A Message to Millennials: Be an Aggressive Saver
Just today, I read an article that the average American couple has $5,000 saved for retirement. A great level of concern immediately gripped me in the most sobering way. How is this possible? Are the citizens of the most prosperous nation in the world really that bad at saving? Americans pride themselves on their independence, since it is one of the most “free” countries on the planet. But if we don’t save enough, we will soon become dependent on someone other than ourselves: either our children or our government. Here are some tips on how to be an aggressive saver, no matter how soon or far away retirement may seem. To ensure that you remain financially independent for the rest of your life, that decision needs to start today.
TIP #1 – Learn to Say NO
Many of our grandparents and parents came from generations where saving was the norm. They knew the importance of saving for a ‘rainy day’, or simply to ensure that their future self was taken care of as much as their present self. But nowadays, there’s a great temptation to live above our means.
We all need to learn to say NO sometimes. No to that fancy new car, or that expensive night out, or that flashy new Apple watch. Can we have nice things? Sure, but make sure you live within your means. Also, be mindful of how you can cut costs in other areas. I remember when I was in college I bought a Starbucks latte every day. Once I realized I spent over $1,600 a year on Starbucks, I bought a drip coffee machine and bought beans from a wholesale club. Be smart and be creative. Find ways to downsize your expenses: get new quotes on home/auto/life insurance, and consider bringing lunch to work every day instead of eating out. You’ll be surprised at how much money you waste for no reason.
The best way to do this is to track your income and expenses and set aside in your budget at least 10% of savings. Saying no today means that you can have a better tomorrow. Begin to train yourself to delay gratification: your future self will thank you.
TIP #2 – Rainy Days WILL Come – So Plan Ahead
It’s not a matter of if hard times come, but when. There are so many unpredictable things that happen in life. What if you lose your job, change careers, or even get demoted to making less money than you were accustomed to? The number of things that can happen are limitless: unexpected health issues and hospital bills, the need to replace your roof, furnace, or air conditioner, or even potential car troubles. I’m not trying to scare you, just prepare you. We all need a dose of reality so we can soberly move forward and have the life we work hard for and deserve.
The first thing you’ll want to do to prepare for a rainy day is create a cushion of cash known as an emergency fund. This should consist of about 3-6 months’ worth of expenses. Keep it liquid in a checking or savings account and only utilize it when unforeseen, necessary purchases come up. Creating this cash cushion can help you avoid one of the potentially worst situations: getting into excessive credit card debt. It may take you a while to build this, but it is absolutely essential before you start saving for other goals. When you start an investment plan, the last thing you want to have to do is take a withdrawal for an emergency expense. This could cost you more money and ruin all of your progress. Long-term investing requires time, and that’s why we need a cushion account for those rainy days so we’re not forced to liquidate investments at a bad time.
TIP #3 – Save Systematically—And Start YESTERDAY
The first lesson in financial planning is understanding the time value of money. What will your money be worth in the future, and how do you have to save today in order to reach that goal? The facts are very clear: If you start saving when you’re young, when time is on your side, it will be easier for you to hit your goals for retirement.
I’ll spare you all the math and calculations, but if a couple begins saving for retirement at age 30 instead of age 45, they will have to save half as much each month to hit the same goal! It may seem like only a 15-year difference, but it is so significant when it comes to accumulating wealth. The more time you have, the less you need to put away each month.
Start a saving routine. You may only be able to put away a small amount each month to start out, but that’s fine! You can always increase your savings at a later date (and it’s even smart to consider increasing it each year). But make sure you’re saving a good amount (at least 10% of your annual income). Sacrifices aren’t easy; they hurt a little bit. Don’t make the same mistake as many people who only save 3-5% (or nothing at all) because it’s comfortable. You will never accumulate enough money to live in retirement if you don’t make small sacrifices today, and continue a steady routine of doing so.
TIP #4 – Ask For Help
Our human nature is to spend, not save. You need to ask others for advice on how they achieve their goals. Whether it’s a financial advisor you can trust, or a successful friend or family member, ask them for guidance on creating a budget or how to create a diversified investment portfolio.
We cannot rely on the government or our company to take care of us anymore. Pensions are becoming extinct, and Social Security may not be there for us when we retire (or even if it is, the government may be forced to reduce or delay benefits). Consider this a wake-up call. It’s time you start planning for your future. The common mantra “Live for Today” we all hear is all well and good, but you need to live for tomorrow too. Your own well-being and the well-being of your family is dependent on that. It’s never too late to get started! Make it happen!
Questions, comments, concerns? Feel free to contact me!
732 364 5462
At Family Focus Financial Group, Rich develops unique retirement strategies for his clients and recognizes that there is no one-size-fits-all approach. Rich is committed to developing both a custom strategy and close relationship with each client. He believes maintaining a relationship with our clients will ensure their strategy is always on course to reach their goals. Rich Feola maintains an insurance practice and the fiduciary standard of Investment Advisor Representation, a series 66 licensed registration, with Global Financial Private Capital, an SEC Registered Investment Advisory Firm.
*Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor. Global Financial Private Capital and Family Focus Financial Group are not affiliated companies. Not intended for specific legal or tax advice. Any views expressed are for information purposes only and should not be construed in any way as an offer, an endorsement, or an inducement to invest or purchase insurance products.