The first steps into adulthood are often difficult and frustrating, and today’s young people face greater financial obstacles than ever before. Rather than being able to dive straight into careers, home ownership and marriage, the millennial generation—those born between 1980 and 2000—have discovered that it’s necessary to be more practical. Thanks to the Great Recession, 8 in 10 millennials have acknowledged the importance of saving for the future. Unfortunately, the pressures of living expenses and student loans have made it difficult for many millennials to start saving and to grow their money.
Here are some of the finding of a recent study conducted by Techchecks.net, an online provider of bank checks and other financial accessories for businesses and individuals:
Financial Issues Facing Millennials
Inability to generate enough income for savings.
Many millennials struggle to put aside money on each paycheck: 84% indicate that they don’t have enough income for savings, while 56% are living paycheck to paycheck. They acknowledge that they may not have some of the retirement benefits experienced by previous generations: no pensions, longer lives, and lower income from Social Security. Unfortunately, in spite of that knowledge, millennials often simply don’t have the income necessary to set aside savings.
Debt eats too large a portion of monthly income.
Credit card debt claims 16% of many millennials’ paychecks, while mortgage debt (15%), student loan debt (12%), car debt (9%) and medical debt (5%) also take out their fair share. Half of millennials admit that more than 50% of every paycheck goes to paying off debt, making it difficult to set aside a substantial percentage of what remains for savings.
Millennials have a lack of confidence in the stock market.
The recession shook confidence in this style of investing and many Millennials are scared to invest—though as time moves further from the recession, many individuals may become more confident. Those who are choosing to invest in the stock market are choosing more conservative investments.
Lack of market knowledge makes it hard to make investment decisions.
Millennials don’t know how to make long-term investment decisions. They tend to overreact and sell stocks too quickly instead of holding on to them and riding out mild changes in the market, or are overly cautious when confidence in the market is called for.
Net Worth of Millennials
Those in the 29-34 age range are struggling to bring their net worth to the level experienced by previous generations. In 2001, the net worth of this age range was an average of $34,643. In 2007, it rose to $39,635. By 2013, however, that number had decreased to $18,400. This decrease in average net worth makes it difficult for many millennials to plan for the future simply because they are forced to use their funds for expenses they have now.
It’s also important to take debt into consideration when considering millennials’ net worth. Millennials between the ages of 20 and 24 already carry a heavy average debt. Education debt averages around $8,200. Credit card debt averages $500, while car loans hit $1,500. Medical bills hit an average of $1,100, loans from parents and other individuals average around $800, and the average mortgage debt held by this age range is $4,500. Other debt averages around $500.
By the time they hit the 25-29 age range, debt is significantly increasing. Average education debt for this group is $8,500. Credit card debt averages around $2,100, car loans total around $3,600, and medical bills average around $2,100. Parents and others have loaned this group of millennials $1,000, while their mortgages average around $17,000. Other debt averages around $1,500.
Mastering Personal Finances for Millennials
There are four key things millennials should do to master their personal finances and reach a more secure financial level:
- First, they need to set a clear budget and stop the “bleeding” of money that is reflected by debt. Instead of accepting credit card offers, millennials need a plan to pay off student loans, develop healthier overall spending habits, and spend less than they earn—not more.
- Next, millennials must shift their savings and investment philosophy. They need to increase their savings whenever they get a raise, contribute to their employer’s 401(k) plan, and get comfortable with investing. Postponing a retirement plan might seem to make sense in the present, but it can be highly detrimental to future financial comfort.
- The next step is to acknowledge their earning potential and increase their income as much as possible. Millennials should always be looking for the next level at their job. How can they earn a raise? What position is next in line? Developing a plan and imagining what they want the future to look like is a critical part of getting there.
- Finally, millennials need to set aside their independence and be willing to ask for help. It’s necessary to get educated and understand their personal finances. They need to get confident with investing—and the best way to gain that confidence is to talk with someone who is willing to be a guiding hand throughout the process.
Millennials have learned different lessons about money than the generations that came before them. They know how hard it can be to pursue the American dream while drowning in debt, how quickly the stock market can drop, and how hard it is to land and hold onto a job. Luckily, they still have time. Despite a rocky start to their careers, millennials are still in a great place to begin saving and planning for the future. And just like what Richard A. Kimball, Jr. always say about the challenges,” To transcend the short term and selfish aspects of money and the ego to discover ethical, win-win, long term solutions for the all stakeholders including our entire society and global population.”