It’s been said that the Millennial generation faces the most uncertain economic future of any generation in the U.S. since the Great Depression. The recession of 2008 negatively impacted Millennials’ finances for years, and many of them are drowning in student loans that will take a lifetime to repay. As a result, over half of Millennials need to use their credit cards just to pay for the basics such as food and utilities. This generation can greatly benefit from a little financial help. Here are the five money lessons every Millennial should learn:
There Are Many Different Types of Loans
At some point, Millennials may need to take out a loan in order to make ends meet or get through a rough patch in their lives. If you reach this point, it’s important to research the different types of loans before deciding which one is right for you. For example, if lenders have rejected your applications in the past, you may still qualify for a car title loan, which uses your car as collateral. There are also short-term and long-term loans, which each have both pros and cons. Learn the ins and outs about loans like these so you can select the one that is right for your unique financial situation.
Check Your Credit Report Regularly
Having a low credit score can affect your ability to buy a new house or car or open credit cards. It can also lead to higher interest rates on loans and credit cards, which means you will end up paying more for borrowed cash. Do the best you can to avoid this problem by checking your credit report on a regular basis. Download the Credit Karma app and check your score every week or so to look for issues. If there is an error on your report, notify the appropriate parties immediately so it can be removed from your record. Follow the app’s suggestions on how to improve so you can slowly increase your score and become more attractive to lenders.
Live Below Your Means
Perhaps the simplest--but hardest--lesson for Millennials to learn is to live below your means. Do not give into temptation and purchase items that you cannot afford simply so you can keep up with the Joneses. Spend less than you earn, and you will never find yourself in financial trouble.
Take Advantage of Tax Credits and Deductions
Many Millennials wait until the last minute to file their taxes, which means they rush through the process and fail to take advantage of tax credits and deductions. Take your time or work with a professional so you can claim the tax credits and deductions that apply to you and put more money back in your pocket. For example, Millennials can deduct up to $2,500 in student loan interest payments. This deduction will reduce your taxable income, which means it could lead to a larger refund.
Track Every Dollar
Millennials should learn to keep track of every dollar that they earn and every dollar that they spend. Use the Mint app to see how much you’re spending every month, and more importantly, what you’re spending it on. The app will group your purchases into categories such as gas, groceries, clothing, and restaurants so you can see where you need to cut back in order to save more money. Failing to manage every dollar can lead to overdraft fees, late payments, and more debt, so this is a life lesson that every Millennial should learn.
Some Millennials struggle with their finances more than those in other generations due to circumstances that are beyond their control. But, this does not mean that Millennials cannot improve their financial situation. These lessons can help Millennials take back control of their money and finally achieve financial security.