Both millennials and Generation Z are the most highly educated generations that the United States has ever produced. Unfortunately, this pursuit of higher learning comes with a much higher price tag than previous generations had to contend with. The high cost of attending college and university leaves many students stretching to make ends meet.
Even with assistance from family or hard-earned scholarships, many people don’t make it out of college debt-free. While some may be lucky enough to land a high-paying job directly out of college, many still struggle to keep up with loan payments, keeping their dreams of success out of reach. However, with proper planning and fiscal education, budgeting for college and beyond can be made less painful.
Developing Financial Literacy
Many young students have to make the tough decision right out of high school whether or not to attend college or university. While trade schools remain a popular, more affordable option for getting into the workforce sooner, many students believe that a degree is essential to success. Because of this, a large portion of people entering college is forced to take out loans, whether they truly understand what they’re getting into or not.
Millennials have continued to exhibit an astonishingly low level of financial literacy, taking on long-term debt while regularly overdrawing their checking accounts at the same time. Many young people consciously go further into debt by racking up spending on credit cards while they still have massive student loans hanging above their heads. This is often done to simply support a basic lifestyle or to quickly obtain big-ticket items like computers and televisions in the hopes that they will generate enough income down the road to pay them off without too many consequences.
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This consistent failing of financial literacy litmus tests doesn’t bode well for millennials, as these negative spending habits tend to stick with people no matter how much money they end up making in the long run. Millennials are by and large not a lazy sect of American society by any means, either. The rise of the “grind culture” among millennials is evidence of a clear desire to become successful. However, large, long-term debts often keep many from their goals, despite all their hard work.
Create a Financial Plan and Stick to It
The best way to avoid having to work endless side hustles well into old age is to develop a solid financial plan. Paying off existing long-term debt like student loans should take priority when it comes to financial planning, as the interest on long-term debt puts the biggest damper on the ability to actually save money. Seeking employment through public service is a good idea, as it often offers up loan forgiveness, and it is always wise to avoid extending the grace period in which loans aren’t being paid off.
If somebody doesn’t pay back their student loans, it can have lasting, harmful impacts on their financial health. While student loan delinquency can wreak havoc on someone’s credit score, its when people default on their student loans that things really start to get bad. Loans and all accrued interest may become immediately due; the debt may be referred to collections companies; and perhaps worst of all, a school might withhold academic records until the debt has been paid.
Because of all of this, adopting an aggressive loan repayment plan as possible is recommended. A good exercise for people learning the ropes of financial literacy is to try doing a trial balance of their finances. A term often used in the accounting world, a trial balance involves tabulating all of your expenses, financial statements, and sources of income for a month. This will let you know if your income can support your lifestyle. Once an individual has developed a sensible budget that specifically addresses long-term debt, people can begin to save in earnest. A budget helps people to stop living from paycheck to paycheck, allowing them to save as much as possible for their retirement and, barring that, have enough money in their checking account to cover any emergencies.
Make Healthy Spending Habitual
It’s no wonder that the U.S. has a financial literacy and savings problem, a few states require any sort of financial education in high school. This results in unhealthy spending habits like living outside of one’s means in order to have experiences that are seemingly worth their investment. However, living outside of one’s means is not a tenable plan for financial success, and though the people attending music festivals throughout the year will certainly have memories that will last a lifetime, their bank accounts will be less prosperous.
This unhealthy spending can lead to unnecessary financial stress, leaving people feeling overwhelmed. People who engage in unhealthy spending habits regularly might find themselves struggling to keep up with a credit card and student loan payments, and they often have virtually no money set aside in case of an emergency. Healthy spending habits are developed by learning how to actually have money and making sure that it can be held on to.
Writing down down financial goals both short and long term is a fantastic way to add some structure to financial planning. Saving up for retirement can seem a bit nebulous, but attaching expectations and experiences to the idea of retirement can spur on improved financial health. Asking for help from professionals or taking financial planning courses through a college or even the local library can give people the leg up they need to become healthy spenders.