April 24th, 2020 David Blain (Taxloopholes.com Advisor)
A recent survey conducted by the National Association of Personal Financial Advisors revealed the unsettling truths about the relationship millennials have with money. Being a millennial himself, BlueSky’s own Stephen Fletcher, CFP®, MBA, digs into the statistics and provides a positive outlook on tackling millennial financial struggles like student loan debt, budgeting, goal setting, and retirement planning. Read some of the hot points below or listen to the full interview with KMBZ News here: Stephen Fletcher KMBZ Interview.mp3
There’s been a study now about millennials and finances. What are some of the highlights that you’re seeing?
Going into 2020, about 60% of millennials have not even considered options for their retirement. About one in three millennials don’t think they will ever be able to retire. Almost 40% of millennials are concerned that their parents didn’t properly do planning and so they’ll have to take care of them at some point. Over half are not confident that Social Security will be viable when they have reached retirement and about 73% wished that they could have a financial planning do-over to set themselves up in a better financial situation.
Is there a feeling for millennials that they think it’s already too late to do something?
Great question. So the millennials that we surveyed, were between the ages of 22 and 37, and while some millennials might feel like they are behind the eight ball, they are certainly not. That’s still a lot of time to be putting together a financial plan, to be getting financial goals down on paper and to be achieving them. So certainly starting sooner is better, but at this point, it is not too late for any millennial in order to be able to get where they’re trying to go.
How do millennials compare with the previous generation, Gen X, or the previous generations of folks a couple of groups before them?
One of the big things is, of course, student loan debt is becoming a bigger and bigger deal and more and more millennials have student loan debt so they basically begin their career at a deficit. And that’s much more prevalent in this generation than it has been in previous. Certainly, with the labor force the way that it is, in a lot of instances, a degree is required. Sometimes master’s degrees are required, which means even more student loan debt. Then the companies that these millennials are going to work for, are more and more not offering a pension, and then Social Security also becoming a concern for some of these millennials. The way that they have to plan for retirement is different than it has been for other generations and the amount of debt that they are carrying before they even really get to the point where they’re able to earn is more than other generations have had. So you can kind of see how that, in painting all of that picture, why a significant number of millennials, when asked how they feel about their finances, they feel stressed or they feel worried.
What’s holding people back? In other words, previous generations may have been better about putting money aside for a rainy day, for retirement. What’s keeping millennials from doing it? Is it just that sense of there’s not much I can do about it because I’m already in debt? What is it?
To some extent, I think it is that sense of dread, that you’re already so far behind. And when you’re feeling stressed and worried, a lot of times that keeps you from taking the next step. So, at the National Association of Personal Financial Advisors, we strongly feel that knowledge is power. And so, the most important thing is to understand where it is you’re trying to go, to work with somebody that is able to give you the advice that you need and educate you on the different factors that are present in your situation to help you break down what is this unbelievably daunting task of being prepared for retirement. Break it down into bite-sized pieces so that you can take it a little bit at a time, so that you have the right savings target, you have the right spending target. You’re thinking properly about how to approach your financial future rather than just kind of throwing your hands up because you already have all of this student loan debt. Things are already difficult and just not really making an attempt at moving forward.
What is that first step? I mean, let’s say I’m a 35-year-old millennial. I’ve got two kids and a spouse. I’m way behind on retirement and I still haven’t paid off my student debt. What’s the first thing I need to do?
I think there are three things that millennials can do themselves prior to working with a financial planner. The first is to know your goals and to write them down and hold yourself accountable. You’re not really going to be able to make it anywhere if you don’t know where it is that you want to be headed. The second is to invest in yourself. Primarily reaching financial independence is going to come from earnings. So the amount of money that you make and then are able to save, instead of just the growth that you’re able to realize from the stock market. And the third is to take advantage of those peak savings years. So in that example of someone who is 35 with two kids, depending on the age of those kids, it’s possible that some of your peak savings years might now be in your past.
And so, knowing what those goals are in the future, are you going to pay for your kids’ college? That’s going to be a very large expense, potentially. So, know where it is that you’re trying to go so that you can take advantage of the years that you’re able to put a little bit more away. Those are some things millennials can do on their own.
Certainly, we advocate for finding a financial planner, finding somebody that can be an advocate for you, that can help you think through all of the things that maybe you’re not thinking through. Student loan debt is a very complex topic, and there’s more to it than just what is on the surface. And so, working with somebody who is a professional, who is an expert that is able to be flexible. NAPFA has advisors that will work on an hourly basis so you can sit down with somebody for just two or three hours and get some really helpful information. Or if somebody is ready to take an even bigger step, you can begin working with a financial planner for years on end, who’s going to get intimately involved in every part of your financial life and make sure that you’re headed in the right direction at each step.