Millennials -- those born roughly between 1980 and the year 2000 -- face a different future than baby boomers did at their same age. In terms of wealth-building and saving for retirement, their challenges include wage stagnation, unemployment, and underemployment. Because they came of age during the Great Recession, their faith in brokerage firms, Wall Street, and global banks has been bruised -- for some, beyond repair.
The financial future of this generation can still be bright, but given their loads of student debt and lack of investment understanding, they need to start learning about money management now.
Time is your greatest asset
One thing Millennials have today that Boomers don't is great stretches of time before retirement. It is their greatest resource. Time cannot be replaced, and if you are a Millennial, then knowing about the power of compound interest will change your financial life. Based on the stock market's historical returns, $10,000 -- the cost of a used car -- invested in an S&P 500 index fund could grow to $400,000 or more throughout your career, building a solid foundation for your retirement needs. A $20,000 investment could become more than $800,000, and $30,000 could grow to $1.2 million.
Our advice: Start investing today, no matter what the amount.
Just get started
A new investor with limited funds can use an online, no-frills brokerage account, and many brokerages allow you to open an account with less than $1,000. Not every house requires initial investments of more than $2,500, and some brokers will let you open up retirement accounts with no minimum at all.
Just get started and invest a fixed amount every month, come rain or shine. Persistence will pay off here. And remember: Pay yourself first -- that is, invest in your future before you start spending money on less important things.
Enroll in a 401(k) as soon as you can
Perhaps the best place to set aside money for retirement is an employer-matched 401(k). Take advantage of this if you can, because if your company matches your contributions, that's like receiving free money, and it's unwise to leave that on the table. If you can save a minimum of 10% of your pre-tax paycheck in your 401(k) right away, you will never notice the difference in your take-home pay.
Make it easy on yourself and automate these savings through payroll deductions. This way you won't have to remember to take the money out, and you won't be tempted to forgo a payment to yourself and spend the money elsewhere.
Pay down your debt
Nothing can derail your financial future more than maintaining debt. Pay it down or eliminate it. If you have high-interest credit card debt, reduce this first, then consolidate your student loans and prioritize your debt payments. Get yourself on a savings plan as you pay down your bills. And again, remember whom you need to pay first.
Track your spending
In order to pay down your debt and save for your future, you must know where your money is going. Tracking your spending is a powerful way to put you in control of your finances. You can keep track of everything you spend through your own system or through one of the many budgeting apps available. Keep a running daily, monthly, and yearly average. Manage these figures rigorously. Even small changes like forgoing the daily latte and the occasional tech toy can save you hundreds -- even thousands -- of dollars per year.
Do you know how much you spend on average per day? Track your spending, and you'll find out, and that knowledge will empower you to make meaningful changes in your finances.
At your fingertips
These days, endless information is available online for your self-education. Calculators, worksheets, sample budgets, and even online courses are all there for you. Learn the language of finance and arm yourself with knowledge so you will not be taken advantage of by financial professionals. Only you have your best interest in mind when it comes to your financial future.
Build your future
What's better than the securities market for investing? The stock market has averaged annual returns of 9.7% over the last 114 years.
When we retired in 1991, the S&P 500 Index closed at 312.5. Today it is much higher, and in those 24 years the index has averaged more than 8% plus dividends, which is about the norm -- and this includes the 2008 crash and a few smaller ones.
If you're a millennial, you may feel you're in difficult circumstances that prevent you from building a solid financial future, but you need to get past the economic and psychological obstacles you face. Take advantage of these potentially life-changing money tips. Your financial future depends on it.