4 Money-Changing Habits for Successful Millennials

When you’re young, it may not seem too important to start setting money aside for retirement. But before you know it, years can go by and your lack of saving will start to become more apparent. We get it. The economy has high points and low ones, so it may not always be easy to contribute to a savings fund.

For millennials – those born between 1981 and 1996 – the outlook for their retirement savings isn’t ideal. According to a 2022 Urban Institute study, about 38% of older millennials are lagging in their retirement preparedness. But that does mean roughly 60% are planning for the future. If you’re concerned about where your retirement outlook is, there are some solutions.

This article will walk you through four money-changing habits successful millennials use, including debt consolidation, incremental savings, reward cards, and savvy budgeting.

Debt consolidation

With debt consolidation, you only pay one lender instead of multiple monthly payments, and typically with a lower interest rate. Consolidation helps you take multiple monthly payments and reduce it down to a single, more manageable one.

Just keep in mind: consolidating your debt may impact your credit score due to a number of factors, from initially applying for the loan to potentially changing how much available credit you have access to. However, it may help you pay off debts faster, which can improve your credit score in the long run.

Popular ways to consolidate your debts include:

• Balance transfer: Some credit card companies offer credit cards that allow you to transfer balances from other cards to a new card with an introductory interest rate offer, sometimes as low as 0%, for a specified time period.
• Debt consolidation loans: Debt consolidation loans condense multiple debts into one loan payment, often offering a lower interest rate. Banks, credit unions, and other lenders may offer debt consolidation loans.
• Home equity: Home equity is the difference between how much you owe on your mortgage and how much your home is worth. A home equity loan allows you to take that difference as a lump sum as you refinance your mortgage. On average, home equity loans have a lower interest rate than most credit cards. Therefore, you can use your home equity to consolidate higher interest debts, but be careful that if you fail to make payments on time and default on the loan, the lender may be able to seize your home.

Incremental savings

Putting $1,000 into your savings account can sound intimidating. What about $100 per month for the next 12 months? That sounds better, right? And, in that case, you end up putting away $1,200 instead of $1,000.

That’s the beauty of incremental savings. You create a more flexible and manageable saving plan with far less stress by breaking your savings goal into daily, weekly, or monthly increments. An incremental savings plan also helps you stay on track with your retirement savings.

Reward cards

Many businesses and credit companies offer reward cards that allow you to earn rewards via qualified shopping.

For example, if you travel often, consider investing in a mileage card that will allow you to exchange for flights and hotel deals with points earned. Meanwhile, many major credit companies offer great cashback cards for individuals and small businesses, allowing you to get the most back from your highest spending categories.

Nonetheless, some reward cards come with a high APR. Therefore, as enticing as these deals may sound, know your credit score and payback abilities before getting a new card. To maximize your rewards, pay off your balance in full each month to avoid paying interest on your purchases.

Smart budgeting

Some people may not like the word “budgeting” because it may seem like sacrificing a part of your quality of living. Well, that’s not entirely true. You can budget smartly and maintain a fulfilling lifestyle while saving money.

For example, one savings rule to follow is the 50-30-20 rule:

• Spend 50% of your after-tax income on fundamental needs.
• 30% should be used for casual spending, such as gym memberships, coffee shops, treating yourself to a small gift, or dining out.
• Use the remaining 20% for monthly debt payments and put the rest into your savings.

The bottom line

Start with these four money-changing habits to take your first step toward building a solid financial foundation. Once you’ve cleared off your debt, improved your credit, and built funds for future investment, you can look into other avenues to grow your money.

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