Financial Planning Tips for Millennials: Books, Budgets, and More Resources
Millennials, or people born between 1980 and 1996, make up more than 20% of the U.S population and contribute a lot to the country’s workforce despite being the most debt-ridden demographic. If you fit into this group, maybe it’s time you learn about financial planning for millennials.
Lucky for you, this article covers important financial planning tips for millennials, as well as helpful financial planning resources for millennials that can help you change your financial trajectory.
Top 5 Financial Planning Tips for Millennials
Financial planning is an important step toward achieving financial independence, which could mean early retirement and the ability to achieve your life goals faster. Every millennial strives for financial security, and the following tips will help you with your life plan.
1. Start Gradually
If you are in debt or live paycheck to paycheck, financial planning may seem daunting. However, you need to start somewhere and work your way up gradually. The best way to start is by making a budget to track your monthly expenses and comparing that to your salary.
Then, you can start to cut costs to accommodate your finances and set short-term and long-term goals around your spending habits.
2. Establish a Structured Saving Plan
Regardless of your short-term and long-term financial goals, developing an effective savings plan is important. Your savings can fuel future investments and help you avoid living paycheck to paycheck. Most financial advisors recommend the 50-20-30 rule, where 50% of your salary goes toward essential items, 20% is saved, and the remaining 30% covers everything else.
If that doesn’t work for you, there are many other plans you can try to start saving based on your goals. For example, you can set up separate accounts for your home savings, future investments, and an emergency fund.
3. Don’t Forget to Buy Insurance
Getting insurance will protect you from the financial burdens that can come from unforeseen problems. Moreover, there’s a wide range of insurance policies that can cover your health, assets, family members, and education. Instead of paying for emergencies out of pocket, invest in a good, affordable insurance policy.
4. Make Good Investments
As a millennial, it might be hard to determine which investment option is the best. Investment management can be complicated. You need to learn about the investment so that you can understand how it will benefit you. Also, remember that diversifying your investment portfolio can have a huge impact on your path to financial freedom.
You can start by developing a basic understanding of the vast investment options available to you and their associated risks. The most popular options are mutual funds, stock market investments, and national pension schemes. A good investment will have a low-risk level and a high rate of return.
5. Seek Professional Guidance
If you learn financial management, you’ll be a step ahead of your fellow millennials. To do this, you should seek help from a financial advisor who can provide financial coaching on budgeting, filing taxes, and making investment decisions.
Alternatively, you can take advantage of the enormous amount of books and other learning resources on the finance industry, money management, and ways to grow millennial wealth.
5 Financial Mistakes to Avoid for Millennials
1. Ignoring the Importance of an Emergency Fund
Keeping a backup emergency fund is important. Many millennials find themselves maxing out their credit cards because of unforeseen life circumstances. To ensure you don’t deplete your savings, create an emergency fund and try to save enough to cover around three to six months of your average monthly expenditures.
2. Living Beyond Your Means
Trying to keep up with the Joneses often leads millennials into debt. Most millennials are exposed to social media, where they see their friends succeeding and celebrities flaunting their wealth. One of the quickest ways to lose money is by spending it all trying to fit in. Instead, try your best to live within your means and focus on investment planning.
3. Overlooking a Retirement Plan
Retirement planning should be part of your financial plan from the start. Starting a 401(k) plan or relying on traditional pension schemes is great, but you should also research other retirement plans. After all, preparing for your retirement means you can have a high return on investment and spend your retirement years in financial freedom. A financial planning firm can help you with retirement plans.
4. Keeping Several Active Credit Cards
If you’re part of the millennial generation, it can be a good idea to use a credit card to help build your credit score. However, credit cards can accrue high interest, can come with hidden costs and can lead to insurmountable debt before you even realize it. So, before you get a credit card, you may want to consult a qualified financial advisor to help you find the best option.
5. Ignoring the Long-Term Consequences of Student Loan Debt
Higher education is a great way to unlock high-paying jobs that can lead to a great job and financial security. But universities can be expensive, often resulting in student loan debt that will follow you for years after graduation. In fact, a survey by the Education Data Initiative states that millennials hold 32% of the total student loan debt, with more than 14 million millennials still struggling to pay them off.
So, before you sign up for a hefty student loan, take time to understand the financial impact it can have on your future. Make sure both the payment plan time frame and the interest rate are acceptable.
How to Make a Millennial Budget
As mentioned in the tips above, tracking your expenditures and creating a budget are key financial planning strategies. Although making a budget can be challenging if you’re dealing with debt, it will provide you with clarity about your financial situation. Below is a sample budget for a millennial earning $47,000, which is the average annual salary for millennials.
Millennial Sample Budget
|Expense or Income||Amount|
|Utilities and Bills||-$4,800|
Financial Planning Resources for Millennials
Financial planning resources can help you learn how to make better investment decisions so you can achieve your life goals. There is a wide variety of books, classes, courses, and software geared toward millennial wealth management that you can easily access. Below are examples of reliable financial planning resources for millennials.
