The Biggest Financial Hurdles Young People Face

You've probably relied on your parents to manage your financial matters for years, and you may not know more than a few basic things about personal finance. Then you graduate from college, and suddenly you're responsible for all kinds of important financial decisions. Learning to manage your money is about overcoming four big hurdles. But just because these tasks may be challenging doesn’t mean you can’t take them on.

Financial Illiteracy

"The crying need for more financial literacy in Gen Yers cannot be overstated,"
says consumer finance expert Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. "The good news is that managing finances is not an innate skill, but something that is learned like math, reading and writing."

Unfortunately, financial literacy is rarely taught in schools. Gallegos says that Gen Yers must take the initiative to educate themselves about topics such as budgeting and living within one's means, paying bills on time, managing credit and debt, making regular contributions to savings, tackling student loans, and planning for retirement. Following just one good online or print resource can provide the foundation to learn these basics, he says.

His advice also applies to younger generations, of course.

Repaying Student Loans

In an age where an undergraduate degree no longer seems to be good enough in many fields, student loans have become the biggest challenge many young people face.

"There's so much pressure to go to a good school and compete for limited jobs that a lot of students are taking out expensive loans to finance an education that won't pay for itself no matter how good a job they land after graduation," says attorney Shane Fischer of Winter Park, Fla. "If I knew then what I know now, I wouldn't have gone to an expensive private school and would have opted for the less prestigious public school."

According to, a student financial aid information website, more than half of graduate students borrow to finance their educations, and their average cumulative debt just from grad school is around $31,000. Almost all law students -- 88.6% of them -- borrow. These students incur an average of about $80,000 in debt. Students pursuing professional degrees fare similarly, with 86.2% borrowing and an average cumulative debt of more than $87,000. Undergraduate debt adds another $10,000 to these students' debt loads.

Learning to Invest and Take Risks

The economy's performance during the Great Recession had a major impact on many Gen Yers who could not find jobs or who watched their parents' investment returns disappear. "Unfortunately, the economic downturn has caused many young adults to fear investing in the stock market," says Rachel Cruze, a professional personal finance speaker and daughter of financial expert Dave Ramsey. "But you have to think long-term when investing in the stock market. The past few years have been rough, but over time the stock market has made money. If you begin investing early and often you'll be able to build wealth through your investments," she says.

Brian Ullmann, CFP and wealth manager at Ford Financial Group, an independent advisory firm in Fresno, Calif., also says that market turmoil has impacted the younger generation’s investment strategies. "Our younger clients now have a much lower tolerance for risk and have more conservative portfolios. In fact, we have clients in their 20s who wish to have their portfolio positioned for someone twice their age," he says. "One of our concerns is that this new, more conservative positioning for Gen Y clients is a permanent change and one that could lead them to miss out on opportunities in the future."

Overcoming Pressure to Follow a Worn-Out Path

"One of the biggest hurdles is overcoming societal pressures," says Matthew B. Brock, CFP, senior partner and owner of Divergent Planning in Bethesda, Md. Brock says Generation Y is constantly being told that there is a right way to plan financially. This advice often comes from an older generation whose financial status doesn't show that their way is the right way.

"Young adults no longer want to keep up with the Joneses, because the Joneses lost their jobs, lost their house and may never retire," Brock says, adding that Gen Yers' choices reflect their preference for freedom and experience over property ownership. "Most young adults are waiting longer to get married, waiting longer to move to the suburbs and waiting longer to have kids," says Brock.

Renting means they can leave a job and move to another city on a whim, save up and then take a few months off to travel, or quit a job to start a company. The American Dream does not always include buying a house, a nice car and earning a high salary. It means being free to do what makes you happy.

"Older generations need to recognize younger people may have a better idea of what happiness means than they ever did," Brock says.

The Bottom Line

To overcome the challenges they face, today's young adults need to educate themselves about personal finance, manage the student loan debt they've already incurred, avoid or minimize additional debt, learn basic investment skills, and not be afraid to choose their own paths. Also, as youth are so often advised, they need to practice patience.

"Remember that you're still young, and be content with what you have," says Cruze. "Work hard so that you're able save up to make large purchases that you can afford without having to pay interest."

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