Nowadays, it seems like the pursuit of the “American Dream” has dwindled to nothing more than a vain ambition. Luckily, members of Generation Y are blessed (or maybe cursed) with levels of ambition previously unheard of. According to Market Watch, “when it comes to saving money, millennials are killing it,” compared to our parents and grandparents. But simply caching money in an everyday savings account won’t elicit wealth. Here are four immediate steps to achieving solvency — affluence will come shortly thereafter.
Prioritize Debt and Pay it Off
Some forms of debt are more cancerous than others. While student loans may not have matured yet, revolving debt on credit cards infects and dissolves checking and savings accounts faster than paychecks can be deposited. Evaluate these factors when prioritizing debt for repayment:
- Interest rate — That exclusive rewards card may feature some exciting perks, but none that aren’t paid for by interest. Save the most money by paying off revolving debt on high-interest credit cards.
- Maturation date — While some debt is immediately payable, other debt accumulated in some types of loans doesn’t become due until a later date. While this debt is important to pay off, focus first on the immediately due amounts (the reasoning should be obvious).
- Debt amount — Minimal debt accumulated on credit cards is much easier to pay off than large amounts of debt tied to assets like a vehicle, house or college degree. Paying off the larger debts will feel much more financially liberating, though.
Save a Percentage of Regular Income
No, simply saving money isn’t the only way (or the best way) to achieve wealth, but it is an important piece of the puzzle. Creating a disciplined savings plan to deduct a portion of every paycheck (let’s say 10 percent) and placing it in a savings account will help accumulate a good amount of savings. Heck, some financial institutions even allow for automated savings deposits from paychecks, making the process even less painful and more convenient.
Invest a Percentage of Regular Income
Similar to saving — but more adventurous — is investing. Choosing the most personally beneficial vehicle is important, though. Mutual funds are known to be less risky, while stock options can be incredibly volatile (and just as rewarding). Whichever vehicle they choose, all investors must ensure that they invest money they can afford to lose.
Contribute to Charities and Philanthropic Causes
What goes around comes around, right? Maybe. Some are firm believers of this ideology, and fewer of those are exemplars of the effects of karma. Whether in an effort to secure fortuitous financial blessings or to take advantage of the charitable contribution tax write-off (as long as it’s still around), giving when we have little will help us feel happier with our financial gains. Such generosity is also indicative of those who will give when they have much.
Ultimately, the process is simple: pay down, save, invest and contribute as much as you can to earn long-term riches.