With Andrew Haley – Chartered Financial Planner (& millennial!)
It’s all too easy to get caught up in labels. The ‘Millennials’ tag attached to Generation Y is one such label used to group those blessed enough to have been born from the early 80s to mid-90s. What a time to be alive! Mix money into the Millennial equation and expect the inevitable references to overpriced lattes and an avocado on toast obsession as the reason for our financial downfall.
There is perhaps a little stereotyping going on, but that’s not to say we don’t have challenges to overcome. Millennials or otherwise, how many of us could confidently say we left school with an understanding of budgeting, how our tax system works, the pitfalls of debt, and how to invest appropriately?
With this in the background, our generation have grown into managing finances alongside the Instagram lifestyle; the glossy, unachievable draw of living beyond our means is right there every time we scroll through the timeline. These days I can’t avoid Youtube adverts encouraging me to trade Ethereum, and then there are the supposed successful day traders asking why I choose to work a 9 to 5 when I could be jet-setting around the world, if only I’d subscribe to their online course.
Worse yet, as a football fan I, like many others will be bombarded with gambling adverts every season. It’s difficult to enjoy a match and somehow avoid the multiple invitations to download a betting app. Gambling and debt often go hand in hand. From buy-now-pay-later to payday loans, the traps are set.
However, enough with the doom and gloom because regardless of the challenges, the path to being financially sound is simple; not easy, but it is simple. I liken it to knowing that we need to eat well and exercise to stay healthy. The rules of the game are straightforward, but it’s not always going to be ‘plain sailing’ and it’s natural to get ‘knocked off course’ from time to time.
That’s where the mantra “when in doubt, stick to the plan” comes in. It might sound obvious, but a simple mantra can be very powerful when it answers the questions we ask ourselves in the moment. The mantra forces us to ask ourselves, should I spend, borrow, gamble or should I invest? Does this bring me closer or further away from where I’d like to be? Is the benefit worth the trade-off?
The mantra in itself isn’t very useful unless you are clear on the plan. Again, this doesn’t have to be too complex. Everyone’s circumstances are different, but I would confidently say most Millennials could live by the following plan;
Build and hold onto the all essential cash reserve (‘the emergency fund’)
Ideally get six months’ worth of expenditure in an easily accessible cash account. The interest rate isn’t your main concern here, it’s the easy access. This is the absolute bedrock of your plan.
Learn to hate debt!
I’m not talking ‘good debt’ because we often need to borrow to invest in ourselves through education/training or to fund a big purchase such as a home. I’m talking bad debt. If you can avoid it, do so. If you have it, get it under control and start chipping away at it with a passion and remember; ‘nothing starts until (bad) debt stops’.
Protect the plan!
It’s no good having a plan if it’s thrown off course in an instant by unexpected events. Income protection feels very neglected by our generation. We insure our phones & gadgets, pets etc. Let’s make sure we value ourselves enough to put in place appropriate insurance.
Budget to achieve ‘carve out’ income
Lifestyle creep is a silent assassin. As our income grows, so too will our spending, without checking in on it. Get a grasp on your expenditure, aim to boost your income, and ‘carve out’ a healthy difference in the top to bottom line.
Take that carve out income and put it to work. Invest regularly, increase the amount regularly if you can afford to (be sure to challenge yourself on this properly), and work towards making investment in your ‘future self’ your greatest expense.
The plan I’ve outlined, along with the power of the simple mantra can see anyone on their way to financial comfort and success. The ultimate goal is financial independence and the freedom to enjoy life on your own terms, with greater peace of mind.
All of this can be achieved on a DIY basis. You don’t need a Financial Planner, but much like planning to eat a healthy diet and to exercise regularly, having the right help in place can be the difference between success and failure. If you don’t have the first idea when it comes to investing appropriately, talk to someone who’s in the know. Don’t be shy when asking for help to get to where you want to be financially. Oh, and lay off the avocado toast.
The content of this blog is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
If you would like to speak to someone about your own financial planning, visit the Active website here