Millennials, born between 1981 and 1996, have really been through it financially. They entered the job market smack in the middle of the Great Recession, dealt with crazy student loan debts, and watched as traditional pension plans disappeared. But you know what? Despite all that, financial pros are actually pretty impressed with how Millennials are handling their money. They’re using their tech skills to plan ahead like nobody’s business. We’ll spill the beans on what top financial advisors are saying, giving Millennials the lowdown on how to boss their financial game.
Learning from the Past
Financial advisors like Douglas Boneparth, president of Bone Fide Wealth, believe that millennials use the past to fuel their financial futures. The trauma of the Great Recession has made millennials very aware of the importance of savings and emergency funds. This awareness creates a stronger foundation that allows them to accumulate wealth during their higher earning years.
Melissa Joy, a certified financial planner (CFP) and certified divorce financial analyst (CDFA), agrees. She notes that millennials are responsible with their money and make great choices, particularly in navigating retirement through company programs.
The Importance of Emergency Savings
All the financial advisors agreed that having emergency savings is the foundation of a sound financial plan. Life happens, and the security of an emergency savings account can help millennials stick to their goals. Individuals without emergency savings are more likely to use credit cards or debt to cover emergency costs.
Douglas Boneparth emphasizes the importance of emergency savings, advising millennials to feel safe and secure before they even start investing. This way, they can navigate the ups and downs of life without having to worry, which separates good and bad investors.
Clear Priorities
Millennials who are most successful in planning their financial futures have clear priorities, say financial advisors. Thomas Kopelman, co-founder and financial planner at AllStreet Wealth, advises millennials to list out and prioritize their financial goals. Many people think investing and planning for the future is just about dollars and cents, but financial advisors know that many money moves are psychological.
By clearly establishing priorities and knowing what you are truly after, your goals will motivate you to keep going. Millennials struggling to figure out what is most important can talk to a financial advisor about prioritizing their goals.
The Power of Budgeting
With millennials earning $8 for every $10 that the boomers earned, Nathaniel Hoskin, CFP, accredited wealth management advisor (AWMA), and founder and lead advisor at Hoskin Capital, recommends giving every dollar a job. The best way to do that is to create a realistic budget.
Budgeting is a critical part of a financial plan, and while there are many different ways to budget, the most important part of budgeting is seeing where your money is going. Financial advisors know this is an uncomfortable truth for many millennials and that the further we get away from tangible money, the easier it is to ignore.
Taking Advantage of Employer Contributions
Another way millennials can secure their financial futures is to make sure that they take advantage of all the free money offered by their employers. Participating in employer-sponsored retirement plans is the first step; taking advantage of employer matching is the next logical step. Leaving matching contributions on the table is like walking away from free money.
Once millennials have established emergency savings and taken advantage of all matching employer contributions, financial advisors recommend working toward tackling those financial goals and priorities based on their budgets.
Investing in the Future
Financial advisors want their clients to invest based on their priorities, but they also emphasize the importance of Roth individual retirement accounts (Roth IRAs) for those who qualify. Roth IRAs are accounts in which millennials can invest after-tax dollars. That is beneficial because millennials who wait to withdraw this money until after they are 59½ years old can withdraw this money and its growth tax-free.
If you’re a millennial with your eyes on retirement, there are more resources to help support your financial future.
Seeking Reliable Financial Advice
The most popular source for millennials to get financial advice is social media. Many advisors today exist in the social media space and practice radical generosity with their knowledge and expertise. However, as with anything, only some on the internet are experts. Millennials should approach some free financial literacy with the same caution that they might approach an unusual, spam-like social media direct message.
Millennials investing in company-sponsored plans need to talk with their plan provider to ensure that their money works for them by being invested appropriately for their target retirement date and risk tolerance. Plan providers can discuss this with millennials, but millennials can also address this with financial advisors as part of their overall picture.
The Road Ahead
Millennials are DIY-ing their financial future more than any generation before them, but financial advisors agree they’re doing an OK job. Still, millennials who desire the best outcomes should prioritize goals and budgeting, take advantage of free money from their employer, make a savings plan, and stick to it.
Financial advisor Melissa Joy reminds us that perception is not always reality because you always think everyone is doing better than you are, and that is not always the case. However, millennials worried about how they stack up should not quit before they begin. It’s not too late to plan for your financial future.
Strategies for Today and Tomorrow
As Millennials journey forward, they draw on past struggles to shape their financial resilience. Experts emphasize the importance of emergency savings and clear priorities, alongside seizing employer benefits and exploring tax-efficient investments like Roth IRAs. While digital resources offer guidance, discernment is crucial. With determination and strategic planning, Millennials chart a course toward financial security, knowing it’s never too late to take control of their financial future.