Millennials often get a bad rap when it comes to responsibility. Apparently, they change jobs too frequently. They put off marriage. They are busy spending all their money on avocado toast instead of deposits for housing or long-term savings.
Saving for Retirement…?
A recent survey by financial startup Earnest found less than a third of millennials are contributing to a retirement fund. Despite the generation’s reputation for being fiscally irresponsible, though, the lack of saving has little do with poor financial skills. For starters, young people of just about every generation avoid saving for old age, reports BBC. The difference is that in previous decades, employers would often step in and offer pensions — a benefit that has largely gone the way of the dodo. For now, many millennials are fixated on their present financial challenge: paying off student debt.
Another study by Merrill Edge revealed that they are saving– they’re just not saving for retirement. So are millennials really less skilled at managing their money than previous generations? Maybe not. Decade after decade, young people have dodged the idea of planning for their old age.
Financial management company Principal recently released a study about its “super savers”: retirement plan participants who are totally crushing it. This elite group of 2,424 people ages 23 to 51 are putting more than 90% of the maximum into their 401(k) accounts. That makes for a total of $16,200 to $18,000 per year. But one thing is clear, these super savers are leading pretty cushy financial lives.
Over 90% reported a household income of $100,000 or more, and more than half said they had no student loans to pay off.
You might think there’s nothing to learn from people like this, but it’s worthwhile to note the sacrifices these savers make despite their financial situations.
Steps Towards becoming Finically Independent
1. Start by doing the simple math. Determine how much you’ll really need. It’s likely going to be more than you think.
2. Focus on creating a budget. Do what you can to minimize your three greatest expenses, housing, transportation, and food.
3. Side hustle to invest. This could mean blogging on the side, getting a waitressing gig for the evenings, or even just completing surveys online for gift cards.
4. Increase your investing rate as quickly as you can. With every 5% more you will be able to retire up to 10 years earlier.
5. Take it one day at a time and build positive daily habits.