Millennials are struggling with the same financial issues as their parents did. They’re having a harder time getting on track and achieving their goals because of poor credit scores, high student loans, low wages in general, and the current economic climate. But there’s hope for millennials to find success after retirement if they can overcome these six challenges in particular: changing housing habits not paying off debt being more strategic about managing money creating safety nets for emergencies overcoming our emotions
The “financial goals in your 30s” is a blog that discusses how Millennials can overcome their 6 biggest financial challenges.
Last month, we argued that Millennials had the potential to be the next Greatest Generation in terms of personal finance. Members of Generation Y, according to the Strauss-Howe generational cycle hypothesis, are similar to and share similarities with the young people who grew up during the Great Depression. While today’s economic problems aren’t as severe as those of eighty years ago, they’re still significant, and having to deal with them seems to be motivating Millennials to adopt the same wise and economical practices that their grandparents did. Such practices will undoubtedly help them weather the current economic troubles and prepare them for a prosperous era if/when it returns in full force.
While these emerging patterns are welcome, they must be further developed and enhanced. Although the worst of the 2008 crisis has passed, the future remains unpredictable, the economy remains weak, and many Millennials are still suffering financially, both in terms of raw income and in terms of just understanding how to safeguard, manage, and grow their money. They’re barely keeping their heads above water.
The current economic “Big One” might be an excuse for pessimism, indifference, and retreat, or it can be a chance to rise to the occasion, to discover a better road, to zig when the world zags — to make the barrier the way.
For those who choose to follow the latter path, we’ll examine the financial concerns that Millennials face today, this time presenting practical advice and techniques for overcoming these obstacles. Millennials, like their elders before them, may become more financially aware, scrappy, and flexible by making these countermoves throughout the economic landscape.
The first issue is that millennials are financially ignorant.
According to a PwC poll, just 24% of Gen Yers have a fundamental understanding of financial concepts like as mortgages and the stock market.
A third of Millennials who had already started saving for retirement said they were “unsure” how much of their money was put in stocks versus mutual funds, according to a poll.
Even Gen Y business owners aren’t always secure in their financial skills; almost half of them evaluate themselves as just “somewhat” informed and effective in managing their company’s finances.
Knowing the ins and outs of money may harm Millennials’ personal financial prospects as well as their business ambitions in the long term. You can’t solve an issue that you don’t comprehend.
Countermove A: Get a self-taught personal financial education.
Personal finance is an essential topic for Millennials to understand, according to research: It “should be taught by high schools, 73 percent believe it should be taught by universities, and 70 percent say it should be taught by parents,” according to 79 percent of respondents.
Unfortunately, most young people are unlikely to get the education they seek from any of these sources.
But it’s never too late to study, and with so much free knowledge available online, it’s never been simpler to finish your own personal financial education.
A handful of my favorite personal finance websites are listed below. They range from frugality blogs to investment blogs that get down to the nitty-gritty.
- Samurai of Finance
- I’ll show you how to make money.
- Bread of Wisdom
- Money Mustache Mr. (also check out my podcast with with Mr. MM)
- Commentary on Consumerism
- Forum for Bogleheads
- Blog of LearnVest
- Blog at Mint.com
- a few of dollars (by LifeHacker)
- Coursera is an online learning platform (while not a blog, Coursera offers several personal finance-related classes)
Aside from those websites, here are some of the top personal finance books I recommend:
- Dave Ramsey’s Total Money Makeover. This is an excellent book for debt-reduction strategies.
- Ramit Sethi’s book I Will Teach You to Be Rich is a must-read. It’s jam-packed with strategies for putting your personal finances on autopilot.
- The Investing Guide for Bogleheads. The best book I’ve found that teaches the basics of investing.
- Beth Kobliner’s book Get a Financial Life: Personal Finance in Your Twenties and Thirties is a must-read for everyone in their twenties and thirties. This is a book that I keep coming back to. It includes information on everything from credit cards to insurance and investment.
- Vicki Robin and Joe Dominguez wrote the book Your Money or Your Life. Techniques for achieving financial independence by spending less and saving more.
- Douglas P. McCormick’s Family Inc. Does a fantastic job of bringing personal financial topics into context. (You may also listen to my podcast with Douglas.)
- Charles Wheelan’s Naked Economics: Undressing the Dismal Science is a book on the dismal science of economics. The macroeconomic ideas that impact your microeconomic choices are explained in a straightforward, succinct, and enjoyable manner.
