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April 11, 2019

Financial Advice: Millennial to Millennial

If you were born between 1981 and 1996, your generation is facing some unique challenges when it comes to finances. You likely have higher student loan payments than your older siblings with a lifestyle including conveniences that come with a cost. Using smart phones, tablets, and ordering meals through an app adds up. Navigating through finances isn’t easy at any age, but today’s way of life can make it even more challenging for millennials. With this topic in mind, we turned to a financial expert, and millennial, on our team, Brittani Fenton. The Retail Branch Manager at our office in the Keystone Industrial Park, Brittani offers solid financial advice, millennial to millennial.

Got credit?

An important first step in a healthy financial future is establishing credit as soon you’re able to do so. “Look for a credit card with a low limit and no annual fee,” Brittani said. She said many of the credit cards marketed to college students meet these criteria. Just be sure to read the fine print.

Establishing credit is a critical step that can be easily overlooked during this hectic, and exciting, time in your life when you’re about to enter the workforce full-time. “When you’re in college and working to find a stable job, you may not be thinking about what you’ll need to do once you graduate — paying back student loans, and finding a place to live,” Brittani said.

You may not be thinking about it, but you should. Here’s why: you need it to move forward with your life. If you want to do any, or all, of the following, you need good credit:

  • Enroll in grad school;
  • Finance a car;
  • Rent an apartment; and
  • Buy a home.

All require a positive credit score. That means paying your bills on time. (Don’t worry. If you’re not feeling it when it comes to money management, technology is your friend. Many banks, including Fidelity, offer automated bill paying services with online banking to make this monthly chore more convenient). Find a system that works for you, and stick with it because bad credit takes a long time to repair, and creates a host of challenges you don’t want or need.

“Once you ruin your credit with negative reports and charge-offs, it takes years to repair it,” Brittani said. “And you don’t want to start your life with a bankruptcy either.”

The skinny on student loans

Brace yourself. Here come the scary stats*:

  • More than 44 million Americans collectively hold nearly $1.5 trillion in student debt;
  • 1 in 4 one American adults are paying off student loans;
  • The average student loan borrower has $37,172 in student loans; and
  • In 2016, the average monthly student loan payment was $393.

*Source: Here’s how much the average student loan borrower owes when they graduate, by Abigail Hess, CNBC, February 15, 2018

Yikes!

Don’t have a panic attack. Just plan accordingly. Brittani emphasized the importance of including your student loan payments in your monthly budget, and making sure that you pay those loans on time.

“Once you graduate, you need to start paying those loans back on time or those delinquencies will absolutely ruin your credit,” Brittani said. “Even if you were to file bankruptcy, it wouldn’t matter because student loans are federal debt, and federal debt doesn’t go away. You’re never off the hook. They will garnish your wages. They will take your income tax refund.”

Another tip: Start paying at least on the interest on your student loans now because it accrues over time.

Take the sting out of budgeting

Would you rather eat rusty nails than have to create a budget in Excel?

You’re not alone. But building a budget when you’re just starting out is important, and it’s a top priority on Brittani’s millennial money management hit list.

“When you’re graduating from college, you need some kind of budget going into the workforce,” she said. “I can say honestly budgeting can save you thousands of dollars, and you should be saving for at least 3 months of living expenses in case you need it. That way, if something unexpected happens, you can still pay your rent while you’re searching for a new job and you’ll be able to pay your bills and maintain a good credit rating.”

The process requires you to closely examine your spending. “You have to evaluate and really nitpick your daily activities,” she said. Figure out what’s essential, and what you’re willing to give up — the morning coffee run, the extra stop at the store, dining out multiple times a week — in order to establish that emergency fund.

Also, consider setting up an automatic monthly or bi-monthly transfer from your checking account to a savings account. The money transfers on a schedule you create, and chances are, you won’t even miss it.

A good rule of thumb for savings: everything in moderation.

Surprise! You’re not too young to think about retirement

When you’re just starting your career, retirement might feel like it’s eons away, but Brittani suggests millennials start planning now. “Once you start your first job, put 10% of your check away (for retirement). It absolutely adds up,” she said. Think of it this way: even 10% of a $200 check from a part-time job is $20. In time, that can really make a difference.

If you don’t have a retirement plan option where you work, or if you’re working 2 part-time jobs, consider opening an Individual Retirement Account (IRA), a CD, or savings account. Your Fidelity banker can help you choose a plan that’s right for you.

It’s never too late to get started

If you’ve been in the workforce for a few years and didn’t take the steps mentioned above, don’t despair. It’s never too late to start working on a healthy financial future. If you need to establish credit, Brittani suggests looking into a secured credit card. Many banks, including Fidelity, offer secured credit cards. You put a certain amount of money down, and those funds serve as your credit limit. They help you build credit faster because there is no risk to the credit card company.

Questions?

Fidelity Bank has multiple local branch offices throughout Lackawanna and Luzerne counties, and our full-service Customer Care Center is at your service 7 days a week. Call or visit your local branch office today.

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Daniel J. Santaniello, President and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at . We would love to hear from you.