How millennials can take control of their finances

Every phase of life ushers in new, exciting challenges. As a millennial, you’re likely busy building your career, and perhaps you’re now even considered a professional in your field. While you progress in your career, you may also grow your family or check off some bucket-list goals. But with all this change comes more financial responsibility. From credit card debt and auto loan repayments to student loans and mortgages, research shows that millennials in their 30s are facing escalating debt. In fact, Americans in their 30s accumulated almost $4 trillion in debt during the fourth quarter of 2022 alone, a $140 billion increase from the previous quarter.¹

To make sure you’re financially on track to take advantage of these important years, here are five things to consider doing to help optimize and protect your savings.

1. Prioritize debt to pay off

Having started their careers around the 2008 financial crisis, only to face the COVID-19 pandemic 12 years later, millennials have experienced multiple economic events that impacted their debt. When paying down debt, prioritization is key, as the amounts and repayment options can vary greatly:

• Activities like online shopping can lead to credit card debt, which charges a high interest rate that can quickly deplete savings.

• A common type of debt millennials experience is student loan debt: The median student debt per millennial is between $25,000-$30,000.² If you have student loan debt, it likely constitutes a significant portion of your salary and may prevent you from bigger purchases, such as buying a home, and properly saving for retirement.

• Medical debt also can have a significant impact. Though not everyone incurs this kind of debt, it is reported as the number one cause of bankruptcies in the US.³

• While owning a home may be an exciting accomplishment, it can lead to high mortgage loans. In 2021, the average millennial had $255,527 in mortgage debt.⁴

As a result of all these types of debt, the average millennial owes $117,000.⁵ That’s why it’s crucial to utilize practical budgeting tactics to minimize debt, such as paying down high-interest debt before investing, as the interest charges on the debt can quickly accumulate and outweigh potential investment returns.⁶ A financial professional can also work with you to help build a customized approach that helps you pay off what you owe while preparing you for the financial future you want.

2. Take on a side hustle

If you’re a millennial facing debt, or just looking for a way to supplement your savings, taking on a side gig is a great way to boost your finances. As of mid-2023, nearly 2 in 5 (39%) of U.S. adults have a side hustle.⁷ In any economy, side gigs can be a great way to earn extra cash or explore new interests. Choosing a side hustle that capitalizes on your skill set and passions gives you an opportunity to earn more faster and enjoy yourself at the same time.

This increase in income should be met with a proper savings plan. Many financial professionals recommend saving 20% of your income as a sustainable, lifelong habit.⁸ While a more immediate goal is to have a year’s worth of expenses in your savings account. Once you have this kind of financial cushion in place, you can help weather the unexpected without accruing debt.

3. Protect your income

To supplement your healthy savings habits, you should protect your ability to earn income. As a millennial only in your 30s or early 40s, you may think this is far-fetched, but what would happen if you became disabled or ill and could no longer work? How would you continue to support your family and yourself? Would you need to drain your savings and retirement? Research shows that 1 in 4 young workers will have to put work (and earnings) on hold due to an illness or accident at some point in their career.⁹ Often this kind of income interruption drains savings accounts or drives people into debt to cover basic expenses. In this case, a payment into disability insurance ahead of time can help protect your savings, ensuring you remain financially stable if the unexpected happens.

4. Secure life insurance benefits

Another form of financial protection is life insurance. When some people hear life insurance, they think it’s something to put off until later. As a millennial, you’re busy building your career while raising a family, and life insurance may be the last thing on your mind. However, it can provide helpful financial support for your loved ones if you pass away prematurely. Look into whole life insurance for a source of guaranteed income with cash value growth potential, that can help you diversify your portfolio.^10,11

As you pay for your whole life policy, your cash benefit accumulates over time and builds tax-deferred value.¹² This cash value can grow to potentially be used for opportunities such as helping to fund a new business or buy a home.^13,14 What’s more, the premiums, or the amount you pay for your policy, are guaranteed to never increase once you purchase the policy, and the death benefit, the amount your beneficiaries get when you pass away, is permanent.¹⁵

If you’re looking for more affordable coverage, term life insurance can be an attractive choice. This may be a great option if you’re not at a place to commit to permanent, whole life insurance. While with a term life policy you get coverage for a defined length of time, there are policies that can be converted to permanent life insurance for part, or all, of the coverage period down the line too.

5. Optimize your retirement accounts

Even though millennials are facing significant financial struggles, many conversations about retirement center around baby boomers. But it’s never too early to start preparing for retirement. A great saving strategy is to contribute to retirement accounts, such as 401(k) employer-sponsored plans and individual retirement accounts (IRAs).

Public educational institutions, churches, and certain 501(c)(3) tax-exempt charitable organizations offer 403(b) tax-sheltered annuity plans, which operate similarly to 401(k)s but are available strictly to employees of those types of entities.¹⁶ If you work for a for-profit organization and your employer doesn’t offer a 401(k), or if you’re a gig worker, you can opt for an IRA and contribute up to $6,500 per year (as of 2023), which may be tax-deductible.¹⁷ Restrictions apply if you exceed the income limits or are covered by a retirement plan at work. Typically, workers can write off contributions to their traditional IRA in their yearly taxes, making it appealing for people who want to lower their immediate tax burden.¹⁸ On the other hand, there are also Roth IRAs: With these, you won’t get the benefit of lower taxes today, but you won’t have to pay taxes on the money you withdraw after a certain age when you retire.

If your employer offers a 401(k) program, any contributions you make won’t count towards your taxable income. This lowers the amount of taxes you pay and can potentially even drop you into a lower tax bracket. Additionally, many employers offer a match to employees up to a certain percentage of their salary that they contribute to the company 401(k) plan. Be sure to look into your employer match rate and contribute the minimum required for a match, which can double your contribution — and growth potential.

Gain confidence about your future

While you’re busy growing your career, a great way to take inventory of your finances and ensure you’re on the right track is by talking with a financial professional. A trained eye can help review your income, savings, insurance, budgets, and more to spot opportunities. They can then help you figure out how to balance your needs today with your dreams for the future.