Why People Still Don’t Get Our Financial Habits
Millennials have been faced with financial obstacles since the day they entered the job market. Unemployment, underemployment and student loan debt was said to be crushing this generation of a bright financial future.
While it’s true that studies have shown that graduating during a down economy can have negative effects that last for decades, it seems like millennials aren’t letting that stop them from meeting their financial goals and still having a good time.
Yet, so many people still don’t get millennials and their financial habits. Millennials have vowed to simultaneously save more money while still saying they will spend on experiences.
The thing financial pundits need to remember is that saving and spending money on experiences can work together. Doing one thing doesn’t necessarily mean you can’t do the other. Just because a millennial wants to travel and is willing to spend the money to do it, doesn’t mean they can’t step up their savings game.
There’s no reason why you can’t do both so long as you manage your money correctly. In fact, I ruthlessly cut out expenses I don’t really care about (like a car) precisely so I can increase my retirement savings and enjoy travel – two things I do care about.
It’s all about being conscious about your money, and if you look at other studies regarding millennials and finances it would seem that they’re going to do well. For example, AARP found that Boomers have more credit card debt than any other generation, meanwhile millennials are avoiding credit card debt and doing as much as possible to not add on to the debt they already have in the form of student loans. If you don’t have debt in the form of credit cards, you have the freedom to do whatever you want with the money that’s not tied up by that debt.
Perhaps it’s because millennials learned from the mistakes of previous generations. Maybe it’s because we have enough to deal with thanks to student loans. Or maybe coming of age during a down economy just forced us to get it together. Whatever the case may be, millennials are clearly on to something when it comes to money – they’re being responsible while still enjoying it.
The Bad News (And Why There’s Still Way More Work to Do)
Unfortunately, it’s not all good news when it comes to millennials saving more for retirement than everyone else. Yes, we’re outpacing everyone else. We’re even saving more money than most Americans (average savings rate hovers around 5%). There’s just one problem. Our savings rate still isn’t high enough.
Remember, millennials are saving for retirement at a rate of 7 percent, and according to financial experts, people should be saving at least 20% for a comfortable retirement. This means millennials still have some ways to go.
Granted, we practically just started making money thanks to a Recession so a 2% increase in savings from one year to the next is pretty fantastic. We also have plenty of time on our side where we can work our way up to a higher savings rate.
How Millennials Can Keep the Momentum Going
The challenge then becomes how to keep the momentum going. With so many sneaky things like lifestyle inflation and eventual financial obligations like housing and children, it can be really easy to get off track. In fact, most people do get off track.
The best thing we can possibly do is make sure we continue with good habits even after we make more money or our financial picture changes.
For example, has your income increased? That’s not a time to buy something shiny, it’s actually a time to increase your monthly savings rate. Again, it’s simply a matter of becoming conscious of our behaviors around money.
Another great tool millennials can use is to spend and save their money according to their values. If you know what your values are it becomes much easier to manage your money in a way that makes sense for you.
For example, as I previously mentioned, I value travel and I value retirement savings. I’m already in the habit of saving for these things because they matter to me so much. I don’t even have to think about it because I know I’d rather save for a great trip or boost my retirement account than purchase a new tech gadget.
That means that even if my financial situation changes, it will already be ingrained in me to save for the things I value. Because it’s so deeply aligned with who I am, it becomes easier to do what I need to do when things change.
When money is approached from the perspective of identifying your values, your actions, numbers, choices and behaviors become clear. It’s not simply a matter of “reaching your goals” or “budgeting”, it literally starts becoming a way of life. It’s no longer just about rules and “shoulds” (though these things do become easier), it’s about living the richest life possible.
This is exactly what David Bach talks about in a recent interview with Marie Forleo and it does truly change the way you manage your money for life.
The good news is millennials have increased their retirement savings and are outpacing everyone else. This is a major cause for celebration! The bad news is we still have some ways to go and we have to be vigilant so we don’t repeat the mistakes of previous generations. By continuing the good habits we’ve started and remaining conscious of our behaviors around money, we’ll be able to reach our financial dreams more easily.