Countermove B: Request assistance.
Only 12% of Millennials have sought professional debt management aid, and only 27% have sought expert guidance on saving and retirement, according to the same PwC report. You don’t have to go it alone when it comes to money. If you’re drowning in debt, try getting help from a credit counselor. You can contact a qualified credit counselor via the non-profit National Foundation for Credit Counseling (NFCC).
Find a fee-only personal financial counselor if you have a grip on your debt but need assistance with savings and retirement. Instead than depending on commissions from selling consumers particular investment funds or insurance products, a fee-only adviser charges the client directly for their services. The National Association of Personal Financial Advisors has advice on how to identify a fee-only personal financial advisor.
The second issue is that millennials are financially vulnerable.
According to a Washington Post poll, 63% of Millennials would struggle to meet a $500 unexpected bill. In a PwC poll, over 30% of Millennials said they overdrew their bank accounts on a regular basis. As a result, more young people are relying on payday loans to get by, a solution that may only dig them further into debt.
You’re financially vulnerable if you’re preparing for an unexpected expenditure.
Instead, you want to become financially antifragile.
Defend yourself by putting aside at least $1,000 in an emergency fund.
Creating a $1,000 emergency fund is the first step in becoming financially antifragile.
If you’re low on finances, this may seem unattainable, but with a little perseverance, you can do it in a surprising amount of time.
When Kate and I first got married, we were both in college, working minimum-wage jobs, and drowning in student debt. It seemed impossible to have $1,000 in savings. However, by cutting down on a few costs and selling a lot of junk on Amazon and eBay, I was able to save $1,000 in less than a month. We were able to utilize our emergency money instead of depending on credit cards to pay for unexpected auto repairs that occurred not long after.
After you’ve saved $1,000 and paid off any high-interest credit card debt (which most Millennials don’t have in the first place) and college loans, you may aim to build a fund that will cover 3-6 months of living costs. Putting that antifragility-producing safety cushion in place will feel fantastic.
Read our post on how to build an emergency fund for more details.
Challenge #3: Student loan debt is a major issue for millennials.
Because the expense of education has risen dramatically over the past two decades, Millennials are entering adulthood with more student loan debt than any previous generation – an average of $35,000 in debt. If they attended a private school or obtained a post-graduate degree, that number may skyrocket.
Student loan debt not only drains Millennials’ cash balances, but it also prevents them from taking advantage of chances and moving ahead in life. They repeatedly state that their debt is preventing them from pursuing aspirations such as getting married, purchasing a house, or establishing a company.
Countermove A: Make student debt a top priority and pay it off quickly.
Getting rid of your stumbling block of student debts will make you significantly more financially flexible, so make it a top financial objective that you pursue vigorously.
Pay off any private variable debts you may have first. While they may have a lower interest rate than federally guaranteed student loans, Mark Kantrowitz, editor of FinAid.org, believes that if the Fed chooses to raise interest rates in the future, the rate on those variable loans may rise by 5-6 percent. It’s possible that this may make your loan payments unmanageable. It’s better to pay them now rather than later.
You may select from eight repayment programs for your federally supported student loans. The majority of young people make the error of opting for the plan with the lowest monthly premium. You will end up paying more in interest throughout the life of the loan if you do this. Rather, pay off your school debts as quickly as possible. Find strategies to save and earn extra money (see below) so that you can pay off your student debts completely. The short-term sacrifice will pay off in the long run.
Check out our page for additional information about repaying your student loans.
Countermove B: Don’t go to college.
Despite its high cost, a college degree increases one’s earning potential greatly over the course of a lifetime. However, it is not for everyone. If you’re a Millennial still in high school, you owe it to yourself to look into the various options available to you instead of obtaining a four-year degree, such as a job in the trades.
If you do decide to go to college and need to take out loans to do so, don’t be like the majority of your colleagues who don’t bother to figure out how much their loan repayments will be once they graduate. And, learning from the regrets of almost half of graduates who now discover they could have borrowed $11,597 less and still paid for their school, take out the fewest amount of loans possible.
Challenge #4: Wages for millennials remain stagnating.
According to research, Millennials earn 20% less than Baby Boomers earned at the same age. Furthermore, the prospect for the near future is not promising; not only do those who graduate during a recession earn less in their first job than those who enter the workforce during a boom period, but they also earn 2.5-9 percent less every year for up to two decades.