Financial Classes for Millennials
- Her Personal Finance. This 10-week bootcamp is geared toward helping young women improve their financial planning in an effort to close the gender wealth gap. You’ll learn about investing, retirement plans, benefits of insurance, spending, net worth, and how to set up accounts. The bootcamp facilitator, Eryn Schultz, is a Harvard MBA graduate.
- The Art of Financial Planning. The Art of Financial Planning touches on everything from differentiating between short-term and long-term goals to organizing your finances and retirement plans.
- Financial Freedom for Millennials. This is a personal finance course curated specifically for millennials. In this course, you’ll learn how to manage money, invest in the stock market, and build long-term generational wealth that leads to financial freedom. You’ll also learn the steps to paying off your student loans. It is a self-paced course with six modules and additional resources.
- Master Your Money. In Business Insider’s live bootcamp, personal finance experts teach millennials how to make better money decisions and become smart investors. The topics covered include diversification strategies, navigating market ups and downs, how to start investing beyond 401(k) plans, and dispelling investment myths.
- Money Matters for Millennials. Money Matters for Millennials is an online class by the General Assembly bootcamp. Tony Pennells, a best-selling personal finance author, is the facilitator of this class. He helps students understand the basics of money management and secure long-term financial goals. Pennells also touches on eliminating debt and answers all of your money questions.
Financial Planning Books for Millennials
- The Warren Buffett Way. Written by Robert G. Hagstrom, this book highlights the investment and business principles used by successful American businessman Warren Buffett. It focuses on how he chose his investments and outlines his financial planning process for each investment.
- Financial Freedom: Breaking the Chain to Independence and Creating Massive Wealth. The book is written by Chase Lawson, who is also a millennial. It’s a fun read exploring aspects of homeownership, investments, taxes, insurance, and more. You can also find budget samples and other relevant financial planning tools.
- Financial Literacy for Millennials: A Practical Guide to Managing Your Financial Life for Teens, College Students, and Young Adults. Like the title suggests, this book is primarily about managing your finances and making better decisions with your money as a young adult, as well as educating children on the benefits of money management.
- Student Loan Solution: 5 Steps to Take Control of Your Student Loans and Your Financial Life. If you’re struggling with your student debt, this is the book for you. David Carlson offers solutions and expert advice on how to tackle these loans. You learn different strategies and how to take advantage of them, as well as how to take control of your finances despite having student loans all while saving money.
- The Financial Diet: A Total Beginner’s Guide to Getting Good With Money. Every millennial struggling to get a grip on their finances should read this book. It highlights the importance of caring about your personal finances and overcoming debt. You will learn how to organize your finances in a year, discuss finances, limit spending in different areas of your home, and how to budget.
Financial Planning Software for Millennials
- Charles Schwab Retirement Calculator. The financial services company Charles Schwab is known for its quality services and tools. One that you might want to try out is its retirement calculator, which can help you determine how much you need to save for retirement.
- Gen Y Planning. This is a website dedicated to millennials seeking financial planning services. On it, you can learn about cash flow, student debt repayment, estate planning, and credit, as well as get investment advice.
- Personal Capital. Personal Capital is a personal finance app that offers various services, including analyzing cash flow and investments, as well as tools for forecasting financial outcomes, retirement planning, and budgeting. The app is intended for both amateur and experienced financial planners.
- Acorns. Acorns is a leading subscription-based investment app. You can select between three tiers where you’ll pay $1, $3, or $5 for various financial services. They include investing spare change, setting recurring investments, a personal financial wellness system, financial advice, and access to stocks and bonds.
- WealthTrace. This is a financial planning program for both personal and professional use. The program allows you to track your finances, set savings goals, open retirement and college funds, and minimize tax liabilities. The program costs between $229 and $309 per year.
Meet Your Millennial Financial Goals in 2022
Meeting your financial goals will give you greater financial freedom and the ability to grow generational wealth. Get your plan in motion by signing up for a financial planning class, checking out some new software, and reading advice books to expand your knowledge.
You should also set up a budget to track your spending or seek help from a financial planner or a wealth management firm. There’s still plenty of time left this year to start changing your financial situation.
Financial Planning for Millennials FAQ
Compared to the baby boomer generation, more millennials are struggling financially or living paycheck to paycheck. A 2019 financial survey indicated that only 24% of millennials were financially healthy. The number hasn’t changed, but more millennials are now interested in using financial planning solutions to increase their wealth.
The best time to start saving is now. You can start at any time and develop consistent saving habits. The earlier you start, the better your chances of making informed financial decisions.
Yes. Although many people focus on traditional pensions and 401(k) plans for retirement, you can diversify your retirement portfolios, which can bring you better peace of mind and tax benefits too. Other retirement plans include IRA plans, defined contribution plans, federal Thrift Savings Plans, and guaranteed income annuities.
You should keep your debt under control, create a savings plan, start an emergency fund, and start insurance planning. Diversifying your investment portfolio and seeking the services of a well-informed investment advisor will help you get closer to your ideal life. Generally, seeking professional help from industry experts and checking out financial planning resources will keep you ahead of the game.