Practice Good Finance and Learn from Experts
Modern technology seems to change by the month. It is of enormous help to everyone even if it is fairly confusing to some. It isn't essential to understand everything as long as you can make use of it in a positive way. It is probably a generation thing. Those of middle age and beyond probably find technology the most difficult to grasp yet many millennials are able to take it in their stride. Their ability to understand technology has certainly helped them to refine their money management. Perhaps the surprising thing is that in general the generation appears to intent on getting their finances in good shape before looking at buying real estate, taking out an auto loan or marrying and starting a family. Surprising because it was not a trend that had been identifiable previously.
One thing that may have caused this is that even though education standards have been maintained and probably improved, income levels have fallen. The recession has gone but it has had a lasting effect. The cost of education has increased and millennials often find themselves with student loans to repay with less money to do so.
Job security was an issue throughout the recession and that situation has only improved in recent months. In some cases it has led to millennials harnessing new technology and the ability to research and share knowledge to work for themselves rather than join large corporations in search of career advancement. Those with the opportunity to open a 401(k) retirement plan seem to be looking to save the maximum allowed to get the maximum from their employers.
It is important for millennials to find a balance. While material things are being delayed, repaying a student loan but ignoring retirement can be harmful in the future. Compound interest provides growth, the longer the period the better while there are tax advantages in carrying student loan debt for a sensible period.
It is the relatively high cost of education that has brought about the change. In some instances the job market forced them to take jobs for which they were over qualified. Saving seems to be a priority and there appears to be a few novel ways to do it, and a determination not to spend on things that are unaffordable:
- Sharing. The idea of renting expensive accommodation seems to have been rejected in favor of getting someone to share to spread the cost of rental. In 2010 a Goldman Sachs survey highlighted that 30% of young adults were happy to live with their parents while apartment sharing in cities can cut living expenses by several hundred dollars.
- Autos and real estate. These are aspirations but their acquisition is being delayed relative to how they were prioritized prior to the recession.
- Marriage. Over the last four decades the average age when Americans are getting married has risen from 23 to 30.
- Technology. There are apps which millennials are using to invest. With interest rates on savings so low, the younger generation appears to be investing for growth instead, even if it is in a small way.
Can Others Learn?
Older generations face problems, some of their own making, others caused by the recession which hindered 401(k) and investment growth in general and others a result of people not thinking sufficiently seriously about the need to save for retirement. It is difficult to suddenly change direction and discipline yourself to saving rather than living from pay check to pay check.
Those who recognize they have financial problems and insufficient retirement provision need to pay off their debts and prepare a budget aimed at creating a surplus which can be invested in their future. Credit card balances should be the first to go. A consolidation loan which will be much cheaper, representating long-term cash 2016 , can solve that problem as long as the card or cards are only used in the future to buy things that can be paid off in full when the monthly statements come in.
This new found self-discipline is only part of the equation. A budget should create a surplus for investment. There may be economies within your regular spending that can increase the surplus being created. Those economies do not necessarily mean sacrifice. Are you getting value for money? Daily spending on coffee and a sandwich adds up over a month and perhaps you can cut back on that?
Millennials have limited experience on money management other than their student loan. They may be well educated but financial management is not a classroom subject. Circumstances seem to have made them good at managing their money and it is a lesson that other generations would do well to learn while there is still time.Read more Comments