The end of the year can be a hectic time with Thanksgiving and Christmas approaching as millions of Americans spend on travel and gifts. As most Millennials juggle student loan payments, this time of year can appear especially daunting in terms of financial health. Despite all the hustle and bustle at the end of the year, a solid financial plan is the best way to ensure you aren’t suffering from a financial hungover after the holiday season ends.
1. Make a Budget
While most people understand the importance of a budget, many people neglect their budget during the holiday season. The end of the year can be quite the trial for your budgeting skills and commitment. There are plenty of free budgeting resources out there; for instance, one free budgeting app to consider is Mint. This app will allow you to create a budget, set spending goals, and track expenses. For those who need help maintaining a budget during the holidays, this is a great way to keep your cash in check. Of course, you can also do it the old-fashioned way with pen and paper, however, the computer programs make it more difficult to overlook certain budget expenses like saving for vacation or auto repairs.
2. Refinance Student Loans
Many graduates leave college with an average debt of over $30,000, it takes more than several years to pay that kind of balance off. For new graduates on a tight budget, a few years may seem more like a few decades. Factoring all this into the holiday season makes the situation even worse. To help make the monthly payments more affordable, one option to consider is refinancing your federal and private student loans. There are multiple benefits to refinancing and consolidation. The largest benefit of refinancing is a smaller monthly payment which helps make budgeting more manageable. Another benefit of refinancing is a potentially lower interest rate for the student loan balance. Many borrowers save over 40% on total interest over the life of a loan, so student loan refinancing is definitely one of the premier ways to tackle student loans. After refinancing, the holiday season becomes much more financially manageable, and you can set a new year resolution for paying off your loans the next year.
3. Increase 401k and Automated Investing
If you work for an employer with a 401k retirement plan, increasing your contribution amount by 1% is a good way to start off the new year. While retirement for a recent 21-year old graduate is 40+ years away, the best time to save for retirement is during your 20s. A twenty-year-old investing 10% of his or her income for the first ten years of their working career has more earning potential than a 40-year old investing 50% of his or her income for 10 years. For every extra year a dollar is invested, the more value it has down the road, so it is best to get the ball rolling early. Compound interest is the key term to remember here which is the reason why investing in retirement early is ideal.
If you do not have a company retirement plan, applying for an IRA is the next best move. Roth retirement accounts are funded with post-tax earnings meaning no tax is paid on the appreciated earnings in retirement. You do not need a lot of money to open an account, and you can start saving for retirement by automatically investing $100 per month. Since you do not want your contributions to be diminished with high fees, investing in an index fund is a low-cost way to track the market.
If investing sounds a little advanced for right now, another option is to start with the mobile apps Digit or Acorns. Both apps deduct a few dollars from your linked checking account each month and put it into a savings account. You may not get rich from either app, but they help encourage and foster the habit of routine saving. At any rate, they may serve as a beneficial new year resolution “stepping stone” towards retirement investing.
4. Review your insurance plans
After rent and student loan payments, insurance is probably the next largest expense for most Millennials. Open enrollment for many individual health plans and companies is during late October and November which is conveniently right before the holiday season. Health insurance is the most expensive insurance product for many and open enrollment is a time to change your deductible or enroll in a health savings account. If you let the open enrollment period slip by, you will have to wait until next year to make any changes. Getting these squared away before the holidays is important because you may be able to save money with a new plan.
5. Find a side job
If you have the free time, you can use your skills to increase your income. You can do so by freelancing in many different ways. For instance, you can find work on the side with local clients, start your own website, write for a company, and much more. There are plenty of job websites, one of which is Upwork, that provide hundreds if not thousands of opportunities for extra work. All of these opportunities can be found online which makes them readily available 24/7. If the online labor market is not your thing, then there are plenty of opportunities to find in person. Since it is shopping season, many seasonal jobs open up during the Christmas rush at retail stores. You should look for these jobs early in October because most employers hire for the season early. If you are really in trouble, then there are always part-time listings on Craigslist for random tasks like house cleaning or relocation help.