3 Tips For Millennials To Start Setting Themselves Up For Retirement

There’s a baby boomer seemingly lurking around every other corner, waiting to give the next bright-eyed millennial unsolicited financial advice. Typically, it goes something like, Don’t spend more than you’ve earned” or “Stop buying coffee for five bucks.” While that may be well-intentioned advice, it’s easy to ignore, because Mr. Boomer lived in a time when Harvard’s tuition ran 17 times less expensive than it does today.

Tuition has increased at three times the rate of inflation over 40 years, which helps to explain the different financial landscape we live in today, compared to that of previous generations. So the question becomes, how should millennials who live with seemingly insurmountable student debt go about planning for their retirement?

Create a Roadmap to Success

If you had a dollar for every time you heard the phrase, “life is a journey,” you probably wouldn’t need to worry about a retirement fund. Since that isn’t how the world works, you need a plan to tackle the journey. Set some time aside to figure out where you want to live after retirement, how you want to live, and be ready to make some changes.

The first thing to do is create a budget. Start with your fixed expenses. How much are you spending to keep a roof over your head? Do you have a car payment? Write those numbers down, along with any other monthly payments you have.

Once you have your basic fixed expenses written down, look at your pay stub. Does it cover everything? If so, that leaves room for the next step. If not, then it’s high time to consider how to fill the gap. Start by asking your current employer about opportunities that pay more. Maybe you need to use a budget analyzer to cut some unnecessary expenses, like subscriptions you aren’t actually using. Be honest with yourself, and don’t be afraid to admit you might need help.

Get An Expert Opinion

Financial trends can change quickly, so it’s important to work with someone who has their finger on the pulse of the economy. It’s easy to tell someone that investing in the stock market is a good idea, but actually capitalizing on it is a whole other ball of wax. A financial advisor can help to navigate questions about tax strategies, like utilizing a Roth IRA versus a traditional one, or managing income tax by itemizing charitable donations.

Be sure to do your homework when it comes to financial advisors. There are many certifications, and not all financial advisors are qualified to handle certain questions or to offer sound investing advice. Additionally, the fee schedule can sometimes surprise clients. While a financial advisor is required to disclose this information, a little research can help you find an advisor who charges reasonable rates.

Be Smart About Paying Off Debt

Pay the most you can afford to pay toward your highest interest debts. Compounding interest is great for your investments, but really bad for your debts. In order to stay competitive, banks are even reducing (or in some cases removing) many transaction fees, in order to retain their customers. Financial firms need to pay their employees and utilities, so they need to come up with that money somehow. Be sure to ask your representative if the payment is going towards interest or principle.

Making your money work for you is the name of the game, and that doesn’t necessarily come naturally to everyone. Take the advice of an expert whenever possible, but remember to do your own homework, as well, since no one will care about your financial well-being more than you.