All those adults born after 1980, aka the Millenials or Generation Y reportedly control $2 trillion of liquid assets. Reports even suggest that within the coming 6 years, this number will surge to $7 trillion. While some may think that this generation is entitled and lazy, but the truth is that we’re ripe for the picking, assuming that we actually know the strategies to grow our wealth and multiply our dollars. In a panel at Forbes Under 30 Summit, held in Philadelphia, three people were trying to figure out how to make financial sites that Generation Y will actually use and while doing this, they gave some vital tips about money management.
According to a 2013 survey, millenials are the generation that are least likely to stay on track for retirement. Reports suggest that the young generation is not paying much attention to their future and hence they’re not only falling behind, but they’re falling further behind. Josh Reich and Jon Stein, Alexa von Tobel, CEOs and founders of some financial sites believe that some kind of smart technology paired with some effecient budgeting, saving and investing tool will help the young generation get on track, not just for retirement but also for their financial goals. Technologically-efficient financial tools like Betterment, Simple and LearnVest are easier things for usage but if consumers can’t keep a track of the ABCs of their wallets, technology won’t help them far.
Money management tips for the newly employed millenials
When your first actual paycheck arrives, a very common reaction is to celebrate with your friends by drinking beer at your favorite bar. Although that’s not a terrible thing to do once, starting out your adult life should be seen as the greatest opportunity to create financial security for the near future. According to 2013 Financial Stress Research, report from Financial Finesse, 62% of those surveyed who are just under 30, report that they have some kind of financial stress, and yet another 15% say that they have a high level of financial stress which is keeping them overwhelmed. Here are some tips from money managers on how to get started on the right financial foot.
- Live within your means and follow a budget: Having a budget is indeed a critical first step that most millenials avoid following. Little do they know that it is the framework that helps you keep your whole money situation in place, according to a certain financial planner of LearnVest.com. You should follow the 50/20/30 budgeting method which means that 50% of your take-home pay should go towards your essentials. 20% goes to the future and can include paying down debt, saving for retirement and other emergencies. And the rest, a whole 30% goes to your lifestyle, vacations, shopping, eating outs etc.
- Sign up for retirement funds: Setting aside money for your retirement years allow it to grow over the long term and helps you save money on your current income taxes. In fact, most professionals recommend saving a minimum of 10% of your pre-tax dollars that you make each month. If you start doing this from the beginning, you will probably never notice the difference in your take-home pay. In case our employer offers any matched contribution, always go for it as this will increase the amount that you save. This is essentially free money and hence you shouldn’t leave any money on the table.
- Automate your savings account: When you’re in your mid-20s or you’re about to enter the 30s, it’s tough to find out the balance between planning for the future and living for the moment. Most young adults are hard of saving money as they tend to forget the date on which they have to save money or transfer the lump sum amount from their checking account to the saving account. Hence if you can automate your savings account and set a pre-fixed date on which the amount will be debited from your account and credited to your savings account.
- Pay down your debt at once: Although it’s important to build up an emergency fund and retirement savings, yet there are few things that often take precedence. If you have high interest debt, in the form of credit card debt, you need to shift your priorities. If you owe a huge amount on your credit cards, you may take out debt consolidation loans in order to get out of debt. Pay the minimums each month so that you can concentrate on repaying the other debts with higher balances.
Therefore, if you’re a millenial who has recently joined his first job, you can take into account the above mentioned money management tips in order to stay on the right financial track. Take help of a financial planner if you wish to always take the best monetary decisions throughout your life.