Among the working generations, millennials are saving more and have a greater positive outlook on their retirement. However, the millennial generation also faces the most economic hurdles when it comes to reaching their financial goals.
As a group, millennials (1981–1996) have faced a steeper financial climb than those in the baby boom generation (1946–1964). While millennials at the top are doing better than their parents, a much larger segment of millennials are doing worse.
The Great Recession, caused by the housing and banking collapse of 2008, shaped the early working years of the oldest millennials. Today, this generation continues to face economic challenges with high inflation, ever-rising home prices, and the ongoing burden of student loan debt.
Working with the financial advisors at Good Life Morehead City can assist in navigating these economic difficulties. Talking to a financial professional can help you maintain or improve the plan for your financial future or guide you in developing a plan. You can start with these financial planning tips for millennials.
Set Your Goals
To get to where you want to go financially, start with the end in mind. What are your goals? Setting clear goals is crucial to your financial planning. For instance, if your goal is to be debt-free in five years, you can develop the small objectives to get you there.
Goal-setting also has these financial planning benefits:
- Clarifies priorities
- Creates an action plan
- Improves your self-control with spending
- Motivates you with purpose
- Builds in accountability
You have competing goals. You may want to invest more, but you must pay off debt. Taking the time to write out your goals allows you to prioritize them. Then, you can work your way through each one.
Create a Budget
Once you’ve set your goals, you must have a budget to track where your money is going. Getting a handle on what you’re spending and where is crucial to meeting your financial goals.
There are many ways to budget. It can be as simple as accounting for all your monthly spending and comparing it to your monthly income. If you’re spending more than you’re taking in each month, start looking for areas to cut back.
One method is the 50/30/20 budget. This budgeting says to pay 50% of your income on needs (housing, utilities, bills, and food), 30% on wants (dining out, shopping, trips, and subscriptions), and 20% on savings and investing, including using any extra to pay down debts.
Saving or investing 20% of your income might be tough. But it’s important to start putting money away to allow compounding longer to build your nest egg. You can start with 10% toward savings and build to a target of 15%. If you don’t know where to start, a financial advisor from Good Life Morehead City can guide you in creating a budget.
Build an Emergency Fund
An emergency fund is the safety net that can keep your financial plan on track. Investing and paying down debt is critical to your strategy, but building your emergency fund is your priority if you can’t do all three.
You want your emergency fund to equal around three to six months of your monthly expenses. Having one can give you confidence that you won’t come up short if something unexpected arises. In particular, it can keep you from charging a credit card, which might throw off your financial plan.
Pay Down Debt
The millennial generation is considered the most educated; however, college education came at a premium, as the cost of attending a public four-year university rose more than 200 percent between 1987 and 2017. Credit card debt is increasing for millennials, too, rising by 50 percent between March 22 and February 2024.
You can start paying off your debt with the highest interest rate or smallest balance. Both approaches will free up money to put toward your remaining debt.
Get Your 401(k) Match
A majority of millennials report that they are on track with saving for retirement. If you are among the millennials with an employer-sponsored 401(k), are you taking advantage of a company match? Contribute enough to your 401(k) to get the full match if your employer contributes. It’s free money.
Work With a Financial Advisor
If you want to get started with any of these tips or discuss them further, Good Life Morehead City’s mission is to bring financial knowledge to your life. We can guide you through any of the tips above and assist with your overall financial planning.
Get in touch with us today.