Millennials are being coined as the “unluckiest generation” lately due to the unfortunate events and economic conditions they’ve lived through. Two events that most recently add to this title include inflation and rising interest rates.
Jaspreet Singh, the face and CEO of The Minority Mindset, says that these rising interest rates are going to be a huge problem for most Millennials. As a financial guru and founder of Market Insiders, a groundbreaking investing coaching app, Jaspreet knows what’s up when it comes to Millenials and beating their unfortunate financial odds.
He points out that the Federal Reserve is raising its benchmark interest rates for the first time in over two years, and anyone with credit card debt is soon to suffer. Many Millennials fall into this credit card debt pitfall, and should be mindful about their finances as rates rise. Since credit card’s interest rates are variable, they can increase with interest rates rising.
This isn’t the same for a loan that has a fixed interest rate, which would remain untouched by these rising rates. With inflation already on the rise, Jaspreet cautions us all to take note and find ways to fight these higher costs of living.
What’s The Problem With Credit Card Debt?
Typically, we all fall into three categories of spending, including:
- Buying items and services with cash, or a debit card
- Buying items and services with a credit card and paying it off on time
- Or, buying items and services with a credit card and making minimum payments, or none at all. This can accrue hefty interest rates up to about 25%
Many Millennials are falling into this third category, with an average of $4,000 in credit card debt among the generation. Because of rising interest rates, this issue will get more and more expensive for those in debt.
The good news is, Jaspreet has some tricks up his sleeve to help us avoid suffering as interest rates rise and inflation threatens our wealth.
Here are 5 practical steps Jaspreet gives us to start building wealth and protect ourselves from rising interest rates:
- Cut credit card debt
This is the natural place to start. If your cards carry a balance, then it’s going to be so challenging to beat these high interest rates. If you need to get rid of your cards for a time to start practicing healthy spending habits, that’s a great place to begin. Or, if you’re confident in your self discipline, continue to use your cards but only within the amount that you can pay them off.
- Stop, “ordering extra guac”
This is Jaspreet’s tried and true method to live within your means. He says during this step, you’ll stop needlessly spending and start saving strategically. There’s no need to be constantly tempted to buy the latest technology, and keep up with all the latest fleeting trends. Especially when using debt becomes your main method for getting these items. (this step is not meant to make you wealthy, just to have a “base” that will protect your finances in case of emergency)
- Spend wisely
Step 3 is a lot like step 2. It will require making smart financial moves instead of doing what everyone else is doing. Even while “buy now pay later” programs are on the rise, this can create a mindset of overspending. Don’t give yourself the illusion that you have more money than you actually do.
During this step, you’ll also want to start planning ahead. You can continue building savings to hedge your finances against hard times, and begin using life insurance to bridge the gap to protect your family between now and a “wealth” point (when you have successfully built enough wealth to take care of your family should you pass away). Term life insurance is typically the product that will help you the most here.
- Give each dollar a job
Here’s where you can start building wealth. This step can be broken down into 3 key elements:
1. Make a plan before you begin. It’s important to set some kind of boundaries for your money before you allocate a certain amount to saving, investing, and spending. Jaspreet advises starting with abiding by the 75-15-10 rule: spending 75% of your income, investing 15%, and saving 10%.
2. Set up a retirement account if you’re offered one through your job. Some employers offer matching programs where they’ll match the contributions you make to your retirement account up to a certain percentage. Why not take advantage of this perk?
3. Invest your money to build wealth. Here’s the most important step. Now you can truly put your money to work for you. Try and learn which investments you can succeed with. All of us are comfortable with different types of investments and the risks associated. Check into ETFs, real estate, and any sectors you’re interested in. Make sure you do some research to make sure you trust the company, product or sector you’re looking into before making the leap.
Overall, Jaspreet says that his secret to building wealth involves this simple but important mantra:
“Wealth is built through your investments”
- Back to plastic
Now you can make the decision to go back to holding and using your credit card if you can handle it. Rewards and perks can be helpful if you are disciplined enough to pay off your balance and never pay interest. In this way, you’ve eliminated any possibility of financial suffering due to rising interest rates. If you’re still not comfortable using a card, no worries. Jaspreet says this is completely up to your situation and how you anticipate you’ll be able to use self control to live within your means.
In the end, there is a way to protect yourself against losing money to rising interest rates. These same principles apply to hedging against inflation, and they can come in so handy if you’re worried about your future finances. Take these steps from Jaspreet and put them to practice and you won’t be worrying about credit card debt like the majority.