by Rich Wesselt, founder and principal, Wesselt Capital Group
The Millennial generation currently ranges in age from 23 to 38, according to the Pew Research Center. Unfortunately, as the older members of this generation reach the end of their third decade, they are struggling financially more than previous generations. Schwab’s 2019 Modern Wealth Report tells us that 62 percent of millennials are currently living paycheck to paycheck and a meager 38 percent believe they’re financially stable.
Why do these struggles arise? Hitting age 30 often triggers a shift in goals and priorities for people who are growing families and careers. From a financial planning perspective, these people are firmly in their accumulation years. Yet they may also find more bills, budgets and plans vying for their money. Here are a few ideas to manage this challenge.
Budgeting is a simple yet important step in financial planning and some millennials are already employing it. However, their needs have likely shifted over time and as a result some changes may be necessary. It’s important to always have funds allocated for emergency situations and to budget for savings plans and retirement. Consider that 66 percent of millennials had nothing saved for retirement in 2018, as reported by CNN.
Budgets should also be adjusted to allow for investing: It is important to start investing as early as possible to allow for the compounding of capital.
Take Care of Debt
Debt in the form of student loans and car payments is still very high for millennials. By taking care of these debts now, it will be easier to focus on goals that may require more debt, such as buying a home.
The key to tackling debt is patience. A student loan was an investment in the future, one that will lead to better incremental earnings. But it’s important to continue to allocate a portion of yearly earnings to chip away at debts.
As I’ve discussed previously, I believe that the key to financial stability is a dedicated and disciplined savings plan. Everyone should save around 15 percent of their income, and this is a habit that should be developed young to be kept for a lifetime.
This habit is supported by the right mindset — try viewing saving money as a “victory” worth celebrating and spending money foolishly as a loss against the overall savings record. While it may be tempting to spend more, remember that the goal is to improve the record (and long-term financial security).
Many people consider turning 30 to be a big milestone. Indeed, it often signals the beginning of a set of new responsibilities. Priorities shift and the need for saving and proper budgeting becomes more important than ever before. When wondering about the best approach to budgeting and saving, be sure to contact a financial advisor.
About Richard Wesselt, Principal and Founder of Wesselt Capital Group
With over 23 years of dedication to the financial services industry, Richard Wesselt brings a wealth of knowledge and experience in helping clients plan for a secure future with financial and investment planning. As principal of the Wesselt Capital Group, Rich uses a relationship driven, individual-based approach to macro economic planning. Rich has a bachelor’s degree in Economics from the Wharton School and is a member of Top of the Table. He holds his FINRA Series 6 Registration. Follow him on Twitter @RichWesselt.