Thrivent, a financial services organization headquartered in Minneapolis, Minn., on April 5, 2022 published an article titled “Financial planning for millennials: How to set financial goals.” Millennials, a group variously described as from their mid-20s to early 40s, seem rarely to be the subject of financial planning but, considering the fact they have the opportunity to start now and years to make mid-course corrections, they seem to be a natural subject.
One of the biggest issues and one of the biggest inhibitors has been student debt. Others include having lived through the Great Recession of 2008 and the “gig economy” where short-term and freelance jobs can affect earning capacity. While it is true that some millennials have moved into high-paying tech and similar positions their parents could only have dreamed about, others are still struggling with debt while spending more for today recognizing an uncertain future.
The Thrivent article has some interesting observations. It notes that “compared to their parents or grandparents, millennials …have unique financial habits, goals and hurdles. Many have faced obstacles to balancing their long-term financial responsibilities and needs. Consider student loans: millennial borrowers carry an unprecedented amount of student loan debt — an average of $38,877 in 2020, according to Experian — I would have said more. Studies have also shown that those in this generation are less likely to purchase cars or own homes than previous generations…” I would add that Uber, Lyft and apartment rentals seem to fill this space.
According to the article, millennials spent 64% more on vacations than the general population and a slightly higher percentage of their food budget on dining out. It is unknown whether this figure was developed before or after the recent COVID pandemic.
On the other side of the equation, the article notes “people in this age group are …more willing to improve their credit scores, invest, and say they’re working on money management goals…”
Taking all of this into consideration and incorporating the Thrivent observations and some of my own, here are some ideas that apply not only to millennials but others as well.
• Budget wisely. With all of the apps out there today it should be easier than ever to plug in numbers and develop a plan so that set amounts will go to specific purposes, including but not limited to monthly or weekly savings and regular repeating expenses such as rent, entertainment, taxes and so on.
• Pay down “bad debt.” The article is probably differentiating credit card debts — it should include student loan debt — from debt involved in investing such as purchasing a home.
• Build an emergency fund. For anyone who managed to have a reliable emergency fund to draw on during COVID, this might literally have been a life saver. Three to six months is recommended. More if there is no steady income source.
• Invest for Retirement. Employer plans are especially important — 401(k)’s and so on, but if none is available, then beginning to save with an IRA can make sense. My personal favorite for new savers, although limited in dollar amount at this time, is a ROTH IRA. Roth’s do not have an up front tax benefit but the funds grow tax free indefinitely.
Here are ideas that are my own as well.
• Find work that begins to build a record in the Social Security system. Social Security has often been discounted as a future source of income using the explanation that it is unlikely to be carried forward into the future. Social Security has actually outlasted many, if not most pension plans offered by private employers and is the primary source of regular monthly income for many seniors. Pensions generally are left with the public sector.
There are two excellent reasons to closely consider what payments you are making into the Social Security system. First, for retirement. Social Security considers your best 35 years in the system. If you are not 35 years in the system Social Security enters any years less than this at 0. Once qualified for retirement benefits, it lasts for the rest of your life. Second, for disability. If you become totally disabled before your full retirement age and have worked and contributed into Social Security with the right number of quarters (dependent on age), Social Security can help both you and, in some cases your family to provide desperately needed income.
Janet Colliton, Esq. is a Certified Elder Law Attorney. Her practice, Colliton Elder Law Associates PC is limited to elder law, estate and retirement planning, life care, special needs, guardianship, and administration, with offices at 790 East Market St., Ste. 250, West Chester, [email protected] She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, co-founder of Life Transition Services LLC, a service for families with long term care needs.