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When it comes to economic issues, millennials haven’t had it easy. They’ve taken jobs in the midst of the Great Recession, been targeted by a culture of hustle and bustle, and saddled with student loan debt. Millennials are now the generation most at risk of layoffs. Luckily for many, mom and dad came to the rescue. According to a new survey by Chartway Credit Union, 24% of millennials admit their parents still pay their rent.
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The general rule of thumb is that 30% of your income should go toward rent, but Americans are often forced to spend more. For example, in New York, according to Moody’s Analytics (according to The NY Times), the rent-to-income ratio in 2022 was 68.5% for him. In contrast, Miami, Florida had 41.6% and Los Angeles had 35.6%.
The ability to save 30% or more of your salary is considerable. So what should millennials, whose parents pay for their living expenses, do with the rent savings?
1. Pay off your credit card debt
“Too many people are buried in high-interest credit card debt that is difficult to get out of,” says personal finance expert Mark Wlosinski. “When you get stuck in credit card debt, paying the interest on that debt becomes another hefty monthly bill added to your already very thin budget. Paying it off ASAP is a positive ROI. It guarantees (return on investment) and in my opinion is one of the best.”
2. Buy a rental property
Fluent in Finance founder Andrew Lokenauth said: “This provides passive income and can grow in value over time. If you are a first-time buyer, you can get just 3.5% off your purchase. You can buy it.”
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3. Invest in your retirement life
“Consider maxing out your 401(k) or IRA to ensure a comfortable retirement,” says Lokenauth.
4. Build up emergency funds
“Life is full of unexpected events, some of which, unfortunately, cost money,” Woscinski said. “This is why emergency funds are essential. A recent poll found that 56% of people don’t have enough money on hand to cover an unexpected $1,000 expense. Those who can’t usually rely on credit cards or high-interest loans to pay their bills, which only exacerbates their financial situation.”
5. Pay more for student loans
“Even if student loan interest rates are below the 4-5% range, you can take advantage of the extra money you save each month here by not paying rent,” says Wlosinski. “Having any kind of debt means an extra charge every month, and getting rid of that charge early means more free cash flow in the future.”
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6. Take a financial planning course
“Invest in your financial education, take courses, or hire a financial advisor to help you make informed financial decisions,” said Lokenauth.
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