Different generations tend to have very different priorities when it comes to financial planning. While baby boomers and Generation X might be more interested in retirement due to their proximity or the need to have a holistic financial strategy in order to protect their family, millennials have their own unique financial challenges that are also worthy of attention.
The good news is, the sooner they start planning for the future, the more opportunities millennials will have to make significant changes to how they live life, and perhaps how generations to come live theirs as well. When it comes to, utilizing the gift of time, we are at a key juncture in the human experience.
We are living longer — 30 years longer than generations before us. And with that longer life, there is an opportunity to change our collective paradigm on how we live life. The traditional life stage blocks (i.e., school, marriage, kids, career and retirement) can be moved around to form a much different pathway. While this is an opportunity for all generations, it is the millennials who have the advantage of time to make this new approach to life the new norm for generations to come. Furthermore, we know they have interest in making this new life path a reality.
[See: 7 Stocks That Should Grow With Millennials.]
Based on this new reality, millennials are wise to take this approach: Live and enjoy the moment, seize the opportunity to try different things, and think through both the short- and the long-term possibilities ahead. But give yourself the opportunity to do these things by planning today for what could and should be a much different tomorrow.
Turning the norm on its head is great, but making it a reality first requires forethought and planning, which can be a pretty tall order. So where do you start?
The first and most important step is to save. Perhaps you might want to try living in a new city in the next five to 10 years. Maybe you are considering going back to school to get a graduate degree. The ability to do these things starts with the simple act of setting aside money for later. And even if you are not ready to begin saving money for a life-altering change, think about something shorter term, such as a new phone or a winter getaway, and save toward that goal. The act of saving is a learned behavior and if you can get in the habit of saving, the door can be opened to living a life much different than the traditional norm.
Taking a step beyond just saving, consider how you can put your money to work. Don’t be afraid to invest your money. There are a lot of financial vehicles out there that position you to potentially benefit from the magic of compounding returns. There has indeed been much written on market volatility and low interest rates that is making investing seem to be an overwhelming task. Getting past those apprehensions can help you potentially grow your savings much faster than keeping your money on the sidelines.
Don’t become tied down by debt. In addition to saving, another suggestion is to avoid creating “the strings” that can tie you down to an unwanted reality. There are always going to be times in life when borrowing is a necessity and appropriate. In many cities, you will need a car, which you will likely finance, and student loan debt is unavoidable in many cases (although make sure you are paying off your loans on the most optimum terms). But as much as you can stick to a budget and avoid the many temptations that credit cards can enable, try to stay as free from debt as possible. The parental advice of, “Do you really need it?” and “Do you really need it now?” are both good starter questions to get you on the right path.
[Read: 11 Hot Investing Ideas for Millennials.]
In addition, try an experiment of spending one week living off of cash only. We have become a cashless society which is convenient, but it also lends itself to living beyond our means. One week of spending just cash provides a very clear lesson on how much things cost.
Once you pay for the necessities such as gas, food, etc., the amount spent on additional, and perhaps unnecessary, items makes itself abundantly clear. It is easy to quickly put yourself in an unwanted financial position, so don’t underestimate the impact it might have on meeting both your short-and long-term life goals.
Don’t be intimidated by financial planning. It does not need to be as complicated as you might think, and in this day and age there is a lot of information out there to help guide you. If you want some assistance, many millennials have set up financial advising services designed specifically to assist the unique situations of their peers.
Also, use automation to your advantage. Along with the ease of auto bill paying, it is simple and painless to set up a direct deposit into an account for saving or investing. Use that as an opportunity to put away a certain extra amount each month. If you have it taken directly out of your check, it is indeed true that you will not miss what you never had.
[Read: A Beginner’s Guide to Building a Portfolio.]
Millennials have many choices in front of them and endless possibilities. Proper planning is the differentiating factor, and may be the key to success, in helping write a new chapter in how we all live our lives for generations to come.
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Millennials Should Plan Today for a Different Tomorrow originally appeared on usnews.com
