Millennials have certainly endured their fair share of economic challenges over the past few decades. Defined as anyone born between 1981 to 1996, many of these individuals struggled to find or keep a job during the Great Recession of 2008. In fact, well-known millennial blogger Grant Sabatier shares in his book Financial Freedom how he went from having $2.26 in his bank account after being let go from an employer to becoming a millionaire in just five years.
More recently, this same group was also at the forefront of one of the most unprecedented disruptions of modern times: the COVID pandemic. Between family safety and widespread stay-at-home orders, many feared their jobs may be in jeopardy. Yet, they proved that working from home was not only possible but in some ways more desirable.
If there’s anything you can say about millennials, it’s that they have resilience. No matter what life throws their way, they’re ready for the challenge and are going to find a way to persevere. That’s why in this post, we’ll talk about millennials can use this strength to better their finances in five important ways.
1) Focus on What You Want
If there’s one regret you’ll often hear older generations express, it’s that many of them never got to do the things they truly wanted to. Rather than pursuing a passion or having enough security to retire at an early age, many older Americans followed the societal norm to simply go to work until it was time to collect a pension or Social Security.
Millennials don’t have to follow this same path. Many of them already understand that money itself is not the prize. Instead, it’s what you can do with it and how it can change your life that makes it so valuable.
For this reason, millennials should examine their savings goals and structure their finances accordingly. This can be done by sitting together with your partner, grabbing a coffee, and having an honest conversation about what it is that you’d both like your money to do for you.
There are so many possibilities:
- Retire at a young age
- Pay off your children’s college (so they won’t be in debt)
- Start your own business
- Travel the world
It doesn’t matter what the two of you come up with. What’s useful is that you have an idea in mind to work towards. Once you know where it is that you want to go, it’s a lot easier to get there.
2) Optimize Your Wealth-Building Habits
Unknown to most, millennials will go down in history as one of the first generations to be completely on their own when it comes to becoming prepared for retirement. In the past, other generational groups such as Boomers and even some Gen Xers had the luxury of relying on their employers to provide them with a lifelong pension. However, this all changed in the 1990s as the grand majority of companies began switching over from defined benefit plans to defined contribution plans like 401(k)s and IRAs.
However, this isn’t necessarily a bad thing. In fact, those millennials who actively take charge get to be in the driver’s seat and decide for themselves:
- How much to save
- What to invest in
- When they’d like to be done working
No longer are they bound by some age restriction that their employer or the government made up. Instead, they’re free to save and invest however they see fit to do.
If you’re looking for a way to start building your wealth, then leverage the power of your tax-advantaged retirement plans. Every dollar you save counts as one less dollar in taxable income, and this ultimately lowers your tax bill for the year. On top of that, those contributions will then grow tax-deferred until someday when you’re ready to retire in the future.
3) Build Rock Solid Credit
Like it or not, your credit rating counts for everything nowadays. Whether it’s applying for a new credit card, mortgage, or even upgrading your mobile phone, they’ll want to know your credit score.
While most millennials have already encountered this, it’s worth reiterating just how important keeping a high credit score is. Eventually, if you want to refinance your house, buy an investment property, or even start a business, you’ll need good credit to qualify.
Thankfully, there are a lot of resources out there to help you understand exactly what you should be doing. For starters, FICO, the company that calculates credit scores, publishes directly on their website which criteria they use. On top of that, there are countless blog posts and YouTube videos designed to educate you on how to improve your score. All you have to do is understand how they work and then implement them into your daily financial habits.
4) Get the Right Types of Insurance
It’s no fun to think about what might happen to you if something were to go wrong: a sudden health condition, an accident on the road, premature death, etc. However, these are all things that happen to people every day, and unless you’ve got adequate insurance, then they could leave you financially devastated.
Millennials can avoid this by getting the protection they need for themselves and their families. Generally, this involves receiving the following types of coverage:
- Health insurance (medical, dental, vision)
- Life insurance
- Auto insurance
- Homeowner’s Insurance
Whenever possible, leverage your employer benefits to provide as much of this insurance coverage as possible. For example, a good family health insurance policy might cost tens of thousands of dollars out of pocket. However, when subsidized by an employer, you may only have to pay a few hundred dollars per month.
5) Minimize Your Budget
If there’s one mistake that millennials could avoid from past generations, it’s not to let their spending habits get out of control. Instead, live by the golden rule and always spend less than what you earn. This can be done by tracking your purchases using a budgeting app like Buxfer.
Of course, life is meant to be lived. So don’t be afraid to have some fun every now and again. For example, if you’d like to take your family on a nice vacation to a destination everyone wants to visit, then go for it. Just be sure to do it in a way that doesn’t compromise your larger financial goals.
There may still be many unknown economic challenges to come ahead for millennials. However, by taking the time now to become as financially prepared as possible, they’ll prove that they can be just as resilient as ever.
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