From One Millennial to Another...
I wanted to take a few minutes and talk about something that I think is really pressing amongst the millennial generation: the 'living for the now' mindset.
While I think Gen Y has a lot to be recognized for, our financial "savvy-ness" is definitely not one. One of the most unfortunate things I see my fellow millennials doing is living paycheck to paycheck, yet chasing the same lifestyle as their wealthy and successful parents. I can tell you from experience that we will never get to have our desired life style by living from paycheck to paycheck.
My goal with this article is to get our thinking to shift just a little through knowing what you want and rolling up our sleeves to work for it. As a millennial, I know that many eyes (including but not limited to: Gen Z, Gen X, Baby Boomers, Silent Generation, and the media) are watching our every move, and I think we have such a responsibility to our younger generations to teach them how to use our currency wisely.
I want to start by dreaming with you.
I've heard a few Gen Y's joke about "never being able to retire" and "working until they're 90." Funny in the moment, but taking a step back, I don't want that for you or me! What I would love is for us to start dreaming of what we could have, do, and be. Then, create a plan with our finances to get to that place. Think: "Do I want to continue working because I have to or because I want to."
So what if you could retire at a decent age of 65? What would that look like? What would you do? What hobby would you take up? Would you golf? Where would you visit? Where would you live? Would your grandchildren come to visit? Would you even have grandchildren? Would they live close? Would you serve in full-time ministry? Would you be able to continue your passion, and not have to worry about finances because you have put enough away? Sounds invigorating, right?!
To be honest, retirement wasn't really even on my radar until recently. I'm 27 now, and even 1 year ago, like most millennials, I thought: "nah, retirement is just so far away, I don't need to waste my energy thinking about that now. That will come later." The reality is that my brain was (and sometimes still is) functioning under that same mindset of 'living for the now.' As I'm learning how to adult, I'm finding that truly anything I do must have a strong foundation before it can be successful.
So, let's talk about building a strong foundation in the financial realm.
Today, GoBankingRates says that a staggering 72% of surveyed millennials have less than $1,000 saved in their bank accounts. But, if you're anything like me, that number seemed SO unreachable. I thought it was impossible because the money was going out faster than it was coming in. How would I ever be able to save that amount of money without needing to spend it on something?
In order to win big with our finances and get away from living paycheck to paycheck, let's start building our foundation. Here are just a few things I've learned as I've grown more knowledgeable about my finances.
You have to WANT it. You have to be mad enough to make a change.
I think the first step is a heart change. You have to be honest with yourself, be willing to reflect, and be tired of the financial mess. I know if I'm ever going to be wealthy, be able to provide for my family, go on vacations, buy a bigger home, own a Tesla, etc. I'm not going to do it by wasting my money on other things. If I am not managing my own money well, then how will I ever be able to teach my kids and future generations how to manage theirs? Actions speak louder than words. That right there, was enough conviction for me get some help financially.
You HAVE TO, HAVE TO, HAVE TO track your expenses. Know what is coming in and when it's going out.
Once I got the budget in place, I was able to start setting goals about what I wanted to do with the money I was making. First thing - and the most expensive goal to date - was to get rid of those blood sucking student loans! My husband and I made a decision and a plan to kick student loan debt in it's ugly face. The ONLY way we've been able to do this is to budget our money and stick to it, no matter what! We have categories budgeted for groceries, gas, car maintenance, home and hygiene, clothes, and yes, even SPENDING! You have to be able to have a little fun here and there so you don't fizzle out on the journey! The idea here is to allot yourself a certain amount to spend so you're not overspending.
Once we got a handle on how much was coming in each paycheck, and what we needed to pay, then we were able to put even more money towards our goal. We would highly recommend paying yourself and your categories first before you put extra money elsewhere. This will ensure your foundation remains firm while you are attacking whatever it is that you want to do.
I also thought it important to note that we've been in student loan repayment for the past 2 years. We are projected to be done by December of this year. We are planning a celebratory trip to Ireland when we are done to reward all that hard work! There is hope, so don't give up on your goals!
Emergency Funds are CRUCIAL!
In order to remain standing on a firm foundation, we needed to stash up money that wasn't going to take away from what we are trying to accomplish. As we built our emergency fund, I realized that we were going to be okay if my car broke down or if something decided to take a turn for the worse. I found that as we had this emergency fund, less and less things went wrong.
$1,000 is the minimum you should stash away because that will cover quite a few of the small things, and if you empty it out, it won't take too long to build back up. Please keep in mind that the emergency fund is for EMERGENCIES ONLY! That doesn't mean an emergency trip to the Bahamas, it also doesn't mean an emergency trip to taco bell after some late night studying. This is more for if your tire blows out, and you need to replace it; if your have a sudden family emergency in another state, or if you suddenly need to visit the Centra Care due to illness. Other than emergency reasons, your emergency fund is OFF LIMITS!
Student loan debt elimination, credit card debt elimination, car loan debt elimination is all possible! YAY!!!
This is where the "wanting it" comes in. You truly can get out of debt if you put your heart and mind to it. No lie, it is hard work, and it sucks - but you'll be like Rocky on top of the Philly Museum of Art steps once you are done - it will strengthen you.
Before you even start investing, loans should be paid off first. Here's why: while you're investing and making money, you're also still paying interest on debt. You're making interest on your investments, but then you are paying that interest on your loans. Anything you net is basically a wash. Really, you're working hard, but not smart. If you paid off all of your debt, you have a clean slate, and compounding interest will work in your favor while putting away for retirement. This is working smart.
How do you start paying off debt? Check out our "Getting out of Debt" series of Allgen's #MoneyMinute we filmed a while back. There are some great nuggets of wisdom to help you, starting with the above 3 steps!
Call To Action
Here's what I want to leave you with:
Like I said before, millennials have many eyes upon them, including younger generations. This means we have a shot at shaping younger generations. I plan to do this in many ways, and one of those ways is with my financial knowledge. Won't you join me in gaining control of your finances for a much deeper cause than yourself?
Being in the financial industry has taught me SO much, but one of the biggest things is that even though I have picked up life applications here and there, I am no professional. It would have never even crossed my mind for a professional to help me with shaping my financial future once I'm out of debt. Now, I'm highly considering it because I see the value in making my money work for me and my dreams. Maybe something you would consider too?
Along with the above, something I highly recommend doing is checking out Financial Peace University. They have classes everywhere! You can plug right in and take the class with other folks who have a similar mindset. This class has helped instill hope in me where there was none. I am happy to say that I won't be working out of obligation until I'm 90, but I plan on doing something I love and want to until I'm 90 because my finances are in place!
Thanks for reading!
If you are interested in changing something about your financial picture, we have many great resources on our blog, YouTube, Facebook, Twitter and LinkedIn. If you just plain have questions, we answer those too! 🙂 Give us a call or shoot us an email and we will gladly help!
Written by Cassy Morrison, Marketing Director for Allgen Financial Advisors, Inc.
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