As the conversation surrounding how to solve rising student debt continues, post-college adults are finding it harder to achieve financial independence.
There are so many tempting items for millennials to spend their money on. Whether it’s the newest pair of Yeezys, a new Fenty Beauty product, or tickets to a music festival, we’re constantly looking to spend our limited income on the freshest, newest products.
However, when we start to spend above our means, that is when we run into debt. According to a survey by Charles Schwab, 62% of millennials are living paycheck to paycheck, which I personally think is. absolutely insane.
The problem is that schools don’t teach children how to manage their income. So when they hit their 20’s, they’re up a creek. While some may argue that parents and guardians should be the ones who teach financial responsibility, many adults are also financially illiterate. So the cycle continues. This is an issue because financial knowledge is the cornerstone of being a secure, responsible adult.
I’m lucky that I have parents who have taught me from an early age about the value of a dollar. They also reinforced that I shouldn’t spend everything I have. They taught me about the difference between checking and saving accounts. Moreover, they told me what an IRA account is, and the types of financial opportunities that will help me.
Being financially responsible means that you are aware of your financial situation. In essence, you know how much money you currently have. And how much money comes in (income), and how much money goes out (expenses). In other words, you know your assets and liabilities.
The easiest way to figure out your income and expenses is to create a spreadsheet of those dollar amounts. Otherwise it’s known as a budget. Having a budget allows you to see the hard numbers and help you plan for larger purchases down the line.
For example, do you have a big trip coming up with friends or a wedding to attend? How about a gift you’d like to buy a significant other or family member? If you’re wondering whether you can afford what you plan to buy, take a look at your budget to calculate how much you can realistically swing.
It’s also important that you understand that credit cards are not the enemy, as long as you don’t abuse them. A recent study by Experian, one of the leading consumer credit reporting companies, found that millennials like the idea of using credit cards, but they carry a lower debt value than the national average.
Furthermore, one of the benefits of using a credit card is that you increase your credit score. The earlier you start finding avenues to build your credit, the easier it will be for you to get approved for lower rates for car loans, and home mortgages, as well as better jobs with companies that do credit checks.
Personally, I love using my credit card. It allows me to maximize my spending and rewards me for my purchases.
The leading credit card guru is The Points Guy and his website help consumers with finding the best credit card. Whether you’re looking for the best cash back bonus or for travel points, his site is informational and can help you get back on track.
Ultimately, you and only you are in charge of your financial future. Take advantage of any financial services that may come your way. Whether they’re through your bank, your job, or friends who work in finance. Debt is no joke. And if you don’t get ahead of it, it can have long-term effects on your life that can carry into your relationships and eventually spread to your future children. Stay informed, be diligent about your finances, and ask for help in order to stay financially literate.