Millennials – those between 18 and 34 years old – are now the largest generation in American history, constituting 25 percent of the population, according to the U.S. Census Bureau. They’ve surpassed baby boomers in number and are poised to exceed that generation’s financial impact on the country. So it’s concerning news that a new Bank of America/USA Today Better Money Habits Report found that while 84 percent of millennials are confident in their ability to manage their finances, 41 percent report feeling “chronically stressed” about money and more than half say anxiety about money affects their emotional well-being.
“Even though millennials are confident about money and focused on their finances, they’re still experiencing a great deal of stress. That’s due in part to factors out of their control – a volatile global economy, a challenging job market and, to some extent, the student debt they’ve taken on,” said Andrew Plepler, Global Corporate Social Responsibility executive, Bank of America. “Amid the uncertainty, it’s important to focus on things they can control, such as their level of financial knowledge and awareness. This survey indicates there may be room for more effective financial management efforts that make it easier for millennials to take greater control of their finances, and hopefully alleviate some of the stress they feel.”
Although millennials are optimistic and are actively trying to take control of their finances, outside pressures are getting in the way. They often worry about the cost of living, lack of income growth, student debt, housing costs and more financial concerns – all of which affects their personal relationships, work performance and even their physical health.
Despite these stressors, millennials haven’t necessarily lost confidence in their ability to manage money. Most respondents (more than eight in ten) said they feel “confident” or “very confident” when it comes to personal finance. A much smaller percentage (17 percent) consider themselves “experts” on the topic.
“We don’t expect young people to be experts,” explained Plepler, “which is why we partnered with Khan Academy to create BetterMoneyHabits.com. The website is free for all and provides information on-demand when you need it.”
Examples of content found on BetterMoneyHabits.com include:
Create and stick to a budget
You can do this with these simple steps.
* Learn your monthly take-home pay – the amount you actually get after taxes, insurance and 401K contributions come out of your salary.
* Tally monthly fixed expenses, those costs that don’t fluctuate much throughout the year, such as rent or mortgage, car payments, student loan payments, etc.
* Calculate variable monthly expenses, such as phone or other utilities, groceries, clothes, entertainment, etc.
* Decide what’s really important. Some expenses are musts, like rent. Others are “wants,” such as a premium cable package or unlimited texting. With a close look, you’ll likely find wants you can curtail in order to spend less.
* Track your spending and review it every month. Use a budgeting app, a spreadsheet or old fashioned pen and paper, but keep track every month of how well you’re doing on your budget.
Managing credit wisely
* Pay all your bills on time every month. Late and missed payments show up on your credit report and will harm your credit score. Use your bank’s auto payment service to ensure you never miss or are late with a payment.
* Pay down credit card debt. Too much revolving debt not only reduces the amount of money you have to spend each month, it can negatively affect your credit report.
* If you want to establish or build your credit, see if your bank offers a credit card. You can use it each month to pay for certain expenses, pay off the entire balance right away and build a good credit history.
Build an emergency fund
* Try to save up at least two to six months’ worth of living expenses – even more is better.
* Not sure how much to save? Look back at your budget for the total of your monthly expenses. This will help you understand not only how much you need to save, but where you can reduce spending in order to pay more toward your emergency fund.
For more money management and personal finance information and tips, visit www.bettermoneyhabits.com.