Millennials are facing an unprecedented array of financial obstacles. They are entering the workforce during the worst economic downturn since the Great Recession, carrying significant student loan debt and navigating an increasingly precarious employment climate.
Millennials are rising to the challenge of managing their money more effectively. In this report, we investigate how millennial values are driving innovation in personal finance across five core areas and how startups and established players are responding.
1. Create a Budget
Budgeting is the initial step to financial freedom, and it’s especially crucial for millennials. This generation has been dealt a particularly hard blow due to the recession and student loan debt burdens. Budgeting is essential in order to reach financial security.
A budget can help you create a spending plan and set objectives. It also assists in saving for retirement or paying off debt.
The initial step in managing your money wisely is to take stock of expenses and identify areas for overspending. Although this can be challenging at first, it’s an essential component for long-term financial security.
Begin by listing out all your essential monthly expenses, such as rent, car insurance, groceries and bills. Then divide that amount by 30 to get your total monthly income.
2. Set Goals
When it comes to personal finance, millennials should set long-term objectives. These could include saving for retirement and purchasing a home.
Ideally, your goals should be SMART (specific, measurable, achievable, realistic and time-bound). Doing so will help you stay on track with personal finances and prevent lifestyle creep that could cause financial strain in the future.
However, many millennials lack clear financial objectives. A recent Prudential study revealed that 55% of millennials say debt is holding them back from reaching personal achievements.
3. Invest
Investing in your personal finances is a wise financial move that can provide many rewards. Not only does it build a safety net for the future, but it also offers tax benefits.
As millennials enter adulthood, their financial goals have shifted and they’re taking control of their own finances. Furthermore, many are taking advantage of the modern gig economy to find side hustles that provide extra money so that they can save and invest for the future.
Tech companies are responding to millennials’ changing financial needs by making investing more accessible. They’re launching robo-advisors and micro-investing apps that enable those with small bank accounts to grow their money passively, while others are developing services that let people get hands-on with investing.
4. Save
One of the most effective and simple ways to save is by setting money aside each month before paying bills. You can do this by loading your debit card with a set amount each month or using budgeting apps to better monitor your spending habits.
The millennial generation has faced an array of financial difficulties, such as recessions, student loan debt and even a pandemic that caused medical inflation to soar. Compounding these difficulties is the lack of financial education and access to readily available credit lines.
To prevent future financial difficulties, it is essential for millennials to learn how to make wise financial decisions. This requires understanding the fundamentals of budgeting, setting objectives and investing.
5. Pay Off Debt
Millennials typically spend more than a third of their monthly income repaying debt–student loans, credit cards, auto loan debt and mortgages. Debt consolidation can simplify personal finances, lower payments and give you financial security so that you can lead a more secure lifestyle.
If you’re in debt, it can be overwhelming to know where to begin when it comes to paying it off. But don’t let that stop you from making progress toward your objectives.
One way to start is by starting a side hustle. Whether it’s driving for Uber or walking dogs, a side gig can be an excellent way to make extra money and boost your bottom line. Furthermore, learning about different financial products and services will give you valuable experience that will ultimately give you greater financial confidence. Eventually, it won’t feel like work anymore!