Paying off student loans or saving money for the future is a common conflict many millennials face after graduating college and entering the workforce.
The graduating class of 2015 reached new heights as the most indebted class ever with a little more than $35,000 in student loan debt, and we can only hope things will shape up better for the class of 2016. But with Sallie Mae nagging your phone and making it clear that your student loan nightmare isn’t going away until your last payment, it’s easy to feel like student loans should be your No. 1 financial priority in your 20s and maybe even your 30s.
While managing student loan debt is important, focusing solely on this area of your finances will surely block you from building your future nest of wealth. Below are tips to help you not only pay off your student loans, but also create a plan for long-term financial goals.
1. Track your spending: The best way to avoid charging too much to your credit card or overdrawing on your bank account is to create a financial tracking system of your finances. At the beginning of each month, create a spreadsheet that outlines how much you pay in rent/mortgage, utilities, student loan debt, credit card debt, grocery expenses, and transportation. Once you’ve calculated those expenses, put yourself on a budget for how much you want to spend on non-essential items. Don’t forget to also put aside at least 10% per paycheck for a rainy day.
2. Save for retirement NOW: Many millennials think they have their entire 30-year plus career span to save for retirement and that the urgency for setting up a 401(k) plan is not now. That mindset is the farthest from the truth. Saving for retirement now will prevent you from trying to play catch up later. If your company offers 401(k) matching, accept it. When you leave a company, don’t cash out of your 401(k) or thrift savings plan, instead roll that money over into another account such as an IRA savings account or mutual fund account.
3. Invest in stocks: Investing in stocks is not a rich man’s game and the sooner we realize that, the better off we will be financially. Think of the companies and products you support/use the most. Head to NASDAQ now, type in the company name, click on the symbol that matches your company and you will see how much it costs to buy a share in that company as well as whether that company’s stock numbers are trending up or down. Monitor the company you’re eyeing for about a week just to see how it’s trending in the stock market. Use the $300 you saved up for that bag or pair of shoes and invest it into your future. Yes the stock market is risky, but in the words of Meek Mill “Scared money don’t make no money.”