There’s a big concern today that young adults aren’t saving money and their debt is increasing. Financial Guidance has not been a mainstream priority. Schools are not readily introducing financial literacy into classrooms and parents are finding it difficult to introduce money management skills into a world that is now dealing with computerized money. (Debit cards, credit cards, on-line banking, etc.) With technology ever advancing, old teaching ways are not working anymore. It’s time to look at new ways, and information regarding finances is available at the touch of a button.
Millennials are information junkies, wired into everything. You have an opportunity to be more informed than ever before when you sit down to make your planning decisions. While the access to data is certainly more available, that data doesn’t necessarily equal knowledge or wisdom. Parents, schools and financial advisors are still good resources to assist you in developing a logical, realistic plan and sort through information overload.
It’s important to bring young people into the financial planning discussion, especially given insufficient funding to the Canada Pension Plan and old-age security to support them in their retirement. Before Millennials can even start looking at investing for retirement though, they first have to look at paying off debt and saving which requires a plan and achievable goals.
For younger adults that are starting out and have not yet started to accumulate debt, stay out of debt as much as possible. BIGCAJUNMAN from the Canadian Personal Finance Blog has an even more definitive perspective on this subject that you should check out. Having no debt is good debt, but there are instances where debt is a necessity, e.g. purchasing a home. If you spend more than you make, you are going to end up in debt. Credit is so readily available now that it is commonplace for people to live beyond their means. This is not okay. Living beyond your means will add up to debt. Tracking spending is not a highlight for most people, but it definitely helps to keep spending on track and achieve your goals, whether they are saving for a vacation, an emergency fund, a new house or retirement. Old school tracking by paper and pencil or spreadsheet probably aren’t your ideal, but there are a number of free phone apps available that assist in this. They can sync with your bank and credit card accounts and quickly display how much money you can afford to spend today, this week or this month to stay on budget and out of debt.
If debt is already dragging you down, then now is definitely the time for to start tracking spending and setting goals. Google, ‘methods of paying down debt’ to determine what works best for you.
There’s a ‘snowball method’ involves paying off your smallest balances first to create momentum and encourage you to keep going. As you pay off smaller debts, you can take the saved money and apply it to your larger debts. Or there is the ‘avalanche method’ which involves paying off your balances with the highest interest rates first. This is the cheapest and fastest way to get out of debt. You need to decide which will work best for you and keep your motivation up.
There are financial advisors out there that can assist you in your financial journey. Go on-line to research who would be the best fit for you. Look for someone who is more about educating you financially rather than just selling a product. Begin making a plan and setting goals so that you become in control of your money rather than your money situation controlling you. Gail Vaz-Oxlade has a no nonsense approach to getting and staying out of debt in her book “Debt-Free Forever”. As well, Gail has worksheets for tracking your spending, a spending analysis and a spending journal available on her website for a small fee. Or check out Kerry over at squawkfox for free worksheets to get you started and tidbits on how to spend frugally.
Image licensed through Shutterstock