By David Goldberg
Ah, Millennials. Why can’t we get our acts together? And why must we insist that irrelevant things like the post-Bush economy, the environmental wasteland, and this nation’s obesity crisis aren’t actually our generation’s fault? And this insistence on finding career fulfillment? Yeesh. Who do we think we are?
While our parents could graduate from college and then stroll off campus into a cushy corner-office job, many of us now face a grim employment abyss where full-time pay, benefits, and stable hours sound like mythical tales from a distant past.
Master advisors and certified financial planners Richard Dickson and Grace Yung were able to provide me with some user-friendly answers to questions about spending, saving, and the job market for Millennials who may be feeling clueless and hopeless about the economy and their job prospects.
What is the biggest difference between my generation and my parents’ generation?
Indeed, the complaining that has defined the Millennials’ generation may be warranted. Ever since that little financial crash a few years back, things aren’t nearly as peachy as they were for our parents’ generation. Yung admits that today’s young bucks may not have a fair shot. “In 2009, when millions of Millennials went into the job market, the youth unemployment rate was 18.5 percent. Your generation had one trillion dollars in student loan debt.”
Both Generation X and the Baby Boomers were able to enter the job market with more cash to spend, and the corporate employment culture was vastly different. “Back then, our parents worked for companies for 20 and 30 years,” Dickson says. “They had pension plans before the 401k was invented. And now that Millennials are only at a job three or four years, they are always looking for something better.”
Though we may have it tougher out in the real world, the good news is that many of us could be in for a big score from mom and dad. Over the next few decades, Baby Boomers will pass on an estimated $30 trillion dollars to their children.
Planning for retirement isn’t a thing anymore, right?
Apparently, it is. There are several simple ways for Millennials to save for the best future possible. If you work full-time, you’re never too young to invest in your employer’s 401k retirement plan that encourages workers to stay with the company. “I tell people right out of college that if their companies have 401k plans, as a minimum they should always put in what their company matches, because it is free money,” Dickson says. “If you can do this earlier in life, you’re going to be so far ahead, and you can learn right out of the gate to save 15–20 percent of your gross income a year.”
Yung agrees. “You should start saving for retirement as soon as you get your first paycheck. The reason you should start as early as possible is because of the power of compounded interest. Over time, [studies show that] people who start investing and saving early do not need to put as much money in as people who start later in life.”
Those of us living the charming life of a freelancer (read: taking naps and buying Raisin Bran in bulk) can go for an IRA, or Individual Retirement Account, which allows us to set up a retirement fund at a bank or brokerage firm.
How am I supposed to save money if I don’t even know where my next paycheck is coming from?
First, take a long, hard look at yourself (and your finances), and don’t pretend that you’re a saint. Did you treat yourself to guacamole with your Chipotle order this week? And you didn’t fall for the line about upgrading your popcorn from a small to a medium, did you?
“The rule of thumb is to pay yourself first,” Yung says. “Start small and be realistic. If you can figure out how to save by cutting spending—for example, $300 a month throughout 2016—you will have saved $3,600. Doing things like skipping that latte at Starbucks, bringing your lunch to work, and cooking dinner at home instead of dining out can really add up.”
Unfortunately for us, both Yung and Dickson agree on this “tough love” approach to saving. “Our parents have told us this forever, and we never do it,” Dickson says. “It comes down to looking at what’s a necessity and what’s just a want. First of all, make sure you have two to three months’ worth of cash in your savings account in case you have an issue.”
Two to three months? Who does he think we are? Travoltas?
What is this mysterious “good credit” thing?
Apparently, maxing out a credit card, paying it all off at once with Hanukkah money, then closing that account to open a new card isn’t the way to prove yourself worthy when applying for a car loan or a home mortgage. Yung and Dickson insist that keeping one card that you are able to pay off regularly is the key. “If you turn off and on credit cards very regularly, that’s going to lower your credit score,” Dickson says. “You need to have that one card that you’ve had forever, and that you’re always paying off on time.” Yung recommends setting up automatic monthly credit card payments with your bank.
What percentage of my paycheck should go to rent, and when can I disown my roommates forever and get a place of my own?
Both Dickson and Yung agree that you shouldn’t spend more than 30 percent of your paycheck on rent. Yung concedes that this old rule can be a bit unforgiving. “It really depends on one’s income,” Yung says. “For higher-income earners, this rule makes more sense, but lower-income earners may have a tougher time with this one.”
As for finally being able to get a place of your own, Dickson suggests taking a look at your spending patterns and lifestyle before making the great escape.
“It comes down to being able to budget and figure out what it is that you really want, and if you can afford it or not,” Dickson says. “You may like living in Midtown in a $3,000-a-month apartment with three people, or maybe moving farther out so you can have your own place. But you need to look at how much you get paid every two weeks, how much you spend on food, gas, and electricity, and still feel comfortable.”
David Goldberg is a regular contributor to OutSmart magazine.