How Millennials Can Reduce Debt and Invest In 2019

How Millennials Can Reduce Debt and Invest In 2019 via Pexels.com Where should you begin if youre living under a mountain of debt?   First things first: evaluate your monthly budget. How much are you spending by going out with your friends for drinks? Are you attending every single trivia night in your city? Is that really necessary? Cut down your entertainment spending first and foremost. After you re-evaluate your entertainment budget, the next thing you should look at is how much youre spending on extras. Most students do a little weekend shopping, eat out too much, or splurge on things they just dont need (probably Amazon). The second thing you should do after looking at your entertainment budget is look at your spending habits from the past few months and evaluate what you could have gone without. Next, you need to start looking at your debt to income ratio which you might think is tough to do while youre in school or if youre a new graduate. But its really not bad. Simply add up all of your monthly bills that youre  required to pay.  (This is called existing. What does it cost you to exist as who you are? Rent, credit cards, student loan, gas, food, etc.) Once youve added up everything you have to pay, look at your  net income.  (This isnt how much you make in one month, this is  how much you  bring home  in one month.) Evaluating your debt to income ratio is how people know theyre living paycheck to paycheck. You arent going to get very far in life if youre barely making it month to month between your income and your bills. So one of them has to change. You either need to lower your monthly bills or you need to find a job making more money. In order to find a job making more money, it might require you to invest in yourself through education. Theres a chance you arent in a financial spot to do so. This means the next thing you need to do is:  pay your bills down faster.   The absolute first thing you need to know about being in debt and trying to get yourself out of debt is:  you should never, ever, ever  only  pay the minimum payment required on any credit card bill.  See, credit card companies are funny little suckers they know they can take advantage of young people who are impulsive. They know they can get you hooked on swiping your little plastic card so you can have the things you  think  you need; the things you  think  youve just  got to have.   If all you do every month when it comes to your credit card bill is pay the minimum balance, youre always going to be in debt. Those credit card companies dont want you to pay off your bill! The interest youre having to pay is  how they make their money.  So the  first  thing you need to do when you get your credit card bill is write a check or make a payment for  more  than the minimum balance. Otherwise, youre going to continue to receive a credit card bill every month instead of just paying it off. via Pexels.com What if you dont have credit card debt, but you do have student loans?   Student loans are a tricky little thing. Most of the loans college students are taking out these days have a grace period of six months after graduation before you have to start making payments. This six months should be used to find a job with incredible earning potential (you  do  have a college degree, after all). Get yourself settled into a place with decently low rent, pay down your credit card bills, and then recognize how much youre going to have to pay in student loan payments every month. Look at this loan like I taught you to look at your credit card bills:  pay more than the minimum requirement and youll see a much more drastic change in the amount you owe.   Investing in yourself can be great, but student loans are  real.  Theyre something most college students have to deal with after graduation. Dont feel like youre the only one fighting this battle, just realize that unless you bite the bullet and start paying it down youre going to be looking at making payments for a VERY long time. The longer you make payments, the more interest its likely that youre paying. The faster you can pay it down to nothing, the less money youre going to waste on interest. via Canva.com You might feel like you dont have a lot of money, but you want to start investing to secure a stellar financial future. Where do you begin?   Instead of holding onto your cash,  investors.com  suggests you invest in stocks and stock funds. In the long-term, returns on cash investments look good, but investments in stocks look better. The key is to  start investing when youre young.  Investors.com even suggests that contributing $5500 per year to an SP  500 index fund, it will be worth almost $4 million after 42 years. That sounds a lot better than earning nickels and dimes on the dollars of what you have sitting in the bank, doesnt it? Absolutely. Should I already be worrying about retirement even if Im in my early 20s?   Yes. Absolutely. Its never too early to start saving for retirement. So as youre evaluating your financial situation and trying to figure out how youll pay for your apartment in a swanky retirement home, you should know that the earlier you begin investing, the bigger the payout is in the long term. Lets run some numbers: According to CNNs  money.cnn.com, it is absolutely  imperative  that you understand the amount of money youre missing out on just by putting off stocking up for your retirement by a few years. Here are the examples they use: If, at age 25, you begin saving $3000 per year. Then after 10 years, at 35, you completely stop saving. By the time youre 65 (which were loosely using as retirement age,) you will roughly have about $338,000 in savings. Seems pretty crazy, doesnt it? Now lets imagine that you put off saving for retirement until youre 35. Since youve missed out on saving for a few years, you decide youre going to contribute $3000 per year for the next 30 years. By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $303,000. Theres $35,000 in difference because you put off saving for a few years. So whats the lesson to be learned from this?  Start investing early. But what should I invest in? How do I know if Im investing in something worthwhile versus making a bad decision?   Sometimes people get intimidated by investing in the stock market. I understand this completely. But there are other options. You dont  only  have to invest in the stock market there are definitely more options to choose from. If youre looking for advice on how you should invest, seek out a financial advisor. Many people think they have to have hundreds of thousands of dollars in savings before an advisor will even give them the time of day. But this isnt the case. If you cant help or stop yourself from wanting what you want, and you really want to make a big purchase, where should you begin?   Your first step towards buying something thats much larger than you would typically buy, you need to split it into chunks. Save for it in steps. There are several ways you can do this: some people will save for large purchases with cash in a clear jar. The reason for this is so you can see yourself saving as you go. Then, when you go to make a large purchase, you wont see a difference in your bank account. Instead, youll use the money you saved over a number of weeks. Split up the purchase into reasonable chunks. You might think of paychecks as a reasonable measure of time. For instance, set aside $50 every paycheck, and after a few months, youll have enough saved to buy a large ticket item. There are many students, today, who are not in ideal financial situations. In fact, its hard to get yourself to a place where you feel financially stable and happy. When youre a college student, you feel overwhelmed by finances. Youre drowning in debt, you dont have much time to work, and you dont feel like youre bringing in very much money on a weekly basis. However, theres a time and a place for you to get yourself in a more stable financial situation. Dont feel like you have to immediately have your life figured out. Sure, theres a pressure to make sure you get yourself together and you have a stable life after college but thats exactly it  after college.  You have time to get yourself financially settled. The best thing you can do for yourself in the meantime is to make intentional and  smart  financial decisions.