I'm here to provide some financial advice for millennials. My journey to financial independence started 20 years ago. The year 1997 was a long time ago. Think AOL dial-up internet, the start of President Clinton’s 2nd term, the movie Titanic was a box office hit, and Tiger Woods won his first major golf tournament.
Not to sound cliché, but many of my friends are Millennials. I have worked with Millennials. I also currently manage a 24-year-old girl who is an amazing employee. I feel the pain that your generation feels. As a Gen-Xer, I have faced many of the financial and career challenges that you now face. Today, I'll share some financial advice that you may find useful. Let's get started.
Financial Advice for Millennials
The purpose of this post is to share some financial advice for Millennials from what I learned on my journey toward financial independence and building wealth.
1. Best Investments to Make as a Millennial
Investing can be a great thing if you know what to invest in, and don’t limit yourself to making money or earning money in a short period of time. The best advice is to stay in your lane, and stick to the things you can easily learn by teaching yourself, taking classes or it might be something you already had some experience with.
Nevertheless, enrolling in a course or taking online courses is another form of investment, because you gain the necessary knowledge and skills for moving up the ladder at your workplace or starting a business of your own. Find out what are the top four things you might want to consider investing in, that can really pay off in a few years’ time.
Private Health Insurance
It’s high time you started thinking about your health and the way you protect it. It isn’t just about eating a balanced diet, or going to the gym, it’s about thinking ahead and putting things into perspective. Think about the bigger picture and the way you want to spend your life. Private health insurance helps you feel less stressed out about minor or major incidents that could happen during the course of your life.
Be responsible for the future of your family and your own and invest in the right insurance plan that can save you a lot of trouble in the future. For instance, in comparison to government-run health insurance, private family health insurance covers dental care and optometry, so it gives you the option to actually get your money’s worth and show your family that you think about their needs.
It’s never too late to acquire a new set of skills or bring a wealth of experience to your life by trying out new things. Getting an education doesn’t necessarily mean that you have to pursue a career, it just means that you’re up for a challenge. Shifting your perspective from being a passive observer of your life to actually making your work meaningful, can really make a positive impact on your mental health, motivation and a general attitude towards life. Education is important for every individual who wants to prosper and move forward in life. It’s an intellectually stimulating process that gives you motivation to work more on yourself to find what it is that excites you. If you find your passion, education is just a missing puzzle piece.
Nowadays, millenials are considered to be the most educated generation. This doesn’t mean that there is no room for improvement and personal growth with the aid of courses, webinars or conferences. Getting formal education doesn’t mean you stop learning, it just means that you are finished with this section of your schooling, and that you are lawfully allowed to proceed with your studies.
Even though we like to focus more on investing in your well being and mental health, money makes the world go round, so this choice doesn’t come as a surprise. Don’t squander your money, but make it work for you. There is no right answer to what the gold mine of 2021 is, but you should still invest as simple as possible. Some of the safest options are dividend-paying stocks and bonds or businesses or real estate, which leaves you waiting for an increase in value from real estate, a stock portfolio, or a similar asset. Find the crucial information about the business you want to invest in, because the risk always exists.
Accumulating wealth doesn’t happen overnight. Put some money for investing to the side, separate long-term and short-term investments, choose what level of risk works for you and invest as much as you can, while tracking these investments. Do your own research and never take anyone’s advice, because in most cases, it just leads you down the rabbit hole of questioning and second-guessing, which killed most of the investments before they even started.
Money isn’t the only thing you can get if you start investing, even though most people see investing as a money-trading process. Instead, focus on improving your skills and accept new possibilities that are coming your way. What would you invest in if you had enough money or resources? Would that be stocks or something more abstract such as knowledge or health?
We’ve given you some options, but in the end of the day, it’s up to you to decide which advice you’re going to take. In the long run, it’s all about reaching your goals and being satisfied with your decisions. Tell us all about your experience in the comment section below!
Obviously, education is huge if you want to reach financial independence, but so are the student loan balances that many Millennials are now left with attending college.
If you are still in college or planning on attending soon, consider your nearest community college for your general education credits. There are so many reasons to attend a community college, and the average cost of attending a community college is $3,500 compared to $8,900 for a 4-year public school.
When it comes to education, I am a believer in testing to identify aptitude. The best degrees for earning a high salary are in the STEM disciplines. The issue with those degrees is that they are not for everyone.
If Science, Tech, Engineering, or Math do not match your aptitudes, find out what does.
When you do identify your aptitude, focus on a degree that matches your aptitude and not your interests.
