The Millennials are America’s largest generation. However, some studies are showing this generation has the most anxiety about having a strong financial plan in place. In today’s post, I will dive into four investment and financial management tips that will help sharpen your financial management instinct, whether you’re Millennial or GenX’er, let’s explore these insights and transform how you manage your finances for today and in the future.
Investment Tips for Millennials
1. Think and Invest Long-term
From any Instagram post, one can deduce that the Millennials are living in the moment. However, just like generations prior, they know their financial planning needs improvement. According to this report from Northwestern Mutual, “a large majority (78%) of Millennials agree they feel pulled apart by the pressure to find the right balance between present and future financial responsibilities. This compares to only 57% of Baby Boomers and 74% of Gen Xers who say the same.”
Our advice is to focus on long-term goals by reducing debt and putting a larger portion of discretionary income toward future major purchases such as a home or investment property.
2. Minimize Debt
Did you know that half of American families spend more than their earnings paying debts! Also, one in every 11 Americans pays more than 40 percent of their income on debts and interests. The key here, as mentioned in the previous tip, is to minimize debt as much as possible. Take a page from previous generations and save up for any items you want to purchase rather than borrowing for them.
Our advice is to choose 0% financing for big purchases (like mattresses, TV’s and such), pay one item off before moving to the next.
3. Timely and Consistent Savings
Even though it sounds easy, saving money can be a challenge. Previous generations were good at saving, especially after the 60’s. According to a GoBanking report, our parents saved an average of 10 percent or more of their income, reaching an all-time high of 17 percent high in 1975. However, we saw a steady decrease to 1.9 percent of incomes in 2005. The Federal Reserve Bank of St. Louis shows that our current savings rate stands at 5.5 percent, out of every $100 an average American earns after tax.
The 5.5 percent rate is insufficient because a Fidelity Investment study shows us that less than 50 percent of our population will be unable to pay for their essential living expenses and two-thirds of our retirees will rely on Social Security to foot most of their bills.
These reports apply to the older generation while the Millennials save lesser than their parents. According to the GoBankingRates survey, less than 10% of Americans aged between 18 and 34 have over $10,000 in savings, about 60% have less than $1,000, and 30% have no savings at all. But despite the grim picture studies paint, the main advantage Millennials have is time—they have at least 30 to 40 years to prepare for their retirement.
Our advice: take advantage of the time advantage and prepare through consistent and timely savings.
4. Spend Within Your Means
It is no secret that we are the world’s most optimistic society and that may sometimes translate into thinking things will always get better. The YOLO (you only live once) philosophy transfers into instant gratification purchases, even if said purchase is beyond your means. The results in Millennials spending outside their means.
Our advice is to find ways to stop living outside your means by making smart purchase decisions or none at all!
We live in one of the most privileged and optimistic societies on earth. Moreover, Millennials’ place as America’s largest generational segment places them on the brink of benefitting from the world’s largest generational wealth transfer. I hope these investment and financial management tips have been helpful!
Pete Asmus is not one to let life idly pass him by. GreenZone 360’s CEO gets things done. From motivational speaking and meeting with new business partners to building ninja courses for his kids and advocating for public education on Alopecia. Whether it’s business or family, you’ll find Pete going to MAKE SOMETHING HAPPEN.