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It is Never Too Early for Millennials to Start Financial Planning

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There are many things people say about millennials – all we do is focus on Instagram filters, how to make the perfect avocado toast and where our next international travel excursion will be. There are mixed reviews, however, on the work ethic of millennials; some say we are lazy and expect money to fall into our laps, and others say we are not only working full-time jobs but we are side hustling for extra cash. Let’s break it down.

How much are Millennials making?

According to a new study of Federal Reserve data by the advocacy group Young Invincibles, the average income is $40,581, which is 20% less or $10,000 less than what our parents made on average. According to this study, millennials have 50% the net worth of Baby Boomers, own less houses, yet the debt is higher. How is it possible that we own less but have more responsibilities to pay for? How is it that as a generation, we are more educated than our parents and grandparents, yet we and drowning in debt (average debt being $40,000)? Why are our paychecks not equivalent to our education?

Work Ethic of Millennials

Millennials have overtaken the Gen X-ers, those who are born 1965-1984, as the largest demographic in the workforce right now. Millennials compose 30% of management positions.

It is a common joke that millennials are lazy – but is that true? 44 million American’s have side hustles, or outside jobs combined with a regular full-time job. Most of these people with side jobs are ages 18 to 26. Potentially due to the starting-out lower salaries millennials enter the work-force earning, millennials are striving to cover the rising cost of living by working multiple jobs.

Millennials are saving an average rate of 8% of their annual salary, if that is compared with the average income of $40,581 – that would be an annual savings of $3246. A little over $3000 a year might be tight when paying off student debts and affording the rising cost-of-living.

Why is it Important to Start Saving Early?

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As of right now, only 37% of millennials are saving for retirement, and 63% are instead focused on creating their desired lifestyle. There is nothing wrong with using your finances to create a standard of life you desire, but it might be problematic if you are not saving any money for your extended future.

There are different levels and ways of saving as well; you might want to start saving a portion of your paycheck towards rent while you are still living at home so you won’t be overwhelmed when you move out. On a slightly larger scale, maybe you set aside some money to purchase a car when you notice yours is starting to break down a little too often. The list goes on and on: saving for a house, saving for children, and saving for their education. These large aspects in life that require large sums of money are important to plan and budget, but finances should also be viewed through an even wider scope – estate planning.

It may seem early for a millennial to financially plan their extended future because often young adults are not financially stable yet, their net worth isn’t high, or they aren’t sure who to name their beneficiary. An estate plan allows you to leave your assets to your desired love one. Without an estate plan, the court will decide how your assets are divided. No matter how large the bank account, it is important to be in control of who your assets are distributed to and avoid forcing your loved ones to go through the probate process or pay excessive taxes for your assets.

Where do I Start?

Due to the complex nature of setting aside, dividing, and claiming your assets, it is usually recommended to consult an experienced estate planning lawyer for guidance. Estate planning lawyers can help you analyze your assets and goals, protect your assets, draft a will to ensure proper division to the correct people, and fully outline your wishes after death. It may sound silly to start planning your finances out at such as young age – but it’s best to start early and have the ability to make changes as your finances grow. This way you are ensuring stability in your future and saving your loved ones from additional stress. Additionally, estate planning allows your loved ones to skip paying or pay significantly less gift, income, and estate tax.  

As millennials, there is constant advice being thrown our way from house buying vs. renting, which schools provide the best education, and which job provides the best benefits. It can be overwhelming to overcome these obstacles and figure out which route is best for you, but one thing is for sure – it is never too early to plan out your finances.

Author: Alexa Martin

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Alexa Martin
Alexa enjoys all things personal finance, budgeting, and saving. And she talks to her cats way too much, if she's being honest.

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