Being a new graduate is a fun chapter in your life. And if you are looking for a way to make your future financially secure, the key to that is to develop saving habits. Of all the financial habits that you need to possess, this is the one that can build up a strong financial future despite your student loans.
You know what the really bad news is about student loan debt? It keeps on increasing and we have no intentions of keeping ourselves from incurring more of it. Why is that? Because we are led to believe that our education is one of the most important investments that we have to make.
Truth is, we do not contest that. It is true that among the many investments that you need to focus on, investing on yourself is probably the most valuable and rewarding of all. You can lose the money invested in stocks or bonds but the knowledge and skill that you got from your education will never be lost.
But despite that importance, we should not ignore the threat of the growing student loan debt. Based on the data compiled by MarketPlace.org from the Consumer Financial Protection Bureau, the current outstanding student loan is now at $1.2 trillion. That means the average student debt for the 40 million borrowers is currently at $30,000 each.
That is a huge amount of debt for new graduates to be burdened with. If you are not careful, you will really find it hard to establish a secure financial future for yourself. This is threat that you have to deal with. While a $30,000 debt may seem daunting, it is not impossible for you to build a great future for yourself. You only need to develop the right saving habits.
6 mindsets that will help you develop the right attitude towards savings
Developing any kind of financial habit is easier said than done. Even your saving behavior will require you to change the lifestyle that you got used to. But if you know that your life will improve for the better, you will find the motivation to make the necessary changes and sacrifices along the way.
The key to improving your saving habits is to change your mindset. With that, here are 6 mindsets that you will find to be quite helpful in changing your behavior towards growing your savings.
Mindset 1: Pay off debt immediately.
It is not enough that you make a plan to pay off your debt. You want to do so by doing it the fastest way possible. There are millennials wanting to buy a home but cannot do so because off the debts that they have to pay off. Remember that the longer it takes for you to pay off what you owe, the more money you waste on interest. Try not to waste money on the interest and fees accrued through your debt. That could be money you can put aside towards your savings.
Mindset 2: Budget every dollar you earn.
Despite the importance of paying off your debts, you also have to focus on literally adding to your savings. That means, you want to budget every dollar that you earn to make sure it goes to where you planned it to be. We have so many little expenses that end up being unnecessary ones. Considering the debt that you have to pay off and the future that you have to secure, make sure that you use a budget plan to keep your finances in their proper place.
Mindset 3: Do not be discouraged by a small savings account.
A lot of people fail to save because they think that they can only put aside a small amount anyway. But here’s the thing – even if you put aside only $5 a day, that will grow to be a significant amount in the future. $5 can turn out to be $150 a month. That can grow to be $1,800 in a year. It will grow bigger as long as you stay committed to putting aside $5 every day. And since you started early, that amount will grow bigger. In 5 years, you will already have $9,000 in your savings.
Mindset 4: Set financial goals for the rest of your life.
Since you are trying to improve your saving habits to benefit your future, why not map out goals from today until you grow old. Set both short term and long term goals. For instance, you can plan to buy a car in 3 years, a home in 10 years and a retirement fund worth $1M when you reach the age of 50. These will help give your life direction and focus too.
Mindset 5: Maximize the benefits offered by your new job.
In most cases, your job will not only pay you a basic salary, it also includes a lot of benefits. Make sure you understand all of these so you can maximize them. For instance, if your employer matches your 401(k) contribution, give as high as you can so you can receive more from your employer. Do not hesitate to ask about this because these benefits are technically free financial help. Taking advantage of the free stuff is always a good idea.
Mindset 6: Mind the lifestyle you will lead.
We are not going say that you have to live cheap to satisfy the requirements of your saving habits. However, we do encourage you to not be too quick to upgrade your lifestyle when you get that first paycheck. You may want to splurge on yourself and while you deserve it, make sure that it is done within the context of your financial goals. Not only that, you want to keep yourself from keeping up with the lifestyle of your friends if it is something that you know you cannot afford. According to the latest study of the American Institute of CPAs and the Ad Council, 78% of young adults are highly affected by the lifestyle of their friends. The study published on AICPA.org revealed the intentions of Millennials to keep up with the habits of their friends.
If your friends have healthy saving habits, this will not be a problem. But if they are irresponsible spenders, you may want to keep a level head so you can distance yourself from these bad financial influences. Do not let your circle of friends dictate the kind of financial future that you will have.
How you saving behavior can set you up for a secure financial future
There are many strategies to save money but the more important thing for you to focus on is the effects of this behavior to your financial future. That will help you be more serious about developing your saving habits.
Despite the seemingly bleak financial conditions, Millennials are displaying an optimistic attitude about their money. According to the latest survey done by PEWSocialTrends.org 8 out of 10 say that they have enough money for their preferred lifestyle or they expect to have it in the near future. Compared to the Gen X and Baby Boomers, they have the highest financial optimism level.
You want to hold on to that optimism and if you are having a hard time doing so, here are three benefits that you will get when you develop the right saving habits.
It keeps you focused on the future – not just the present. Your saving habits will put you in a mindset that is always focused on the future. You don’t save for the past. You always save for what lies ahead of you.
It motivates you to prepare for your future. Since you are focused on the future, you get to find the motivation to prepare for it. This is how your habits will be strengthened and shaped to come more naturally to you.
It encourages you to make smarter decisions about your present so as not to affect the future. As you work on preparing for your future, you get to be more conscious about the decisions that you will make today.
Here is a video from Reuters TV that discusses the survival secrets of Millennials and how it can possibly set them up for a secure financial future.