By: Ethan Taub– founder and CEO of Goalry
If high house prices, higher rents, soaring domestic bills and massive student debts weren’t enough, a pandemic on top of all of that has threatened the financial futures of millennials (anyone born between 1981 and 1996). However, it is possible to plan – and wise to start as soon as possible – for a fruitful retirement.
According to reports, 72% of millennials are significantly more pessimistic about achieving financial security in retirement compared to Baby Boomers (43%)* and 61% of older millennials (born between 1981 and 1988) believe they’ll be working at least part-time during retirement**.
However, on a positive note, according to a survey by Bank of America, a surprising 16% of millennials between the ages of 23 and 37 now have at least $100,000 saved for retirement.***
Although some people have started to think about their circumstances in older age, not everyone has. With research highlighting general anxiety surrounding retirement pots, there are small steps that millennials can take to improve their ‘financial health’, start to feel more secure about their future and plan for the day that they no longer work!
No big spenders
Keeping expenses as low as possible and living within your means is a great start. Creating and following a budget as well minimising your expenditure means that you can focus efforts on putting money into a retirement fund. For example, renting a space just big enough for your needs, cutting the commute for lower fuel costs – easy enough if you’re a part of the work from home generation – and not taking out loans unless absolutely necessary are reasonably easy ways to start squirrelling money away. A great tip is to cut the small expenses first – perhaps you might forgo your daily coffee or end a subscription service that you never use!
Down with debt!
There is no way to start putting any form of savings away when there is outstanding debt, particularly when higher interest rates are looming and making the prospect of paying it back more difficult. Focus on putting any extra income towards making that bill smaller, which will go towards saving money in the long run. A good strategy for paying debt is called the ‘debt snowball method’. It works by paying the smaller debts first and clearing those, before moving on to larger ones.
Allocate your earnings
When payday rolls around, assigning money to the correct ‘pot’ as soon as possible is beneficial to both wallet and wellbeing. Automating the process, using an app, certain bank or fintech solution, can also help to safeguard your money from accidental spending as well as give you one less thing to worry about.
Points mean prizes but don’t be afraid to shop around
What’s better than going shopping? Going shopping for free. Utilising loyalty points can add up to big savings on purchases. That being said, brand loyalty when it comes to shopping is no longer as effective as it once was, so make sure you are looking around and finding the best deals. Similarly, there are several apps on the market that can search the internet for codes and coupons to help reduce costs.
Don’t restrict yourself
Don’t make yourself miserable – a life without some luxury, whatever your type of luxury might be, is going to be a sad one. And restricting yourself too much – or denying yourself of any joy – may result in a splurge of unnecessary purchases down the line. As the old saying goes, ‘everything in moderation’ and this especially applies when it comes to spending money and having fun – FOMO is a no-no, and boredom and a small stash of money might prove to be disastrous.
Be a winner!
Using apps to automate or gamify your finances can not only make the process of saving money easier but also fun. Known for their love of tech and nostalgia for old school gaming, what a perfect way for millennials to make the most of their earnings. There are several apps that can help users manage their money through features such as auto transfers, ‘swear jars’ and even quizzes to help the user get to grips with their habits.
So now you’re freeing up some money, how else should you prepare for retirement?
The easiest thing to do is to pay into a pension scheme or retirement fund as soon as possible. The earlier you start contributing to it, the more money you’ll have when it comes to your retirement.
Depending on where in the world you are, there are various options for saving for retirement. There are a number of schemes in the USA, the most common being the 401(k) retirement savings plan offered by many employers and one that has tax advantages to the saver. The UK has the workplace pension scheme, where employees and employers pay in, with a government top up.
Regardless of what country you live in, there are various retirement saving options, so it’s worth doing your research to see what else is available (whether or not your occupation offers a scheme) and to start planning for financial security later in life.
Saving money and preparing for the future isn’t just good for your financial health but for your mental wellbeing too. Knowing you have a sensible financial plan is sure to relieve some of the general retirement anxiety that a lot of millennials are currently experiencing.
Ethan Taub is founder and CEO of Goalry, a financial ‘Goal Mall’ and an entirely new fintech experience that is set to reinvent personal finance.
***2020 study by Bank of America