Despite all the negative stereotypes heaped on the Millennial generation, the overwhelming majority of twenty- and thirty-somethings in the U.S. today are hard working, conscientious young adults striving to better themselves in an economic world that seems stacked against them.
Does this sound familiar?
Massive student debt, skyrocketing real estate prices, and stagnant wages in many industries have made it difficult to get ahead. You’re not even considering buying a house, getting married, or having children anytime soon. Certainly not the way previous generations have. In many ways, you’ve simply given up on achieving anything like the traditional “American dream” your parents and grandparents sought out.
But, that doesn’t mean you aren’t giving your financial future a second thought, or that you don’t want to better yourself. And, (finally some good news for you…) the situation is far from hopeless. Even if circumstances require that it takes you more time and more effort to build wealth than it took previous generations, you can do it! What’s more, if you do you’ll probably notice a significant reduction in daily stress, you’ll feel better physically and emotionally, and it may even inspire you to make other positive life choices as well.
The key is understanding money, making a solid plan, then putting in the time and effort required to bring that plan to life. Here are some timeless principles that are as true now as they’ve ever been, and that will help you make a secure financial future a reality:
Set a budget immediately
If the word “budget” sounds too old school, let’s call it a financial plan. Or, a spending/saving plan… or, whatever you need to call it to make it real and appealing to you. Because you need a realistic budget NOW.
Setting up a budget is very simple in theory: you just need to record your monthly income and any known monthly expenses (like rent, loan payments, Netflix, etc.). Then, for all those other expenses that fluctuate a little bit each month, you need to either come up with an average based on what you’ve spent in the past, or just start with a realistic guesstimate of how much you’re likely to spend over the course of the month.
With these figures on paper, you should be able to do some very simple math to determine whether or not you’re living within your means. If you are, congratulations! You’re in a great position to move ahead to the next tip. But, if you’re not (and you’re not alone in this,) that’s why you feel like you can never make ends meet, and why you may have growing credit card debt weighing on your mind.
Now comes the hard part: your final monthly financial plan has to leave you bringing in more money than you’re spending. And that means figuring out how to either increase your income (not usually very easy) or reduce your expenses (often easy, but painful.)
So, that’s your first task: manipulate your monthly budget until — at least on paper — you’re living within your means and have at least a little bit of discretionary funds available to you at the end of the month. For tips on how to make this happen, check out this great guide on Free the Nickel.
Start saving this week
The next vital step in building a firm foundation for your financial future is building up an “emergency fund.” This stash of cash offers a monetary buffer that lets you handle unexpected expenses without falling back on a credit card with a 26 percent interest rate. It’s your protection against most of the unforeseen speed bumps you’re likely to run over on the road of life:
- Job loss
- Car repairs
- Emergency room/healthcare bills
- Replacing that phone you dropped in the toilet
- Being the best man at your buddy’s wedding
- And more…
Some experts believe Millennials should aim to have $100,000 saved by their 30th birthday. While that may be out of reach for most, if you can stash away enough funds to support all your monthly expenses for at least three months, you can rest easy and move forward.
Get debt under control ASAP
Yes, we know: this is quite obviously easier said than done. Crippling student debt is a way of life for many Millennials, and other economic factors we’ve already discussed also make it difficult to completely avoid credit card debt.
At the same time, Forbes reports that, on average, Millennials spend more per capita than previous generations, on both necessities and conveniences. And, since those figures are already adjusted for inflation, it seems to be a mindset that leads the majority of young adults into a consumer mentality at the detriment of their financial health.
So, since you’ve already massaged your budget to the point that you could save up your emergency fund, you can do one of two things: either take that amount you’ve been saving every month and use that to go on to the next step, or look back at the budget you’ve been working with for a few months now and see if there’s any more room to reduce your expenses and reallocate even more funds going forward.
What you can’t do is stop here and think you’ve made it.
Start investing this year
It’s never too early to start making your money work for you by investing. While there are plenty of potential investment opportunities out there, including businesses, intellectual property, and real estate, by far the easiest investment to get into is stocks and bonds.
The Millennial Guide to Investing by BankRate offers many tips for practically dipping your toes in the investing waters. And, there are dozens of apps out there now that help make the concept far less intimidating, time consuming, and expensive.
For instance, using Stash, you can set aside a specific amount from every paycheck — even as little as a few dollars — and have that automatically transferred to an investment account where your portfolio will grow based on predetermined rules you’ve set in place. Set it and forget it (at least, until you wisely look it over every few months and make any necessary adjustments.) Or, with the Acorns app, you can have the app monitor your bank accounts and siphon off the “spare change” you generate throughout the day. The app rounds up your purchases to the nearest dollar and invests those nickels and dimes for you daily.
Despite all its day-to-day volatility and the scary possibility of sudden and huge losses that make headlines every now and then, investing in stocks has been one of the most consistently profitable and stable investments in history. The key is, that’s only the case over the long haul. No matter how well you pick the next hot stock, it’s incredibly difficult to make huge returns in a matter of days, weeks, or even a few years. Investing wisely and building a portfolio over 10, 20, or 50 years, however, is pretty much guaranteed to build wealth you can count on.
Which brings us to our final tip.
Time is on your side
Unlike your parents and grandparents, you have time to build wealth the slow and steady way. You don’t need to take any huge risks or invest half your income in order to build up a solid nest egg for retirement or to pursue passions down the road. All you really need to do is to brush up on your financial knowledge, set a realistic plan in motion, and then get to it.
For more tips and resources on living your best life, come back and see us at the Dental Solutions blog.