Tips and strategies.
You may have gotten off to a slow start; but with the right financial tools and strategy, you can create the lifestyle you want.
If you are considered a millennial or a member of Gen Y, there's a good chance that your financial needs are very different from those of your parents—or from any other generation for that matter. Why?
Frankly, a lot of it has to do with timing. Since millennials started hitting the workforce in the early 2000s, your early working years have included 9/11, a housing crisis, and the great recession—that's a lot of economic turmoil in a relatively short period of time. As a result, your financial needs—and the tools you use to achieve them—may have to be adjusted.
Build a financial strategy based on your realities and expectations.
So how does a millennial start building a sound financial future? Here are some tips and strategies to consider.
- Money is a tool, not a goal. Before you begin planning, think about what you want to accomplish with your money. Do you want to travel, start your own business, or champion an important social cause? If those are priorities in your life, be sure to factor them into the equation.
- You are your greatest asset. At your age, your income potential—the amount of money you will earn over the next 20-30 years—is most likely your greatest asset. To protect this valuable asset, make sure you have good health, disability, and life insurance plans, all of which should be relatively inexpensive given your youth.
- Time is on your side. Here again, your age gives you a decided advantage. Even small amounts—$50-100 a month—if saved or invested early, can amount to substantial sums given enough time. The key: get started early and stick with it.
- Compare benefits as well as salary. These days, a company's benefits package can be every bit as important—if not more important—than the salary it offers. Before you jump ship, or leap at the first offer, take a good look at the company's health, dental, life insurance, and retirement benefits. You may be surprised at how much a good benefits package will save you over the years.
- Determine a baseline budget and build from there. While we all understand the importance of living beneath our means, few people take the time to build a monthly budget—let alone stick to one. For millennials who do, however, the benefits can add up quickly. This is especially true if, as your salary grows over time, you are able to bank or invest the difference.
- Use social media wisely. Social media—which is popular among millennials—can be an excellent source of financial information. Unfortunately, it can also be a tremendous source of misleading information. Make sure that any sources you follow are credible, and use your social network to vet any financial services or advisors you may be considering.
- Put your unused mortgage payments to work. Having seen the housing market crash once already, it s easy to see why most millennials are in no hurry to purchase a home. And, because renting is often cheaper than buying, this strategy can be an effective way to free up extra cash—money that can be invested, saved, or used to meet other pressing financial needs.
- Take responsibility for your retirement. While retirement may seem a long way off, it will arrive sooner than you think. And while the retirement landscape has changed with the decline of traditional pensions, there are lots of ways to prepare for it. If your company offers a 401(k), be sure to take advantage of it. If not, look into traditional IRAs, Roth IRAs, and—given your long-term time horizon—tax-deferred annuities.
While millennials like you may have gotten off to a slow start—through no fault of your own—there's still plenty of time to put a sound financial strategy in place. If you would like more information about any of the topics covered, just let us know, and a New York Life agent will be happy to help.