For much of my life, my father was an accountant. Though I got homemade Halloween costumes and I can still hear his deep booming voice in my head discouraging me from upsizing my combo, I also received an excellent foundation for making financial decisions. But now, as a millennial, I often hear or read disparaging remarks about my generation’s liberal spending habits. The discussion usually begins with: why do you spend $500 on the latest phone?
To help understand how to navigate the challenges that millennials face, I spoke with Melanie Adams, a Sun Life Financial Advisor.
Here are her tips on how to manage the top 4 financial traps for millennials
Burden of School
Over the years, the cost of post-secondary education has skyrocketed, making educational debt a considerable issue among millennials. A poll by CIBC found that 51 percent of post-secondary school students said they would need to borrow money to pay for tuition, living expenses and books. Furthermore, the Canadian Federation of Students says that students in Ontario and the Maritimes have debt loads averaging $28,000 at graduation – the highest in the country. Yikes!
Adams says that the best way to address debt is to prioritize your spending and create a payment strategy. “Put a portion of each paycheque towards reducing your debt. Remember, Rome wasn’t built in a day and your debt won’t be paid out in one either. So, chip away at it and stay the course.”
Fear of Missing Out (FOMO)
In this social media age, where one can see everything their friends are doing, the old adage of “Keeping up with the Joneses” has been replaced with FOMO (Fear of Missing Out). More than ever, millennials are faced with social obstacles to maintaining a budget. The idea of missing out on a new purchase, event or travel adventure can instil feelings of anxiety and depression and lead people to spend. In fact, a Citizen Relations Study revealed that 7 in 10 Canadian millennials said that they would make a purchase as a result of FOMO.
“To avoid this trap, the key is to always allocate money smartly, strive to maintain a budget and figure out what is important to you,” says Adams. “This doesn’t mean never having entertainment or enjoyment; it merely suggests budgeting appropriately for it.” Never lose sight of your goals and values. If watching your friends leaves you itching to open up your wallet, consider reducing your time on social media.
Ignoring Workplace Benefits
For many millennials, starting a career is a challenge in itself. You can get caught up in just focusing on your current salary and your next raise. When conducting a job search, in addition to salary, never overlook workplace benefit options.
“Not taking advantage of workplace benefits is a huge issue. Ask about these when applying for a job,” Adams says. “This includes dental, pension, health, etc.” Having these benefits in place helps not only to save money but, depending on the options you choose, they can help generate income at a later time.
Not Seeking Financial Planning Advice
“Too many millennials get into financial issues and don’t seek advice soon enough,” says Adams. Whether you’re just starting your financial journey, you’re attempting to save for a purchase, or you’re already in debt, professional financial planners can help. Many of the fiscal challenges described above can be better understood, planned for, or manoeuvred through with the help of a planner.
It isn’t all doom and gloom. By starting early and developing good money habits, millennials can have a fruitful financial future.
For more insights, tips and tools on financial planning, make sure to check out our Financial Literacy Series to help get you on the road to financial confidence.
Allstate Canada works together with Sun Life Financial to provide our customers with an extensive range of insurance and investment products beyond Home and Auto Insurance, including Life, Disability, Critical illness, Long-term Care, and RRSPs, annuities, RRIFs, GICs, etc., (excluding mutual funds). Learn more.