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According to many personal finance experts, millennials often grapple with making the best financial decisions. This uncertainty makes the process more complicated than it otherwise might be.
### Financial Choices for Millennials
**Debt Repayment or Savings**
When deciding between paying off debt or saving, the simplest approach is to establish an emergency fund first. After that, it largely depends on your specific situation. Paying off high-interest debt can be viewed as getting an immediate return on investment. Your choice on whether to prioritize debt repayment over savings should be based on the interest rates on your debts compared to potential returns from investments. Experts recommend an emergency fund of three to six months’ worth of living expenses before focusing on debt repayment.
**401(k) or Roth IRA**
Ideally, you should consider both options if possible. In times of financial difficulty, start with your employer’s 401(k) plan. A 401(k) allows you to contribute pre-tax income, with the money growing tax-deferred until retirement, when you will pay taxes on withdrawals.
Alternatively, a Roth IRA, which you can set up independently, uses after-tax dollars and grows tax-free. You can withdraw your original contributions at any time without penalty or interest. For 2013, you could contribute up to $5,500 to a Roth IRA if your adjusted gross income was below $112,000 (single) or $178,000 (married). Contributions decrease if your income exceeds these amounts, and you cannot contribute if your income is above $127,000 (single) or $188,000 (married). Ideally, consider contributing to both plans.
**Buy or Rent**
Conventional wisdom often suggests that renting is better for millennials. However, the right choice depends on your situation. There is no universal solution; what worked for others may not work for you. Avoid the pressure to buy just because it was traditionally seen as part of the American Dream. For millennials, flexibility is more crucial. Think about how long you intend to stay in one place. Staying flexible can help you seize job opportunities without being tied down by homeownership.
Personal finance experts have noted that millennials like you understand that homeownership isn’t necessarily part of the modern American Dream. They emphasize the importance of staying adaptable to take advantage of better job opportunities as needed.