Retirement is probably the last thing on the minds of millennials. However it’s never too early to start preparing for what is inevitable – debt and retirement. It’s almost impossible to live without some kind of debt, and that’s ok, as long as it doesn’t control your life and jeopardize your way of life. So how can a person that may be living with some kind of debt and just starting out in this world, prepare for retirement? Care of the Toronto Sun, here are five tips for our millennials.
CUT COSTS
Before you sign a lease or buy a car, think about cheaper options. Housing and transportation are the two biggest costs for most people and significant commitments of your future income. Share a living space with a friend, car pool or ride your bike to work to save some money. A small change can give you a lot of financial freedom.
MAKE A BUDGET
Track your spending for at least a month. That is the first step for exercising restraint. Otherwise, your spending can sneak up on you. A $3 Starbucks coffee a day adds up.
Categorize your expenses as “needs” and “wants,” and distinguish between the two. Paying your rent and transportation to and from work are necessities. Going out for dinner and cable TV are not.
If you think it’s overwhelming to make a budget for all your expenses, pick a couple of categories and track them. We have a great budget tool that can help you track your spending and learning how to budget properly. Go to https://www.occa.ca/budgeting/how-to-build-a-budget.
ADJUSTMENTS
Try increasing your savings for three months. You will eventually adjust to this. You can live without having it all for a few months to find out how much you’ll save. You can still go out with your friends once in a while WHILE you are saving for retirement. It just means you may need to cut out the entertainment to two times a week instead of three or four.
When you do get a job and start making some money, don’t get caught up in living pay cheque to pay cheque. This can be a trap that some people never get out of.
SAVE WHILE PAYING OFF LOANS
Student loan debt prevents some millennials from saving. But it’s important to prioritize both saving and paying off loans.
First, build an emergency fund of three to six months of salary. Then prioritize paying off your loans. Start by paying off the loan with the highest interest rate.
MAKE IT AUTOMATIC
While you are working, you should save a fifth of your salary so that you have money for the last fifth of your life. Arrange it with your employer to allocate a certain amount each pay to a savings fund. If it gets withdrawn automatically, you may never miss it.
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