By It’s no secret that many Millennials have had a rough go of it when it comes to the financial instability they have faced during much of their working lives. Between slow wage growth, multiple financial crises, and an inflated housing market, it’s been difficult for many to grow their wealth at a similar rate to their parents and grandparents.
But here’s the good news: It is still possible. If you’re a Millennial struggling to build your portfolio, consider these six areas:
1. Start investing now
Compound interest is a powerful tool for growing wealth, but compound interest takes time. So, the younger you start, the better, even if it’s a few bucks here and there. Whether it’s a Roth or traditional IRA, or a 401(k), I’m a big fan of a set-it-and-forget-it approach to retirement saving. When your target is 20, 30, or 40 years out, you’re likely to experience market volatility, but compounding interest can help your savings grow over time. Of course, I can’t guarantee that the market will continue to go up in that time, but historically, it always has. Please note: Past performance is no guarantee of future results.
2. Be prepared for emergencies
Nothing can derail a financial plan like large, unexpected healthcare or repair expenses, or even job loss. It’s important to build up the appropriate funds to be able to navigate those emergencies. You may have setbacks, but with the proper planning, it shouldn’t make too much of a long-term impact. Aim to save 3-6 months of pay so that you have a solid cushion.
3. Know where you’re spending
It seems simple, but make sure you’re not overspending. A lot of people spend in undisciplined ways, which can hamper progress. Build a comprehensive budget so that you understand where your paycheck is going, and make sure that it includes built-in savings buckets.
4. Invest in yourself
Wage stagnation means that staying in one job for 30 years may not allow your salary to keep up with rising prices. You’ll need to be active in leveraging your skills to make yourself more marketable, allowing yourself to earn raises, promotions, or even a job at a different company. Make sure you’re getting into a field that can continue to level up with you.
5. Enter the housing market wisely
Housing prices are crazy. People have been sitting on the sidelines waiting to “buy the dip,” but they just keep going up. If you’re in the market but frustrated, keep at it. Continue saving for that down payment or look into options like FHA loans or buying in areas with USDA loans. Expand your area.
Renting isn’t always a bad thing, however. It’s hard for some people to conceptualize, but sometimes renting makes more sense. The most important thing is being able to afford your housing. Do not overextend yourself and become house poor. That could take longer to dig out of than it would to save for that down payment.
6. Ask for help
A lot of people don’t know where to go for guidance. Maybe you have the discipline to save, but you don’t know what kinds of accounts you should open, or how much you should be budgeting. Working with somebody who can give you a plan can be life-changing. You can learn about budgeting, investing, and saving from people who live this stuff every day. Reach out to a financial advisor like the ones we have at Family Financial Partners. When you have someone on your side, helping you allocate and even expand your resources, you’re taking the guesswork out of a complicated process.
Article by Jacob Buckley, CFDA, MBA, Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.