Compared to earlier generations, Millennials are having a difficult time adjusting to life as adults. The Great Recession of 2007 has delayed their ability to start a career, which has also hindered their ability to save for retirement. And it’s not just the younger generation that has been affected by this change in the market. It has also impacted earlier generations in more ways than our government would care to admit.
In an increasingly unstable and volatile economy, it’s important for young people to save for retirement while they still have plenty of working years left. I realize that this is easier said than done, but it’s a necessary reality that young people must face. Retirement may seem like a long way away, but as someone who is nearing middle age I can tell you that time has a way of sneaking up on you when you least expect it.
As of 2007, the number of retirement accounts has fallen, even though account balances have risen. The average net worth in America has also declined from 2007 to 2013. This is a clear indication that there isn’t as much money flowing through the economy as there once was, and that has had an impact on the job market. Combine that with the fact that many Millennials are struggling with student loans, and it’s no surprise that they’re having such a hard time making ends meet. But even in today’s economic climate, it doesn’t mean that it’s impossible to save.
Managing Your Finances
While this may not seem like a major breakthrough in the Laws of Economics, the first step to getting a grip on your finances is to spend less than what you’re currently taking in. It might seem difficult in this day and age, but that is precisely what you must do. Work hard to get out of debt, as it will give you peace of mind.
I use Personal Capital to monitor my finances. Not only does it allow me to link all my financial accounts, but it also allows me to monitor my income and expenses in a 30-day period. It even categorizes each transaction so I can see where my money is going.
Investing the Difference
Once you’ve gotten a handle on your finances, the next step is to invest what you have left over. This is where you have to be careful, because there is a strong possibility that you won’t have a lot to put into the market. Find some good low-risk investments (such as mutual funds and ETFs) that can give you good returns. The idea is to invest in some key assets that can help you to facilitate long-term growth.
Betterment is a low-cost investment broker that’s good for beginners. They have a good selection of mutual funds and ETFs, and they have a series of automation tools that can help you get the most out of your portfolio.
You also might want to take a look at Motif Investing. They have a very unique platform that can be good for new investors. The good thing about this company is that you can build a strong portfolio with very little money up front. They group 30 stocks and ETFs into what they call “motifs,” and they sell them for $9.95 a piece. They are grouped together based on certain investment criteria, but most of the time they are sorted by industry.
As you build your portfolio, you can use Personal Capital to keep track of them. It can even help you rebalance your portfolio, so you can get the most out of your investments.
Getting an IRA
As you continue to build what Anthony Robbins calls a “critical mass” of cash, you want to set aside a portion of it each month into some sort of retirement account. If you’re employer offers a 401(k) plan, that’s a good place to start, but it’s still a good idea to get an Individual Retirement Account (IRA). The reason why I say this is because it is an account that you have complete control over. That way, if something were to happen (such as you getting terminated), you still have money set aside into an account that no one else can touch.
Betterment has a great selection of IRAs, and they even have a handy retirement calculator (that they call RetireGuide) to help you build a long-term savings plan. Personal Capital has a retirement calculator as well, but they don’t offer any IRAs themselves. However, you can link an IRA into their software, which allows you to monitor its performance.
It’s true that the younger generation has more challenges than those who came before them, but it doesn’t mean they can’t build a solid financial future that can help them over the long term. While the road is more difficult now than it ever has been, it is still possible to rise above the uncertainty of the modern world.