The millennial is someone who was born anywhere between 1981 and 1996. Often the kids of hard-working baby boomers, they are usually ambitious, educated, self-confident, and technologically savvy. They often go against the conventional way of thinking or doing things, and tend to push the limits.
Most importantly: they are up to 40 years old now. Millennials are adults with a set of challenges unique to their time in history. They’re looking to start a family or buy their first house, all while trying to make a name for themselves. The typical millennial doesn’t have your traditional job; you can find them working for a tech start-up during the week, bartending on evenings, and volunteering at the local CSA on the weekends. No pension plan, no benefits, and no one to trust for advice; add up all of this, and financial planning with expert support is something they lack—and need.
Here are three things every millennial should be doing right now to improve their financial health:
1. Stop chasing the next shiny object.
All too often you’ll see young retail investors “day-trading”. With no concept of risk, they are taking their stock tips off Reddit, taking out loans, and chasing momentum.
Never forget the asymmetrical return patterns you learned in high school; if you have a $100 and lose 50%, you’re down to $50 – you now need 100% just to get back to even!
This may seem alarmist, but we need to take a longer view of the market. We are currently in a growth bubble and everyone is hitting home runs. But if history can teach us a thing or two, it’s that will be temporary; the trouble is, most millennials were too young to remember the last bubble burst in 1999.
Be the tortoise and look for a prudent investment strategy. In your 30s, you have time to take a more cautious approach to investing—you’re not rushing to the finish line like so many of our Boomer parents may be doing, looking for quick wins to top up their savings. The luxury of time means that you can seek to build out an investment portfolio that provides you slower, but more predictable, returns.
It’s tempting when you’re still so far from retirement to jump on trendy investments because we may feel like we’ve got all the time in the world to make back any money we lose; but it’s possible you’ll hit a point in your later years where you will be able to see exactly where that extra X-amount would have brought you notable ROI if you’d invested it more prudently.
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IP Private Wealth is a Family Office—a team of wealth advisors that operates as a round-table board of advisors. Our 360° approach to examining your goals, wealth, and future needs is what makes us the first and only choice of family office for our clients. If you’ve been looking for a way to manage your wealth more effectively, reach out to us.
2. Have clear plans for both life and finances.
Millennials watched their boomer parents struggle to realize the ‘American dream’, and knew that the path to that dream wouldn’t be the same for them—in fact, many are eschewing that nuclear family Utopia altogether. What millennials need to realize is that, whether you are striving to own a mansion with six kids, or intending to live nomadically in a camper van touring the continent, you still need a thorough plan. The reality is, with the new complexities of workplaces, technology, obsoletion, health crises, and even environmental catastrophes, millennials cannot afford to assume there’ll be a simple path to a happy retirement or second career.
Everyone has seen the back-of-the-napkin math on starting to save early. Unfortunately, that’s not the reality for most millennials; your debt loads are different, you may return to school several times, down payments are exorbitant, and children require a host of extracurricular support.
These challenges may make planning feel impossible, but with the right advisors and strategy, there are ways for millennials to thrive. It’ll be structured and it’ll require work, but it’ll be worth it.
3. Be prepared for death and taxes.
Unfortunately, these are two sure things in life. And if there’s one guarantee for all millennials coming out of this pandemic, it’s higher taxes. There is a $381B federal deficit that will need to be paid at the end of this, and that bill is going to mainly fall on millennials. Proper tax planning will be one of the most important things for any young professional to do during their lifetime. What good is a stellar rate of return if your affairs aren’t structured properly, and half of it goes to paying taxes?
Sometimes the fact that we have easy access to information can be a curse as much as a blessing. Apps and software programs that promise to successfully complete your tax returns are a) fallible, and b) not built for strategic tax planning. There’s a few things in life that should be left to the professionals—tax strategy is up there with heart surgery and electrical work.
35 is the new 25, and this means that the average millennial feels pretty invincible. Taking care of your health is crucial—exercise and diet, yes, but also your mental health. Most millennials don’t think of properly covering themselves in terms of insurance, but what happens when something happens? Most millennials will soon have a family, house, car, debt on debt, with no estate plan or will. A risk management (insurance) strategy is a lot like putting Apple Care on your iPhone: it’s annoying to purchase it, but you’re sure glad you have it when that phone fall face-down on the pavement.
These are broad strokes; choose expert advisors to fill in the details.
Millennials are magnificent at self-educating. With the internet providing endless data, we often think we’re our own best expert. But historical knowledge comes from experience, and cannot always be clearly taught through online content. Find yourself a set of advisors you can trust, and look for an age range that carries the knowledge and scars of the past generation, as well as the modernity and fast pace of the present. Put those superhuman research skills to work by finding yourself a wealth management option that you’re excited to work with.
