I often joke tongue-in-cheek with my attorney wife that I can’t make her do anything, all I can do is “offer good counsel”. I’m offering the same advice to all millennials who care to take note. Trust me, as the father of four intelligent 20-somethings, I have a great appreciation for the millennial mind. They demand more freedoms and often challenge the “status quo” of how things have always been done. They want to know why. They aren’t shy about speaking up for their beliefs and taking charge. From observing many millennials, I’ve noticed they often have a desire to help others and fulfill inspiring missions, and their life goals may not necessarily align with those of the generations before them.
For older generations, success may have looked like a single-family home, 2-4 kids, a comfortable retirement plan, and the annual family vacation. Many of today’s young people are spending their 20s and 30s traveling the world, going to happy hours, and posting on Instagram, unafraid to try a new and different way of life. This may partially explain why there are 618,000 millennial millionaires in the United States. That was not a mis-print, 618,000! Although some reaped the benefits of inheritance, the majority did not. Typically, this doesn’t happen by accident, as some have already figured out the “cheat code” for becoming wealthy: ownership, entrepreneurship, and investing.
Even with the great success of some of our young and bright stars, the vast majority can benefit from this seasoned guy’s straight talk. Follow these tips that admittingly aren’t always fun, and your financial life will get much better. The test answers begin with establishing a budget. This alone will put you ahead of 78 percent of the population. Please name me anything you can accomplish without a plan…I’m waiting…thought so, enough said.
Secondly, control your debt. You don’t want to be a prisoner of society’s norms, so why subject yourself to debt prison (P.S. ignoring it won’t make it go away). I’ll go into more strategy details on this in future blogs.
Thirdly, manage your credit. I’ve spent previous blogs addressing this, so that’s a good place to start. Take time learning about how credit works if you, like many, weren’t necessarily taught that in school. Just remember the primary way credit is scored: payment history 35%, credit utilization 30%, length of credit 15%, credit mix 10%, new credit 10%. Spend the majority of your focus on the first two.
The fourth leg of my “good counsel” is to start investing (pay yourself first). I can feel voices saying, “I’ve got debt so why should I care about saving or investing? Before I finish answering that, I want to make a few recommendations. Always contribute as much as you comfortably can to your employer’s 401K, whatever percentage your employer match is, take it! I’ve read all the books— Suzy Orman, Dave Ramsey, Chris Horton etc., and guess what? There aren’t many secrets and magic formulas. Shoot, the majority of their income is telling you the same dang thing I’ve just covered in one blog, for free! You don’t have to be a financial genius to get started. If you tune into CNBC, they’ll sound intelligent about technical market trends, asset allocation, and diversification. Remember your parents telling you don’t put your eggs in one basket? Boom! That will take you a long way. If you just invested in index funds, you’d have a higher return than what most financial consultants recommend, and much lower fees. I know, I used to be one. They get paid when you buy and when you sell. So, you think you don’t have enough to invest? Baloney, you can buy $10 worth of stock, bitcoin and so forth, just with “Cash App” alone. Other apps I recommend are “Acorns” and “Simple”. A good rule of thumb is for every dollar spend on “wants”, match the same amount to your investment accounts.
Let’s get back on point regarding why it’s a bad idea to wait to invest. Let’s look what happens when you wait to invest. Ashley, 27, earns $50,000 a year and receives a 3% match from her employer. She puts $250 per month into her 401(k), and her employer contributes $125. Ashley’s annual contribution is $3,000, and her employer’s is$1,500 for a total of $4,500 per year.
Hypothetically for our illustration, Ashley never gets a raise and manages to stay with this employer for 40 years. Her average return over those 40 years is calculated at 8 percent. When she retires, she has $1,165,754 in her 401(k), thanks to what I call magic math (compound interest)!
Had Ashley tucked $4,500 into a savings account earning 0.01% for 40 years, it would only be worth $180,351. But wait, what happens if Ashley doesn’t start saving until she’s 37? The same $4,500 for 30 years only nets her $509,774. If she waits until 42, Ashley only has $205,928 in her 401K. The earlier you start investing, the better!
Hey millennials, we can’t conquer the whole financial world in one blog, but I promise if you just execute the few suggestions I’ve shared, you’ll find there’s no need to re-invent the wheel. Your financial life will surely improve! Remember, all I can offer is “good counsel”!
President, Black Lion, Inc.