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Top 3 Financial Planning Tips for Millennials

We live through many ages and stages throughout our lifetime. But for the age group known as Millennials, the current stage of your life is important for planning and setting up your finances in order to benefit your retirement years and future self. We look at the best ways you can do this.

First, who are Millennials?

The Millennial Generation

Generations weren’t always named. But the post-World War II spike in birth rates led to the “baby boom” and the label “baby boomers” was born. They also gave the following generations given nicknames: Generation X, Millennials (also called Generation Y), Gen Z, and now Generation Alpha.

The babies of Generation Y were born between 1981 and 1996. Their coming of age was associated with the change in the millennium. Nicknamed “Millennials,” they are the largest generation group in the U.S. at 72 million people.

This is the first generation that is considered being “digital natives.” Because they grew up in an information-soaked age that included cell phones, computers, and social media, they can easily use and understand technology faster than older generations. They can’t imagine life without it!

Other characteristics of Millennials include:

● Among working adults in the U.S., they are currently the largest generation.

● Thirty-nine percent possess a bachelor’s degree or higher and are considered the most highly educated generation.

● They also are the biggest student loan borrowers, with 14.8 million in their generation having debt from college.

● Their average net worth is $127,793.

Financial Planning Basics


With financial planning, there are some basic tenets that apply to everyone, regardless of what generation they belong to. Let’s look at these foundational points.

Goal setting. Every good financial plan starts with goals. Ask yourself, “What do I want to achieve in 5 years, 10 years, 15 years, and beyond?” Maybe it is to save for a down payment for a home, lower your debt load, or set aside funds for a family vacation. Having goals gives you a road map and direction to follow.

Budget development. Now that you know what you want from life, you can put together a budget to get you there. Perhaps you follow the 50/30/20 principle of budgeting, where 50% goes to needs, 30% to wants, and 20% to debt and savings. Plus, having a monthly budget that lays out a spending plan for your next month helps keep you on track.

Debt repayment. Paying off debt is an important step in financial planning, especially high-interest credit card debt. It is hard to get ahead when you are paying double or triple the amount of your original purchase. Qualifying for home loans can be difficult if you have a high amount of debt.

Emergency fund creation. Life can hand us costly situations out of the blue, so having an emergency fund is key to handling those circumstances. Most advisors advocate having at least six months’ worth of income set aside for emergencies such as auto or home repairs, accidents, and job loss.

Retirement planning. Everyone gets old, even Millennials, so having a plan in place for your future self is crucial. Even if you don’t plan on “retiring” in the traditional sense of the word (not working a job and living a life of leisure), you will want to invest in and contribute to a retirement savings plan so that you have options in your later years.

Three Tips for Millennials

What do Millennials especially need to pay attention to, given their age and stage in life? We look at three important things to recognize and on which to take action.

Max out contributions. The oldest Millennials are now in their 40s and amid some of their highest earning years. It is wise to max out contributions to 401(k) accounts, IRAs, and other retirement accounts. Those on the younger end are in their late 20s and early 30s and should aim to contribute enough to employer-sponsored retirement plans that they can receive the company match.

Diversify. Real estate makes up over one-third of the total assets for this generation. The increase in home prices over the past decade has contributed to this asset growth. By diversifying their financial portfolio, Millennials can protect themselves from market fluctuations and downturns. A variety of assets with different risks and returns provides more stability to their portfolio.

Seek guidance. Millennials look at financial advising differently than their parents. Many have turned to robo-advisors because of the lower cost and ease. While these tools can be helpful, they don’t help with strategies for your personal financial situation, since they are a one-size-fits-all resource. Self-proclaimed “financial coaches” are all over social media, but many do not have the training or experience to be coaching anyone. Certified financial planners are educated in financial-specific training like how to invest, manage risk, and minimize taxes. Seek someone who can help you set a budget and savings goal, plus can educate you on how to reach those goals. Millennials are also poised to receive the largest transfer of wealth in the coming years. An estimated $68 trillion (yes, trillion) is expected to change hands when Boomer parents’ gift an inheritance to Millennials. It is important to have a trusted advisor to help manage and safeguard your inheritance.

Final Thoughts

Financial planning is for everyone. There are some basic principles that apply to every generation, regardless of age and stage in life. For Millennials, there are a few extra tips to help them plan and secure their future finances.

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