If you were born between 1981 and 1996, you are a Millennial. It is just a label that reflects the generation with parents who are Gen X or Baby Boomers. Unfortunately, your financial world is quite different than previous ones.
Gone are the days when one income could pay for a house and feed the family, never mind saving for retirement. You need to be proactive and make smart decisions so you have money to fund your lifestyle and beyond. Fortunately, you are in your prime earning years, in your late 20s to early 40s. This means you probably have found a job, career, or business to earn significant income.
Now what? How do you care for your future?
Financial Planning Strategies For Millennials.
Write Down Your Goals
Everybody has wants and needs, and many plans float around in our heads. Just like a talented writer who jots down every idea that comes to mind, you need to document your goals to make them a reality.
Put pencil to paper and list your short-term, medium-term, and long-term goals. They could be:
- Paying off consumer debt
- Buying a new car
- Starting a business
- Buying a house
- Paying off student loans
Having your goals in front of you will help you focus on how to fund them with an individual action plan for each. You can also categorize them as assets or liabilities and prioritize their importance because you only have so much money.
Track Your Spending
People want to invest without knowing how much money they have to spend. You’d be surprised how fast morning coffees, lunches out, and drinks with friends add up. There are many ways to spend your money, but most won’t help you financially, so you need a budget. It will show you the hard costs and frivolous spending.
Try to live on a modest budget so you have more cash to invest. This is because you will need it later in life, and the best time to start is now.
Take 25% Off The Top
When you get your paycheck, regardless of how much it is, take 20% away and put it into your savings account. You will use this money to invest, and it should be treated like a bill. If the 80% left over doesn’t cover your minimum living expenses, you must streamline your life or earn more money.
A savings account is not ideal for making money, but it is a secure holding place for your cash. It is where you will draw on to invest.
It’s exciting to have some cash to invest with, but if you don’t know where to put it, you could miss out on profits or lose it fast. Stock trading and cryptocurrency are exciting, but why not seek financial advice instead of throwing your money into another investment?
These wealth management professionals work daily, looking for the best investment vehicles. They track their performance with an educated profit goal. They can advise you on the best places to put your money and tailor financial advice to your goals and risk level. With a customized strategy for your situation, you will be introduced to a wide range of financial products you can invest in. You will also be monitored to keep you on track.
Their decision-making is data-driven, and they know short-term market fluctuations will occur. An experienced financial advisor will help you stay on track and reach your goals within your timeline.
What happens if all your eggs are in one basket and it slips out of your hand? Chances are, most eggs will be broken. This adage applies to investing because there is always a level of risk you take, and by spreading your money around, you can more easily take a hit in one area.
Consider low-risk investments like GICs, mutual funds, and bonds for stability, and then invest in riskier vehicles like stocks, real estate, mortgage investing, precious metals, and cryptocurrency. Your financial advisor will present various options, and you can create a diversified portfolio.
While this is last on the list, its importance should rank it near the top. Life comes with ebbs and flows, and predicting the future is challenging. Having a rainy day fund is critical in case you lose your job or have a sudden expense like car repairs or medical bills. Put away six months’ expenses in an account you can access quickly. Building up to this amount may take a while, but you can sneak in money here and there until you have an emergency float.
This is an excellent Millennial financial plan that is realistic and achievable. Use these strategies to build your wealth; when you retire, you can do it in style.
Check our previously published article on Commodities Prices.