Recent research shows the demographic wave of 75 million Americans born between 1980 and 2000 will surpass the number of baby boomers this year, making Millennials the nation’s largest generation ever.
Millennials are often described as diverse, educated and tech-savvy, with big career goals and an optimistic outlook. When it comes to finances, however, this generation appears averse to risk – maybe because many of these young professionals came of age during the Great Recession. Some feel unable to purchase a house, or fear they won’t be able to retire until much later in life than their parents. In too many cases, these young adults have staggering college loan debt.
Last and not least, almost one in four Millennials trusts no one for financial advice.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
No matter how you refer to this new booming generation (formerly known as Gen Y), its size constitutes a significant force in the economy. With Millennials estimated to make up a third to half of the American workforce in just five more years, the time is now for you in Gen Y to understand your financial potential and future.
1. You need a plan. Critical for long-term success, your financial action outline doesn’t need to be complicated but rather provide a starting point and create a baseline for measuring your goals.
If, like many in your generation, you prefer portable, connected devices as personal technology, incorporate programs and apps into your initial planning. For instance, finance sites such as Mint can help you document your money goals, time horizons and investment objectives and, most importantly, create a strategy and action plan.
Your plan can also serve as a basis for an individual or family budget. If you’re unsure where to start, consult a financial professional.
2. Start investing. With time on your side, invest early on to maximize your returns. Keep investments simple and costs low initially. For instance, consider low-cost, broad-based index funds in your portfolio to diversify holdings, reduce management expenses and mitigate tax consequences.
Automating the transfer of money from your paycheck to your investment account streamlines this process. You can start with a small amount of your pay until you get more comfortable, and increase amounts later.
3. Start saving for retirement now. It’s never too early to create a retirement plan. Retirement accounts provide tax-deferred growth, a powerful feature to help boost long-term returns and provide income decades from now when you stop working.
If your company offers a 401(k) plan, see if your employer matches a portion of your contributions. At the very least, contribute enough to receive your full company match, often around 5% of your annual pay (though percentages vary).
With the limit on employee contributions to 401(k)s up to $18,000 in 2015, you stand an even a greater chance to maximize investing for your far-off golden years.
4. Trim pesky fees that ding your income. Creating a financial plan includes scouring all your incoming revenues and outgoing expenses, the actual (on paper or on screen) paystubs and statements.
You may notice a number of fees tacked onto bills, loans and other expenses that you previously overlooked. Banks, for instance, often quietly change rules and start charging you increasing amounts for services you once received for free.
Every fee means less money in your pocket. See how many fees you can reduce or remove in the year, and reinvest those dollars in a savings or retirement account.
Either type of account can be your best financial friend if you have time on your side.
Taylor Schulte, CFP is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
How Much Money Is Enough to Be Happy? Can You Have Too Much?The relationship between money and happiness is complicated, but the experts agree on these three eye-opening fundamentals.
-
Five Year-End Strategies You Can't Afford to MissInstead of making New Year's resolutions, consider making some money moves that could help save you big bucks on your taxes.
-
Buying an Insurance Policy: Three Ways to Do ItYou can buy an insurance policy through an insurance agent or broker or on the internet. Which way works best for you?
-
10 Ways Your 1031 Exchange Can Go Horribly WrongDon't let your tax-saving strategy become a financial nightmare — discover the hidden pitfalls that could turn your 1031 exchange into a costly disaster.
-
From Entrepreneur to Retiree: Boosting Your Business' ValueWhen business owners contemplate retirement, their first step should be maximizing the value of their biggest asset. Here are a few steps that could help.
-
You've Got a Trust: Now Who Should Be the Successor Trustee?You've set up a trust to protect your assets and your beneficiaries, but you still must choose the right person to execute your wishes. Here's how to do that.
-
Three Ways Fiduciary Financial Planners Put You FirstFiduciary financial advisers are required by law to work in your best interest. Here's how they are key to intentional and efficient financial management.
-
How Long-Term Care Insurance Has Become More FlexibleToday's long-term care insurance offers retirees more appealing options, which can preserve assets and protect the financial stability of a healthier partner.
