Financial Security: Baby Boomers, Generation X, and Millennials Face Mixed Fortunes

 

Baby boomers, Gen X, and millennials have very different financial experiences. When compared to baby boomers or Generation Xers, millennials have it rough when it comes to finances. They enter the labor force when full-time jobs are few and far between, making the strive for financial independence, marriage, or retirement even harder.

In addition, they have an overwhelming student loan debt that prevents them from achieving their financial goals. Even worse, those who are already working are barely making enough money to cover their bills. Never mind savings. Data from Smartasset show that the average salary of the millennial today is about 20 percent lower than the average salary that a baby boomer earned at the same age.

These unique set of financial challenges make it difficult for millennials to build up rainy day savings or establish themselves financially. For instance, a study by the National Institute on Retirement Security found that 66.2% of working millennials have no retirement savings because they hold off savings in favor of paying off student debt or buying homes.

In contrast, prior generations, Gen Xers and baby boomers exhibit far more financial confidence, thanks to their higher salaries, employer-sponsored retirement plans, and years of soaring markets, which enabled them to plan their financial future.

A Sea of Financial Traps

Another reason why the financial prospects of millennials are less than those of their parents is that they often make bad investments. The quest to live in the here and now and to enjoy life to the fullest has millennials spending money they don’t have to buy items they don’t need.

For instance, some millennials consider buying a new car as against a used one a status symbol. Same goes for luxury cars, expensive houses, premium cable package, leased cars, etc. It’s either these or they are overspending or living a frivolous lifestyle that makes it harder for them to put money toward their top priorities.

The lack of basic financial education also comes at a cost, as does lack of financial goals, their spending without a plan, falling for scams, taking on more student loan than is necessary, rushing into investing or not investing at all. All of these issues delay the ability millennials to secure their financial future. Even worse, it makes them more susceptible to economic vulnerability.

Staying on Track

Millennials will do well to consider measures that will help them climb out of debt quickly, especially if they are to make progress towards their financial goals of building a stable future. Good thing is, they have time in their favor, and so can make the most of that time to improve their finances.

To stay on track, one should first of all design strategies that will prevent them from falling into the bad habit of spending too much or living beyond their means. If you’re the kind of millennial who doesn’t have much or is in debt, your goal should be to earn more and spend less.

This means cutting costs, saving a certain amount every paycheck, establishing a side hustle, having a realistic budget, and buying only the things you need. Also, you should consider hiring a finance expert to help you set financial goals and advise you on how best to invest your money.

About investing, you might want to avoid investing in depreciating assets like cars, which tend to lose 75 percent of their original value within the first 3-4 years. Don’t put a brand new car in your garage if you think that will strain your budget. Instead, consider getting a used car and saving the balance or investing it in a profitable venture.

 

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What Millennials Can Learn from Boomers about Retirement Planning

Boomers retiring by the tens of millions each year.

How many times have you heard it said, “If I only knew then what I know now…” about everything from financial planning to raising kids? It’s likely that you’ve heard it at least several times a week and now even millennials are becoming tuned in to the problems besetting boomers as they age and retire.

The world is a much different place than it was, even a generation ago, and so it would be wise for the younger generation to look at some of the trials and tribulations of boomers as they begin retiring by the tens of millions each year.

Insufficient Planning Delays Retirement

One of the major problems that many boomers face is that they didn’t plan sufficiently for their future. They assumed their Social Security check along with that 401k or other retirement investment would be sufficient to provide for them in their senior years.

Back a few generations, there simply weren’t the resources to plan well for retirement and today’s retirees are learning that they should have planned better. Today there are financial products that are aimed at growing wealth for your senior years and these are the products millennials should be investigating when seeking to invest in their own futures.

Unexpected Rises in the Cost of Living

What it all boils down to is that no one really expected the cost of living to skyrocket as it has. Some attribute it to the cost of production, keeping prices rising while others attribute it to higher taxes and the increasing cost of fuel and food. For whatever reason, the cost of living has far surpassed the rise in wages and this is something no one could have foreseen but perhaps should have planned for anyway.

Avoid Borrowing against Retirement Savings

Another one of the big mistakes boomers made, almost across the board, is to have borrowed heavily along the way against their retirement savings. This is a big problem that millennials should learn from. If at all possible, don’t delete those savings! Find a way to finance what you need to pay but leave that money where it is so that it can continue growing.

You know what they say about good intentions, so don’t be caught in the ‘intend to replace it’ trap. Chances are you will never replace that money once it has been spent. Just as you think you’ve got your head above water, another crisis surfaces and so it goes. Put that money away and forget it’s there. That, perhaps, is the biggest lesson you can learn from boomers.

The Logic of Downsizing Early

When it comes to downsizing once the nest is empty, altogether too many people fail to liquidate assets early enough. That big six bedroom home you live in and raised your children in may be sentimental but now that it’s paid off, sell it, buy a smaller property and invest the profit made from the sale.

Too many middle age people hang on to the family homestead thinking to save it for the kids, or to have a place for them if they need to come home. It’s time for grown kids to be grown kids. Think about your future by downsizing as soon as the nest is empty. Can you imagine how that amount of money can grow over the course of a couple decades until you are ready to retire?

Diversify Your Investments

And one final thing which millennials should learn from boomers is that they failed to diversify their investment products early enough. Altogether too many people lost their savings with the economic crisis of a decade ago and now those boomers simply don’t have enough time to recover their losses.

By diversifying your retirement investments, you can have that added bit of protection if one market should fail. The last time it was real estate that led to a global crisis. What will it be next time around? No one knows so diversify, unless of course you are a fortune teller and can predict the future.

The intelligent millennial will take a good look around them and fully understand the predicament most boomers are in now as they face retirement. It is always good counsel to be told to learn from your elders, in both their triumphs and failures, but never more so when planning for retirement. Don’t fall into the same trap your parents and grandparents fell in. You can learn a lot from boomers if you care to open your eyes. Plan now and live comfortably later – a great investment strategy altogether.

 

 

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