Financial Advice for Millennials without Rich Parents

by Kathryn Hauer, CFP®, EA

In her article, “Millennials Who Are Thriving Financially Have One Thing in Common…Rich Parents,” Gillian B. White points out the difficulties average millennials have in building wealth and financial stability. She considers the ability to purchase a home a good measure of financial success, writing that “only about 9 percent of millennials whose parents were able to contribute to their post-high school education were also able to help them purchase a home... this ‘funnel of privilege’ [means that] young adults with rich parents soon become rich themselves...and save more than those who were forced to throw away tens of thousands of dollars on rent due to their inability to buy.”

If you are among the millennials who are making it on their own without parental help, what are some things you can do to improve your financial situation?

Get Training or Certs with Strong ROI

It can be a good plan to go to online school or study for additional training or certifications. However, when you support yourself, you want to make sure that you’re going after credentials that will actually increase your responsibility level and ultimately your salary.Take the time to figure out if the letters behind your name will add up to dollars in the bank. Every field has their own credential pool. When I worked in construction, project management and safety-related certs were popular. The financial industry has even more to choose from, and figuring out if the time and money they cost will provide a good return on investment (ROI) can be tough. For example, the IRS Enrolled Agent designation I got cost more than I expect to see in financial reward. In my case, no big deal – I am older, I like to study and take tests, and I had the extra money to do it, but I wouldn’t recommend a designation like that to a younger person struggling to establish financial stability.

Get Financial Assistance for Additional School

If you decide to further your education, see if your company has tuition reimbursement. One of the fringe benefits an employer can offer tax-free to its employees is up to $5,250 (in 2016) of money annually for tuition and expenses. It’s a little known benefit that is often not advertised well. You can usually tap in to company tuition assistance for all kinds of classes and training – it doesn’t have to be for a 4-year degree. And if you are thinking of changing careers, you could work full-time at your current job and go to school nights and weekends on their dime; then you apply for jobs in your new field after having earned your full salary and had your school paid for. Be sure to check your employer’s policy on tuition reimbursement since some employers require that you stay at your current job for some period of time after tuition reimbursement or else have to pay the money back. If the program or major you want to take makes it impossible to keep your current job full time, ask if you can work for them part time or on a consulting basis so that you can keep bringing in some cash while going to school.

Depending on your salary, you may be eligible for Federal grant money, such as a Pell Grant. The Pell won’t help you with grad school, but if you are working toward an undergrad degree it could work. In 2016-17, the maximum award is $5,815. In 2016, most Pell Grants are awarded to those making less than $30,000 annually.

Do Your Own Taxes

In my opinion, people who have simple financial lives are well able to do their own taxes using one of the many trustworthy and reputable online tax sites out there. Freetaxusa is a good one and there are lots more that are free if your AGI (adjusted gross income, or simply put, how much money you make in a year) is below a certain amount (about $60K for most programs) Other good free online tax prep sites are H&RBlock, Tax Slayer, and Tax Act. This IRS website lists many In addition to saving money, you can learn a lot about finances by doing your own taxes. If you own property, buy/sell stocks, have a business or have other more complicated tax issues, you probably want to hire someone to do taxes for you. But most of us have pretty simple returns, and by doing your taxes yourself, you can save money.

Understand Your Student Loan Repayment

Many millennials have student loans to repay, and many have asked me what happens if they just stop paying. The sad answer is that not repaying student loan debt can be worse that shirking almost any other kind of debt. The government student aid website explains what happens if you don’t repay: “if you don’t make your student loan payment or make your payment late, your loan may eventually go into default. If you default on your student loan, that status will be reported to credit bureaus, and your credit rating and future borrowing ability will be damaged. In addition, legal action can be taken to require payment through garnishment of wages and withholding of tax refunds.” You need to keep up with those loan payments. You can negotiate slower repayment, defer payment, get forgiveness if you work at certain jobs, or consolidate loans. Just be sure to be proactive and attentive with regard to those loans.

I wish life were fair. It isn’t. As a college and tech school professor, I see students fighting to succeed academically while struggling under heavy financial burdens. I’ve lost talented students to insurmountable financial difficulty. Studying for your stats midterm pales in comparison to not knowing if you’ll be able to come up with the money for next semester’s tuition. You make it through somehow and then seven years later, you’re in the same boat when rent and other basic life expenses chip away at your meager salary. A crippling student loan repayment for a job that only nets your $40k a year is even more insulting. As a mother, I would like to be able help all the millennials who are struggling. The best I can do today is this advice and a heartfelt wish that you are able to achieve financial stability.