Millennials are significantly different than their baby boomer parents. Their challenges are different and they have an unconventional outlook on most aspects of life. For instance, most people born in the 1980s had to deal with the student loan crisis and the prevalent wage stagnation in the market. The recession further worsened their financial conditions and the housing bubble caused a depletion in their net worth.
This has led to increased awareness among the millennials. They are saving more than their previous generations. This is true even for the affluent millennials who are worried about their future. A majority of them feel they will have to work beyond their retirement. This was proven by the Bank of America survey held in 2018. The survey found the top financial priorities of the millennials. While 64% want to save for emergency funds, 49% are saving for their retirement life. Another 33% believe in saving money for buying a house.
Despite their intentions to save, millennials often feel they are not equipped with the right knowledge about personal finance. If you are in a similar situation, read below to know how you can get started
It’s never too late
Do not worry if you hear a financial expert say that the right age to start investing is 25. Instead of feeling bogged down, know that the right time is always now. You may have missed a couple of years but you have many more in front of you. Use this advice as a lesson and try to save more to make up for the lost time. For instance, it may be a good idea to let go of that pricey pair of shoes that you have been eyeing for a while. You may have to give up on your occasional urges to splurge and save that money instead.
If you venture out into the market and look at the investment options, you may get overwhelmed. After all, there are so many options and each one has a unique proposition. Millennials often get confused as they were never prepared to handle their money matters. This low confidence results in a conservationist attitude towards investing. Reading up can help you in this regard. Most of the information is available online and you can do your research from the comfort of your home. Once you understand the details, you will be in a better position to put your hard-earned money into a safe place.
It is a known fact that millennials spend a considerable time on their phones. From dating to ordering food, there is an app for everything. Well, the good news is that personal finance is not far behind. Several good apps can help you with your budgeting, saving and investing activities. You can even link some of these apps to your bank accounts for greater control over your finances. For instance, you can use a budgeting app to understand where your money is going. This information may help in tweaking your expenses to make the most of your money.
Several millennials saw their parents lose their money in real estate. This is an important lesson for you. When it comes to investment, it is always a good idea to spread your money in different baskets. This strategy will reduce your risks and also ensure optimum returns. Depending upon the risk you can take, you can change the percentage of your savings in these investment instruments. In fact, if you start early, you can invest a considerable proportion of your savings in stocks. Although they are considered to be riskier, they yield higher returns in the long term. If you do not want to take on too much risk, you can always consider the option of bonds.
Utilize 401(k) and Roth IRA –
There is a no bigger mistake than not utilizing your employer-sponsored 401(k) scheme. Both 401(k) and Roth IRA are designed to offer tax advantages and can lead to good retirement life. If you have both these accounts, you can enjoy more flexibility during your retirement. For instance, withdrawing a lumpsum amount from your 401(k) can lead to heavy taxes. You can avoid this situation if you also have savings in Roth IRA.