Millennial Money Tips

Stability in a leader is a must. Ethical, moral, mental, and emotional stability provide an atmosphere of stability in the workplace. A leader must consider the effect of their personal life on their professional life. Instability in one’s personal affairs will bleed over into the workplace. Financial instability can be one of the worst. It pressures the leader to make decisions to protect his job above all else, morals and ethics included. Working to reduce or eliminate undue financial pressure is a good first step. It should begin long before you don the leadership hat but it’s never too late to start.

Much like the pop culture leadership “tips” I see posted I have also observed a few conventional wisdom money tips as well. One wish I have for all forms of advice, financial advice included, is some realistic explanation and examples. To me it seems as though popular lessons, or advice, always include the “what” with little or no realistic and practical “how.” The old adage of “save for a rainy day” is good advice but how? When you’re so broke that your heart skips a beat over finding a quarter in the seat cushions, how do you save money? Consider the “typical” graduate who could use some solid and practical financial advice. This graduate will probably be taking an entry level position at just over $10 an hour (or still be working their pregraduate minimum wage job).

I’ve jotted down a few techniques I believe can help someone when they begin to piece together their financial house.

Put it down in black and white.

Putting together a system to calculate your total annual commitments (loan payments, housing expenses, insurance, transportation expense, etc.) combined with realistic/probable discretionary spending (food, gas, partying, etc.) is the first step. I suggest putting it all into a spreadsheet. Match that against your projected annual income. Then when you’re offered benefits in lieu of pay, you can work through some of the conventional financial norms surrounding these employment perks to see if you can afford them.

Show me the money.

Drowning in student debt and essentially living hand-to-mouth means money IS the number one priority, for now. Promotion potential, extra days off, flexible scheduling, or any other “currency” won’t pay the bills. You need cash to pay down your debt and get yourself out from under your indentured servitude. There is an exception to taking as much cash as possible. It’s called the company match on a 401k. Maximizing this is a must because it’s MORE money (increased income) and can help relieve the stress of not saving more of your paycheck each week. Since you probably don’t save at all, this fills that void for now.

Build your credit.

Building good credit is a must. The reason for needing good credit extends beyond buying a house or car. It influences the cost of your auto insurance among other things. It can also influence your potential employer’s decision on whether to hire you. Here again the size of your paycheck weighs in. Premier health insurance doesn’t count toward credit nor does an extra week of vacation. Staying current on your loan payments and paying down your debt will also help you maintain good credit.

Another popular way to establish credit is through the use of a credit card. One trap of the credit card is how easy it is to think that the extra $5 you’re spending on an item won’t be a big deal. Debit cards don’t let you overspend, they don’t hit you with a $35 late fee, and they don’t lure you with a low monthly payment. However, they don’t help you build good credit. The trick is: save up cash for a purchase, pay for it with a credit card, then use the cash to pay off the card. Builds good credit without “accidentally” overspending or paying any interest. This even works when buying groceries just be careful not to spend more than you have set aside.

Buy or rent?

Without alternative funding, most recent college graduates won’t qualify for any sort of home loan because of: the lack of stable job history, insufficient income, and a low credit rating due to lack of credit history (except for those student loans). Besides, buying a house locks you into that location for a minimum of 5+ years which you’ll need to build sufficient equity so you can at least break even when you sell. If living at home with the folks isn’t an option, be reasonable in your expectations for housing. Weighing transportation costs against housing, you may find better housing for less money further out of town.

Saving money.

It really is important to begin saving money from the start. Long term savings can initially be achieved with your 401k contributions but eventually you’ll need to do more. My suggestion is this: use 50% of your next pay increase (I always figured it after taxes) and all subsequent raises. This way you enjoy some quality of life improvements with part of the raise and begin your long term savings with the other part. If you have massive student loan debt you may want to use a large part of any raise to pay down your debt first but always use part of any raise to improve the here and now, it’s good for morale, your morale.

I suggest you use your spare change to help build up short-term savings, an “emergency fund”. Your target should be roughly $2,500. Major car repair, initial housing costs if you have to move, or cash to help you through an unexpected job change to name a few. Even if it’s nothing more than change less than a quarter, you’ll be surprised how fast it adds up. In our house, we’ve reached the point of not spending any change less than a ten. Once you reach your goal, or emergency fund amount, you can direct your spare change toward paying down your debt or saving for a car.

The crux of the matter.

Regardless of your monetary status, it always pays to live within your means. If you have to borrow to buy it (except for a house and maybe a car) live without it. Your goal should be one of fiscal responsibility and becoming as debt free as possible. It provides you with a freedom that feels great.