Millennials: Finances, Investing, and Retirement – Oh My!

Millennials: Finances, Investing, and Retirement – Oh My!

According to the Pew Research Center, millennials, defined as anyone born between 1981-1996, have eclipsed the baby boomers as the largest generation in American history. Millennials are facing the most uncertain economic outcome of any generation since the Great Depression. The Great Recession followed three decades of stagnant wages, and less than a decade later, the COVID-19 pandemic arrived, upending the financial and housing markets across the country. All of this significant economic activity has presented unique challenges compared to previous generations. 

All of these factors have made it all the more necessary for millennials to pay closer attention to their spending habits, personal finance, and long-term financial goals. 

Humanity offers financial planning for millennials in the Bay Area, retirees, and everyone in between. Our subscription-based financial planning ensures access to affordable help when you need it. 

How Millennials can get Their Finances in Order

While everyone’s situation is unique, regardless of each person’s aspirations and obstacles, setting long-term and short-term financial goals is necessary. Since even the oldest millennials have at least two decades until the traditional retirement age, they can potentially capitalize on the effects of compound earnings in their investment and retirement accounts. For millennials striving to achieve their financial goals, use the information below as a guide to help with financial clarity. 

Retirement Planning for Millennials

Financial planning for millennials bay area

Regardless of how millennials invest, the simple fact is the earlier you they start saving and investing, the higher the probability that earnings will be accrued and subsequently, more money you will have when you reach your retirement age. As a millenial, you should take advantage of 401(k) plans if offered by by employer. If you don’t have that option, you should consider a Roth IRA or another investment account and potentially consult a financial planner to help guide you. 

Also, make sure that as you begin to save for retirement should make sure that your  investment choices are diversified and accurately reflect your risk profile. Consider working with financial advisors in San Francisco for retirement planning to help build a large nest egg before you retirement. 

Living Within Your Means

Living within your means is crucial for setting and achieving financial goals. If you are living within your means, you ensure that your income exceeds your expenses and avoid frivolous spending. Adopting a personal financial plan and sticking to it can help ensure your financial goals are met and avoid bad habits that can make achieving them challenging.

Living beneath your means is another excellent option to help avoid bad habits, such as frivolous spending, excessive credit cards, and not putting money away in an emergency fund. A budget is necessary if you want to live within or below your means. Budgeting for millennials has never been easier, with so many accessible tools available for use. 

How millennials invest

The Importance of Financial Stability

Financial stability is the foundation for achieving financial success. Budgeting, avoiding unnecessary debt, paying down existing debt, and investing early are all important behaviors that lead to continued financial stability. Good financial behavior will improve your credit score, which can have rewarding results, such as when you buy a house. A good credit score will help any venture into real estate, as you will be more likely to get a good interest rate on your mortgage. 

Another good habit that helps financial stability is having a strong emergency fund, as unexpected expenses can throw a wrench into things and cause you to potentially take on bad debt or engage in other bad financial habits. 

Resources and Advice for Millennials Seeking Financial Help

Working with a financial advisor or planner can be an excellent way to help you achieve your financial goals. Whether you are just beginning and don’t know where to start, or you have some experience under your belt but need some advice for your current financial plan, a second opinion can help

Knowing where you stand financially is important. Although you may earn less than you’d like, you can still practice good financial habits. Lifestyle choices are important, and living beyond your means when you can’t afford it is a sure way to begin to dig yourself into a hole. Keep in mind that the further you dig yourself into a hole, you have to dig yourself out, which can severely impede your ability and progress to build wealth. 

Budgeting, having an emergency expense, living within your means, and having a defined financial plan are all necessary to put you in a strong position to capitalize on opportunities throughout your life. For example, suppose your money is tied up paying off any bad debt you accrued. In that case, you may miss out on investing opportunities that could result in decades of lucrative compound earnings. 

Creating a strong financial plan and sticking to it requires daily discipline, but it will have a ripple effect that will be impactful for decades down the road and allow you to live the lifestyle you want to live. 

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

More about the author: Harry Sherdil

As a fiduciary financial advisor at an independent firm, Harry strives to offer the same resources, tools, and research as bigger firms while serving new and existing clients' best interests.