Millennials are entering the workforce at a precarious time: the labor market is still weak and many are carrying around record student loan debt. How you handle your finances as a young adult will carry through into adulthood, but navigating the financial waters in the current economic climate is no easy task.
If you’ve any student loan debt, paying attention to spending is a vital part of your financial plan as you start your career. “It’s all about ratcheting up the intensity on your personal finances— you have to make extra effort so it doesn’t get worse,” says Scott Halliwell, certified financial planner at USAA.
When it comes to getting on the right financial path, experts provide the following tips:
Tip 1: Start Working
Meeting your minimum needs and payments is paramount, which may mean taking a job that might not be your exact dream job while exploring other opportunities.
“You can’t make a mistake in your career before the age of 30— your first job is not going to dictate your entire career,” says Amanda Augustine, job search expert at TheLadders. “Think of that entry-level job as a gateway—take that receptionist or customer service job that gets you in the industry where you want to be.”
The interview process is not without its challenges. “If you keep getting rejected from jobs, ask the recruiter why and whether it’s because of a lack of education or lack of experience,” says Wesley Gunter, a financial solutions advisor with Merrill Edge.
Keep in mind that many companies often give preferential treatment to internal candidates, so taking an entry-level position could lead to advancement. If you’re in a situation where you need more cash, Augustine suggests taking a job that won’t cut off other part-time opportunities to make more money.
Tip 2: Create a Budget and Save
Creating and executing fiscal discipline from the start of your career is key, and don’t make the mistake of thinking you don’t have enough money to budget. “Know what you’re going to spend on certain items and track your expenses,” says chartered financial analyst Robert Stammers, director of Investor Education for the CFA Institute. Being focused on where you spend your money is important. “People who have less money tend to budget better than people who have more money.”
Know how much money is coming in and how much is coming out, suggests Gunter. “Put it down on paper so you can see it and hold yourself accountable for it. Don’t worry about setting up a yearly budget. Start small and build out your budget when you’re comfortable with it.”
If possible, make saving automatic by having part of your paycheck diverted into a savings account that isn’t linked to your debit card, say Stammers. “Know how much you’re going to spend for the month and put money away before you spend.”
If available, contribute money to your company’s 401(k) plan, says Gunter. “This is a great way to save, even if it’s $50 a month. The employer match doubles your money immediately without being invested in the market.”
Tip 3: Forget the Jones
“Live within your means,” warns Gunter. Everyone loves to treat themselves from time to time, but don’t do this regularly. “If you’ve reached a savings goal, treat yourself to a reward because you can afford to do it.”
Depending on your income and expenses, you may have to keep your budget to the bare bones, says Jerry Love, a certified public accountant in Abilene, Texas. “Try to live as inexpensively as you can while looking for a job.” Depending on your expenses, try to make saving and paying off student loans and other debt a priority over discretionary expenses like eating out or buying clothes.
“It’s important that [millennials] don’t do what a lot of baby boomers did— don’t get wrapped up in the instant gratification world that a lot of baby boomers got wrapped up in,” says Halliwell.
Tip 4: Be Careful with Credit Cards
Credit cards help you build your credit score, which you’ll need later in life, says Halliwell, but they can also be your downfall. Only charge on a card what you can afford to pay off and limit the size of the balance you carry over.
If you already have debt and aren’t able to pay off your credit cards in full every month, you may be compounding your problem. “Try to avoid new debt at all costs,” he adds.
Tip 5: Consolidate Your Student Loans
“Student loans follow you for the rest of your life,” says Stammers. “If you defer them, they’re just going to grow.” Regardless of your income, try to create a habit of paying them regularly to prevent the loans from ballooning into an unmanageable amount. “Student loan companies won’t let you defer these forever, and you don’t want to go into default.”
Make your payments manageable and look into consolidation, says Halliwell. “If you’ve a lot of student loan debt, don’t just accept them for the way they are. See if there are ways to save money on those loans.”
He also suggests looking into whether you can qualify for loan forgiveness programs. By working in the public sector or in certain professions, like teaching or practicing medicine in an underserved area, for example, all or a portion of your loans can be forgiven after a certain period of time.
Once your student loan payments are finished, Stammers suggests using that money to save towards your long-term goals.
“Open your horizons to an area that has lots of jobs,” says Love. Areas with labor shortages tend to have higher wages to attract talent. If finding a job in the area is difficult, consider moving to an area that will benefit your career and help you get on your feet financially.
Tip 7: Live in Affordable Housing.
“Cheaper and a lesser commitment is probably the right approach when faced with a tough job environment and debt from college,” says Halliwell. Consider living with roommates or back home with your parents, if possible, to cut down on expenses.
Tip 8: Ask for Help
Budgeting isn’t easy.
“There are public consumer counseling places that teach you to budget and track expenses— take advantage of these especially if you’re having trouble,” says Stammers.