks or your local coffee shop – or, for that matter, on craft beers and the like. Young people today are the subjects of relentless marketing campaigns that preach that premium products are worth $3 extra when often something simpler is just as good. So try this: spend a month setting aside all the money you’d otherwise spend on specialty drinks (rather than just saving it). It’ll give you an idea of how much there might be to save.
3. Understand Cryptocurrency
Cryptocurrency is incredibly trendy right now, to the point that it’s easy to look at it as the new form of investment, rather than just a new form. Simply put, a lot of people buying in are amateur investors who don’t understand how to evaluate price trends, and in some cases don’t even fully grasp cryptocurrency! This is an easy trap for millennials, so before you buy in make sure you understand the bitcoin basics, grasp what cryptocurrency means, and learn how to evaluate trends. Even then this is a risky prospect for investment – but because it’s out there and getting more popular, it seems worth mentioning.
4. Use Acorns
If you’re looking for a trendy, modern way to invest, look instead to Acorns. Full disclaimer: this app will not make you rich. You’re not going to get in early on Google by investing through Acorns. What it does do however is take your spare change (rounding up to the dollar for each transaction with a card linked to your account) and put it all together in a strategic, professionally operated fund. It’s a passive way to invest that could net you a few hundred dollars over the course of the year, which can go a long way when you’re operating on a tight, young adult budget.
5. Invest Responsibly
Aside from using Acorns and approaching cryptocurrency with care, it’s still important for millennials to get into investing. This is a generation that, with good reason, is largely distrustful of the stock market and major financial institutions. But exploring responsible investments, such as well-regarded and affordable mutual funds, is still an almost necessary step toward financial independence and security.