How millennials can take control of their finances in 2016

From student loans to retirement, we’ve got you covered.

Digit is an app that checks your spending habits every couple of days and transfers a few dollars from your checking account to your Digit savings account if you can afford it.
Digit is an app that checks your spending habits every couple of days and transfers a few dollars from your checking account to your Digit savings account if you can afford it. –AP

You may have a mountain of student debt, or a Boston rent, or a job that just doesn’t pay what you’re worth, but you can still afford to get a handle on your finances this year.

At least that’s the attitude of Erin Lowry, founder of the personal finance blog “Broke Millenial.’’ The 26-year-old writer never took a course in finance at college, but made it her goal to become a “fiscally responsible member of ‘Generation Me’’’ upon graduating.

She’s gone a bit further than that, though.

In addition to maintaining Broke Millennial, Lowry regularly writes for Business Insider and U.S. News & World Reports’ My Money Blog about ways young people can save, invest, plan for retirement, and pay off debt.

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As Lowry explained to Boston.com, many millennials have quite a few misconceptions about money, including that it’s impossible to save, financial advisors are solely for rich people, and things like emergency savings funds and retirement accounts can wait until you pay off your student loans.

We spoke with Lowry and a certified financial planner (CFP) from the Society of Grownups, MassMutual’s financial literacy organization that doubles as a sort of “masters’ program for adulthood,’’ about the best ways for 20-somthings to get control of their money in the New Year.

Here are their tips:

On saving…

Saving, rather than living paycheck to paycheck, is something many millennials aspire to do without a clue of where to begin.

A good starting point, according to Lowry and Steve Taylor, a CFP for the Society of Grownups, is making yourself aware of your budget. It sounds simple, but many people have never taken the time to figure out how much money they have left after taking their monthly income and subtracting necessary expenses like rent, health insurance, student loans, transportation, food, and whatever else you need to survive.

“Ask yourself if you’re living on your needs or your wants,’’ Taylor said. This can easily be figured out by making a spreadsheet, or using free personal finance websites like Mint that can aggregate your spending habits to show you where you’re falling off the bandwagon.

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Once you’ve gotten organized, Lowry recommends that you give yourself a spending budget and decide what percentage of your paycheck you want to go directly into your savings account. I say ‘directly’ because Lowry said the KEY to sticking to a savings plan is to automate your savings.

“Automate, automate, automate,’’ Taylor echoed. “I can’t emphasize that enough.’’ Taylor added that you should also automate bills so you never miss a payment.

Other saving tips included having multiple savings accounts for specific goals – like the dream trip you’ve always wanted to take, your retirement, or your child’s education (if you have one). You can automate a small portion of every paycheck to go into each one, and any holiday bonuses or tax returns can be divvied among them.

“Set real goals for your savings rather than having an abstract goal,’’ Lowry said. “Say, ‘I want to have $2,000 in my fun fund by this time,’ and it helps you work toward something.’’ Most banks have online features that serve as barometers for your progress toward your goal.

Another way to maximize saving is analyzing your financial products, Lowry said. Take the time to make sure your savings account has a high interest rate to ensure you’re getting the highest yield for what you’re depositing.

You’ll also want to examine your credit cards. “Are you getting hit with overdraft fees or annual fees on a credit card you don’t use?’’ Lowry asked. “Take a day in January and look at every product you use and see if it’s charging you with hidden fees. If it’s not charging you, see if it is giving you the best perks you could find,’’ like cash back rewards, or travel points.

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Lowry also uses Digit, an app that checks your spending habits every couple days and transfers a few dollars from your checking account to your Digit savings account if you can afford it. “It’s a very low yield savings account,’’ she said, “So every month, I cash out my Digit savings and put it in my actual savings account, which accumulates interest.’’

On paying off debt…

The first step to paying off your student loans is knowing your balance and understanding what kind of loans you have. If you’ve never quite “gotten’’ the difference between federal and private loans, now is the time to figure out what kind you have, what their balances and interest rates are, and what kind of repayment plans are available to you.

While it can be tempting to throw all your extra money at student loans, Taylor stressed diversifying where your money goes – putting some toward your loans, but also a portion toward retirement, credit card debt, and emergency savings.

“If you lost your job and had a couple months between jobs, could you cover food, and shelter?’’ Taylor asked. It’s tough to think about, but millennials often ignore the fact that, sometimes, bad stuff happens. When it does, you’ll wish you’d saved a little cushion for yourself.

In many jobs, you may even be eligible to have a portion of your student loans forgiven if you meet certain conditions, like working for a government organization or a nonprofit.

On investing…

“First get your retirement account in order,’’ Lowry said, in terms of investments. Company-sponsored plans like a 401(k) are a popular and effective way to start saving for retirement, especially if your employer matches your contributions.

One reason 401(k)s are convenient is because the money is automatically withheld from your paycheck before you even get the chance to spend it. “Most companies have a resource you can talk to,’’ Lowry added. “At least take the match if your company offers it. Keep it simple.’’

If your company doesn’t offer retirement, you can fund an IRA or open a Roth IRA, both of which allow you to save thousands, but are taxed differently. Just make sure you shop around for funds with the lowest maintenance fees. An appointment with a certified financial planner, which the Society of Grownups offers for $100, is a good way to talk to someone qualified to help you make smart investment decisions.

The Society of Grownups’ front door logo in Brookline, Mass. —The Boston Globe

Regardless of how you start saving for retirement, start. Start now.

“That’s the one thing most often overlooked – not starting early enough saving for retirement,’’ Taylor said. “How much you should be saving really depends on your specific situation.’’ Basically, if you hope to retire by 50, you’ll have to start investing more aggressively than if you want to keep working till you’re 75 – which you’ll be doing anyway if you don’t get your finances in order.

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