Get a degree that will transfer more easily into a job. If you like to write, look at a Marketing degree. If you like Psychology, think Human Resources degree. If you want to study History, get the required education credentials to become a professor.
If you are out of college, getting your Master's Degree or MBA is a great way to advance your career. It truly helped me to advance into a senior management position. However, I was not willing to go into debt to pay for a Master’s Degree.
I searched out and found an employer who had tuition reimbursement as a benefit. My Master’s degree cost me about $3,000 for books and fees. My employer covered the rest of the tuition costs.
Just as with education, find a job that matches your aptitude.
You will spend at least 8 hours per day at work. Find a job that you are truly passionate about.
Be willing to start at the bottom and work your way up.
Read online industry journals. Become a master of your craft or profession. Share and apply what you are learning. Mentor others along the way.
Always try to add value at your job. Do this and you will advance in your career.
There is a good chance that your supervisor will be a Gen-Xer or a Baby Boomer. You might feel a disconnect in how they communicate with you. There is a major reason for that. They came up during the latter stages of the industrial revolution and you are from the information age. They know and understand top-down leadership and you were brought up in an age where you learned anything was possible due to the internet.
They are set in their ways and most will not change. Here is a trick to overcome that barrier. Don’t try to force issues with your manager. Be positive. Use Ju-Jitsu. Learn how to communicate as they do.
Read the book How to Win Friends & Influence People by Dale Carnegie. This book will give you great insight into the business communication style of the industrial revolution. It is a good book because it is full of practical communication practices.
Unfortunately, most jobs today do not offer a defined benefit plan. These plans declined at the turn of the century due to laws surrounding funding requirements.
Prior to the decline, most employees would work at a company for their whole career and receive a pension at retirement. Most pensions are based on years of service, salary, and a multiplier.
It is rare for a private corporation to offer a pension today.
The only jobs that do offer a pension tend to be government jobs. Most of these pension plans have been replaced with a defined contribution plan such as a 401K or 403B plan.
A lot of my financial advice for millennials will advise you to work with what is available. Start saving now. Save early and often. Brian wrote a nice write up on easy ways to save $1,000 a month that I would recommend reading. Only saving 3% as the media often suggests will not cut it if you want to reach financial independence at an early age.
Save at least 10% of your salary. Starting with 15% is even better. Add 1% annually to your savings rate. Take advantage of the tax-deferred growth that your 401K or 403B provides.
Make it a goal to contribute the maximum amount allowed to your 401K or 403B. After you reach that goal, open an IRA and contribute the maximum to that account. Also, keep some cash in a savings account for emergency expenses.
6. Long-Term Approach to Investing
When I started investing in 1997, the stock market was soaring. The dot.com bubble was swelling and getting ready to pop. Day trading was being marketed as the way to invest because of the advances in internet technology. It was also a way for investment companies to make major profits off investors due to trading costs.
Fortunately for me, I read a few good books on investing that suggested a much simpler way to invest.
I learned to invest in index funds and to select an asset allocation based on my risk tolerance.
The book A Random Walk Down Wall Street by Burton Malkiel was one book that helped me to determine my asset allocation based on age and risk tolerance.
Index funds allow investors to own the total U.S. and international stock market as well as the total bond market.
Instead of struggling to pick individual stocks or bonds, index funds enable investors to capture the average returns of all the markets. Another great feature is that they are low-cost and tax-efficient.
Today, it is even easier for investors. There are target-date funds that have an asset allocation based on a future retirement date. It is truly a set-it-and-forget-it approach to investing.
I have followed this approach for many years. This allows me to check my account balances once or twice per year and re-allocate.
I don’t need to follow the financial media to know what is going on in the markets. I can keep my focus on other areas of my life where I have a greater influence.
The Bottom Line
Time seems to fly by. I remember being 25 years old as if it were yesterday and I am now 40. The most important thing a Millennial can do is to enjoy the process.
Reaching financial independence (FI) takes time. It is a lifestyle and a lifetime endeavor. Once you reach FI, a new journey starts.
At that point, you have to make sure your money lasts while you are relaxing, traveling, getting involved in service, or seeking new business endeavors that you are passionate about.
One last thing. The older generations might say that millennials are narcissistic, lazy, and difficult to work with.
At least they don’t call you a “slacker” the way they did to us Gen-Xers because we wore cut off cargo pants and jammed out to Kurt Cobain.
We all know, however, that those negative observations are true.
I hope you found my financial advice for Millennials article useful. If you have any questions leave a comment below!