Countermove A: Ask for a raise and/or look for a better job ahead of time.
Part of the reason why people who join the workforce during a recession earn less for such a long time is that the experience of growing up during a slump makes them risk apprehensive. When such people do find work, they are more concerned with keeping it and retaining the money they have – no matter how low it may be. Even once the economy has recovered, they are less inclined to hunt for higher-paying positions or risk upsetting their employer by asking for a raise.
Fortunately, circumstances aren’t predetermined, and this scarcity mentality, as well as its income-depressing impacts, may be addressed by consciously deciding to be proactive in your search for the finest possible job and being paid what you’re worth. According to researchers, the salary penalty for beginning work during a recession may be avoided by bargaining for a raise after the economy improves or transferring jobs.
So, if you want to improve your financial situation, you should start playing to win rather than not lose. Begin learning how to request and negotiate a wage rise. A single rise may result in a pay increase of thousands of dollars. That one salary boost, if properly invested, may result in hundreds of thousands of dollars saved over the course of your career. Despite this, very few individuals ask for increases! The fundamental cause for this is fear.
Ramit Sethi of I Will Teach You to Be Rich is the finest instruction I’ve seen for overcoming that nervousness and being paid what you’re worth. He sets out the groundwork you need to perform before asking for a raise in his Ultimate Guide For Asking For a Raise, as well as exact scripts to follow while presenting your case. Also, for more wonderful advice on earning a raise, listen to my podcast with Frances Cole Jones.
If you can’t get a wage rise, you should start searching for a new work immediately. Don’t be scared to quit a job that pays better and/or is a better match for your professional aspirations and goals for one that pays more. Ramit offers a fantastic (and free!) 3-week email course on how to search and secure a well-paying job. Chris Guillebeau’s Born for This is another book that gives great advice on how to acquire a career that pays you what you’re worth.
Countermove B: Follow Grandpa’s example and be frugal.
You can either raise your wages or reduce your spending to improve your income.
While you may not have total control over how much money you earn, you do have complete control over how much money you save.
Millennials are already less interested in conventional status signals like vehicles and designer labels, and are making more frugal purchases. Adopt your Greatest Generation grandparents’ motto: “Use it up, wear it out, make it do, or go without!” and embrace this developing trend toward old school frugality.
Thrift is just another approach to become financially antifragile; it is the use of route negativa, or adding by removing. When you spend less money, you avoid not just the initial expense, but also the negative aspects (such as interest payments, maintenance fees, and so on), while enhancing the positive aspects (paying down debt, increasing personal capital for starting a business, buying a home, or funding retirement savings).
Check out this post for 80+ ideas on how to save money by adding by subtracting. I’m sure you can come up with another 800.
Challenge #5: Millennials’ money is being sucked dry by rising rents.
Rents have been rising all around the nation as a result of rising demand, particularly on the coasts and in attractive towns like Denver and Nashville. At the same time, earnings have remained flat, causing rent to consume an increasing part of people’s salaries. When rent accounts for 30% or more of a household’s income, economists call it “cost-burdened.” Between 2003 and 2013, the number of renters aged 25 to 34 who are “cost-burdened” increased by 6%.
Rent costs eat up a large portion of Millennials’ salaries, leaving them with less money to put toward retirement, an emergency fund, school debts, and a potential home payment.
Alternative A: Stay with your folks (without shame).
By moving in with your parents, you may remove your rent expenditure, which is one of the most efficient methods to add by subtracting. Despite the fact that there are more young people doing this now than at any point in over eighty years, the arrangement is nevertheless met with a surprising amount of guilt and finger-wagging about Millennials’ “failure to launch.”
Pay little heed to this peanut gallery, which is mostly made up of elderly people who grew up when rents were cheap and a college degree was, well, peanuts. To the skeptics, remind out that the number of young people living at home was considerably greater in the 1940s — you know, when the “lazy,” “entitled” Greatest Generation scrounged off Ma and Pa.
There’s no shame in living with your parents as an adult, as long as it’s a temporary arrangement to help you gain financial independence in the long run. So stop berating yourself, accept the economic necessity of the circumstance, and make the most of it.
Rather of spending the money you save by living with your parents on a luxurious lifestyle that includes partying, streaming video games, and traveling, invest it in yourself. Put your money toward paying off your college debts and putting money down for a down payment on a home. Establish financial objectives that you wish to achieve while living with your parents and set a deadline to finish them by to guarantee that living with them is a short-term strategy. The idea is to give up some short-term autonomy in exchange for increased long-term autonomy.
