How Millennials Can Prepare for Financial Future in the Modern Age
Ask your grandparents about their retirement income. You’ll likely hear the word “pension” or references to “social security.” For younger generations, however, pensions aren’t as readily available and the “security” part of social security simply isn’t as, shall we say, “secure” as it once was.
On the plus side, investing has become cheaper, more efficient, and easier to do on your own. So what’s a financially savvy millennial to do? Take charge of your own future!
Know your options.
This typically starts with your employer. What retirement savings benefits are offered? Is there a 401(k), 403(b), or 457? Are matching contributions part of that benefit? Is there a Roth option? What about employer Health Savings Account contributions? For employees of larger companies, there are often entire departments dedicated to helping you understand these benefits. Take advantage of them.
If you’re self-employed, you’re not left out of the retirement savings fun. Options such as Roth IRAs, SEP-IRAs, Simple-IRAs, and even solo 401(k)s allow you stash away cash in a tax-advantaged manner.
Start now and automate.
You looked into the workplace retirement plan offerings but figure you’ll start once you’re earning more money. Please reconsider! Start saving now. First, take advantage of that workplace plan. Start with as little or as much as you’re comfortable… the key word being start. Next, you signed up for direct deposit, right? Make sure that a portion of each paycheck bypasses your checking account and goes straight to your cash savings account. This money should be set aside only for emergencies: life’s “need to haves,” not life’s “nice to haves.” If you’re not using direct deposit, split the deposit on each paycheck so that a portion goes into this savings account.
Avoid costly debt and unnecessary risks.
You’ve laid the groundwork for a more secure future by starting the powerful automatic savings and investing mechanisms. Now, it’s time for a little preventative medicine. Don’t buy things you can’t afford. Sound simple? It is. Sound popular? It isn’t. This is where the dreaded “B” word (budget) comes into play. Luckily, in today’s world, there’s an endless supply of apps that can help do the work for you. These tools can help you save for that dream car or vacation so that you can actually afford them without breaking the bank.
Avoiding debt is one way to stop you from having to dig out of a financial hole. The other is to make sure you’re appropriately insured. Having health coverage, either through traditional insurance or a healthcare sharing ministry, can dampen the blow of large medical bills. As much as we’d like to, we don’t stay young (or healthy) forever!
Don’t be afraid to ask for guidance.
We all like to be independent. Independence doesn’t have to mean going it alone, without support or informed advice. From robo-advisors to in-person advice, there’s a way to make informed decisions to suit every young saver’s style. Searching the web for financial answers should be the first step, but not the only step, towards making educated decisions about our financial future.
Disclaimer: This article is generalized in nature and should not be considered personalized financial, legal, or tax advice. All information and ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.