35% of young Americans lack confidence in their finances. Here are 3 ways to boost yours

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Here’s how to improve your outlook and your financial situation.

Key points

  • Rising inflation has impacted many people’s finances.
  • In a recent survey, many young consumers in particular felt like they were in the wrong place.

For many months, inflation wreaked havoc on consumers, forcing them to spend more on everything from gas to groceries to utilities. Unsurprisingly, this causes many people to have a more negative attitude towards their finances.

This is especially true for young Americans. In a recent BMO Harris Bank Survey, only 65% ​​of consumers aged 18 to 24 say they are confident about their financial situation. That’s down from 75% in the last quarter of 2021.

If your personal financial outlook is less than rosy, there are steps you can take to improve your image. Here are three must-haves to get you started.

1. Build a strong emergency fund

If you don’t have money in savings, you could be one unexpected bill away from financial ruin. On the other hand, if you’re making an effort to save money for unexpected expenses, that alone should give you more peace of mind. It pays to make building an emergency fund a priority.

At the very least, you should aim to have enough money in the bank to cover three months of essential bills. For the best protection, aim for six months of living expenses.

Even if you decide to stick to the lower end of this range, it’s not a goal you should expect to achieve overnight. It will take time to build up an emergency fund, and that’s okay. But once you start making progress, you should start to feel better about your financial situation.

2. Pay off high-interest debt

It’s hard to feel good about your finances when you’re racking up more and more interest on your credit card every day. Rather than sinking further into a hole, develop a plan to pay off your high-interest debt. Once you lose it, you’ll have one less expense to worry about.

You might want to consider temporarily finding a side job to find the money to pay down your debt (incidentally, you can also use this income to build up your emergency fund faster). It also pays to look for ways to make your debt more affordable. This could mean doing a balance transfer or consolidating your debt into a lower-cost personal loan.

3. Start with retirement savings

You may be worried about not having enough money to live on in the future. Once your emergency fund is strong and you’re out of credit card debt, transfer any extra money you have to an IRA or 401(k) plan. Better yet: automate the process to stay on track to reach your long-term savings goals.

As a general rule, it’s a good idea to set aside 15% or more of your income for retirement savings. But don’t panic if you can’t reach that threshold yet. If you’re young, that means you have many decades ahead of you to build up a retirement nest egg, so do your best to fund your IRA or 401(k) for now with the goal of increasing your retirement savings. savings over time.

It’s no surprise to hear so many young Americans lack confidence in their finances, but it’s heartbreaking nonetheless. If you’re not feeling good about your financial situation, follow the steps above to put yourself on a more positive path.

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