Option B: Relocate to a less expensive section of the nation.
In San Francisco, the typical rent for a one-bedroom apartment is $3,600. It costs $470 in Wichita, Kansas.
The Bay Area, of course, has a lot more going for it than Wichita (though some ardent Wichita-ians may disagree). But you have to ask yourself whether what they have going on is worth a $37,000 loss in revenue each year.
The answer will be yes for some people. Others, even if they say no, are forced to live in an expensive city like San Francisco since their preferred employment is there.
Others, on the other hand, who have a more geographically flexible job and feel that you can grow to love any location you live might see a significant increase in income by relocating somewhere with a lower cost of living. If you have children and the new location is your old hometown, the relocation may also come with the significant advantages of having your parents (i.e., your children’s grandparents) nearby.
Challenge #6: Millennials are becoming fewer and fewer full-time entrepreneurs.
There is a common misconception that Millennials, scorned by a harsh job market during the crisis, choose to forego paid work in favor of being self-employed masters of their own destiny. According to the media’s popular narrative, members of Generation Y have started enterprises in droves and are now the monarchs of start-ups.
There’s just one issue with this story: it’s absolutely inaccurate.
Over the previous two decades, the number of young entrepreneurs has actually decreased.
“The percentage share of new entrepreneurs constituted of persons aged 20 to 34 years old has declined from 34.8 percent in 1996 to 22.7 percent in 2013,” according to a recent survey. “Young adults, who used to be the biggest age group active in new enterprises in 1996, are now among the smallest demographic group,” the study’s authors write.
The high load of their student loan debt has made it harder for Millennials to develop and finance their company ideas, which has led to a drop in entrepreneurship. The fact that they grew up during a recession, as previously said, has made them risk cautious is also likely to play a role.
Alternate strategy: Start a secondary business.
If you want to be a full-time entrepreneur, don’t allow these roadblocks get in your way. United Airlines, GEICO, Duracell, Rubbermaid, Tyson Foods, Publix grocery stores, and Esquire magazine are just a few of the now-billion-dollar, still-thriving businesses that began during the Great Depression. Other businesses, such as Ford and Heinz, which were already established when the Great Depression struck, aggressively grew rather than fled, reaping the rewards once the economy recovered. You, too, may launch your own business during this difficult period; all you have to do is prioritize paying off your school debts first, and/or seek capital from angel investors or crowdfunding platforms like Kickstarter, rather than conventional banks.
But, if you’re having a hard time starting your own company, or even if you don’t want to, I strongly advise you to avoid thinking about entrepreneurship as an all-or-nothing proposition.
10 percent Entrepreneur by Patrick McGinnis was one of my favorite books from last year. Rather of abandoning your day job to pursue a full-time start-up, Patrick suggests continuing your 9-5 and putting 10% of your money, time, and skill into other entrepreneurial initiatives. By doing so, you may keep the security of a regular salary while still growing your total income from your side hustle. Your side hustle might turn into a full-time job, or it could simply be a steady source of additional cash for you. For additional in-depth ideas and suggestions, listen to my audio conversation with Patrick.
What steps do you need to take to become a part-time entrepreneur? We’ve compiled a list of 37 side hustle ideas for you. Use the money you make from moonlighting to pay off debt and save for other things you want to do with your money, such as retirement and homeownership.
Whatever financial challenge you’re experiencing, there’s a way to overcome it, and with a little dedication and sacrifice, you’ll emerge stronger on the other side.
Millennials are faced with a lot of challenges in their life. This article will teach you how to overcome these 6 biggest financial challenges. Reference: i will teach you to be rich steps.
Frequently Asked Questions
How do you overcome financial challenges?
Are millennials struggling financially?
A: Yes. Millennials are the generation that has been left with little to no savings in their 20s and 30s, who have had massive student loan debt since college, and who work for companies where they may not get a pension at the end of it all.
What actions might be taken to avoid personal and financial difficulties?
A: One way to avoid personal and financial difficulties is by living a healthy lifestyle. This can include exercising, eating the right foods, maintaining strong relationships with family members and friends, taking care of your mental health (e.g., getting enough sleep). It also includes not spending money on high-interest loans or credit cards that will trap you in debt over time – instead pay it back gradually using low interest savings accounts like checking or savings
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