Programmers are consistently in the Top 10 entry-level jobs with high earnings potential and a fast rising salary. So how do you maximize the cash flow early on for a head start?
Pay down student loans
Debt takes away from your ability to accumulate wealth. The PEW Research Center indicates college-educated millennials without student loans haveseven times greater net worth.
Why is there such a difference? Let’s walk through an example.
In 2000, the average Stafford loan rate was 8.19%,[1] and assuming a 2004 graduation date, the average borrower debt was $24,000.[2]
Given the 10-year repayment period and a monthly payment of $294, your total interest paid on a standard plan would be $11,247[3] – almost 50% of the original loan amount.
Student-loan debt has increased since the early 2000s. If you feel the pain now, just wait until your kids get ready to head out for college!
Commit to the process of saving
I know you’ve heard it all before, but really, pay yourself first. Saving money may not feel natural at first, but like any good habit, time and consistency are key.
Is this easier said than done? Maybe. The majority of millennials believes it’s difficult for their generation to live within their means and not overspend. It’s important to keep the long-term strategy in sight: we all fall off the wagon sometimes, but staying the course and not allowing a bad month of lost savings to turn into multiple bad months will pay off.
Here are some great resources for motivating yourself to stick to a budget and stay the course.
- Podcast: You Need a Budget (YNAB)
- mrmoneymustache.com
- budgetsaresexy.com
While you are saving for a down payment or vacation, you should also review your investment strategy.
Investing for financial freedom
During their formative years, millennials saw the volatility caused by the dot-com bubble bursting in 2000 and the financial crisis in 2008. This crunch translated into hard-to-get jobs out of college, feeling stuck in current jobs and general distrust of the stock market.
It’s important to remember that participating in the stock market means passively participating in business growth around the world. By investing in the market holistically, you focus on protecting yourself from risks in the future – risk of inflation changes, income disparity, unfunded social security promises, etc.
As a starting point, invest for diversification. Diversification means looking at more than just the U.S. market. Home bias occurs often – don’t fall into the trap! We see it in our 401(k) options that may offer one international market mutual fund while offering 10 U.S. large company skewed funds.
Educate yourself on the important points of starting to invest. As a first step, read my book review of the 5 key decisions every investor must make on Merriman’s website.
Stay invested and focus on long-term growth rather than short-term “wins” at a higher cost as an active player in the market. When you’re learning to cook, the best recipes tend to be the simplest ones with fewer ingredients, minimal kitchenware needs and simple instructions. Investing is a similar experience.
Do you have other helpful thoughts others should consider? Add a comment below and check out more articles on the Merriman blog.
