The journey to financial freedom remains a work in progress for everyone, especially millennials. Along the way, many millennials may compare themselves to others. A friend in a relationship just bought a house. A former roommate has a new car. Pretty much everyone seems to have enough time and money to go on vacation every month. So why not you?
The good news is — despite what others appear to be doing — you may not be financially behind. Good personal finance habits are part of a marathon, not a sprint. If you’ve been spending the last few years steadily paying off debt or putting money toward retirement, you’re likely in a good spot (even if it doesn’t translate to hundreds of likes on social media). However, if you’re not quite where you’d like to be, it’s time to get back on track. Here are a few simple ways to get ahead of your peers financially.
Set Your Priorities and Make a Plan
What financial goals do you want to achieve? Callie Cox, U.S. investment analyst at eToro, recommends starting by setting your biggest priorities. If you have any high-interest debt, for example, it’s time to make a plan to pay it off. What if you don’t have an emergency fund? Cox recommends making a plan to create or replenish this fund with a few months’ worth of expenses.
Heather Winston, CFP and director of financial planning and advice at Principal, said financial planning is important no matter what age or generation you belong to. Forgetting about financial planning basics is when many people start to feel overwhelmed.
Having a financial plan, Winston said, maps out your financial goals and lays out the steps needed to take in order to meet those goals. For millennials, Winston said they should consider their current expenses and see where they can potentially cut back. This allows millennials to start thinking about the life they envision in retirement.
Millennials still have time on their side as investors, but Cox said not to procrastinate. Use this time to get engaged with the markets and learn more about investing.
What if you feel ready to invest but nervous about stock market volatility? Winston said don’t let market swings influence your investment plans.
“Despite what you may be seeing on the news, now is a great opportunity to continue investing as much as you’re comfortable in the market,” said Winston. “With stocks ‘on sale,’ you may not see the immediate impacts to portfolio growth, but those efforts may bear fruits as the market inevitability rebounds. The key is being intentional with what you are trying to attain and the risks you are willing to take, or endure, to make those goals a reality.”
Take Advantage of Every Saving Option Available
Do you have a workplace retirement plan with a company match? Winston recommends maxing it out. Are you saving 5% of your income in your 401(k)? Winston said to automatically increase this percentage by 1% each year. Do you have additional savings? Consider putting this money into a tax-advantaged investment option like an IRA or a Roth IRA.
Anywhere and everywhere you have a savings option available, take advantage of each one. “While there’s no way to plan for every obstacle, leveraging all of the options available to you can help secure your assets for the future,” said Winston.
Work With a Financial Advisor
In the 2022 Natixis Millennial Investor report, 48% of millennials said advice and a comprehensive understanding of their financial picture received from their financial advisor best helped them during the COVID-19 pandemic.
Don’t be afraid to ask for help if you need it. Matt Gellene, head of consumer investments at Bank of America, recommends millennials seek out professional advice from a financial advisor. These advisors, Gellene said, can provide you with personalized advice and guidance, work with you to make a plan to achieve your unique financial goals and help you prepare for the unexpected.
Consider running your existing financial plan by an advisor for their feedback and asking any questions you have along the way.
Don’t Compare Your Financial Journey to Others
Though it’s relatively easy for millennials to see how they stack up to their friends or peers on social media, try to avoid doing this.
“Everyone’s financial circumstances are different, and your needs might be unique compared to your friends, coworkers or acquaintances,” said Winston, who adds that meeting with a financial professional can help you keep on course for your own financial future.
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