Money Tips

Powerful wealth management tips for millennials

Rachael Harper
October 1, 2021
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Powerful wealth management tips for millennials

Illustration by Divya N


If you are a millennial, there is good news and bad news when it comes to financial planning and wealth management. The good news is you still have time on your side. The bad news? It won't be for long. While building the resources needed to accomplish your financial goals is not rocket science, time is of the essence.

In other words, the sooner you start, the better off you will be. If you wait for too long (when you are in your 40s or 50s), you would need to save and invest a considerable portion of your income. Fortunately, there are several alternative investment options available at your disposal nowadays.

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Start now: Top wealth management tips every millennial should know

If you are a millennial looking for compelling ways to manage your finances, below are great financial and wealth management tips to get your efforts off to a good start:

Stop living paycheck to paycheck

This is one of your priorities if you want to manage your wealth more effectively. Figure out how you can cut costs, even if just by a few dollars monthly. The best way to go about this is to track your spending.

From there, you can set financial goal sand make a few tweaks to your spending. Cutting costs can also help you begin saving right away, even if you don't have any other means of earning extra income at the moment.

Create a financial cushion

When creating a financial cushion, saving at least three months' worth of salary is recommended. Saving a years' worth of salary is considered ideal. It would also be a good idea to save your emergency fund in a high-yield savings account so it earns higher interest.

Save the maximum in retirement accounts

You can also save up to the amount your company is willing to match. It would also be a good idea to invest the maximum amount tax-free in an IRA. Come to think of it, every $500 you set aside now will be worth over $6,000 in 45 years.

This is assuming the annual rate of return is 6%. If you start saving $500 at 45 years old, you will likely get around $2,000 when you turn 70.

Consider investing in low-cost funds

When you purchase mutual funds, it is essential to remember that low fees are the best predictor of a good return. Let's take the $500 example again. If you invest the money in a fund that will charge a 1% annual fee, your money will be worth $4,500 instead of $6,000 by the time you retire. That said, opt for low-cost funds that will charge you less than 1% yearly.

Use the 50/30/20 rule

Once you meet your savings goals, consider adding to your savings outside your retirement account. Access to a larger pool of money can prove invaluable when you find something worth investing in down the road. For instance, you can invest in a business, your dreamhouse, or your children's education.

Better yet, make use of the 50/30/20rule. This is how the 50/30/20 rule works: 50% of your income goes to necessities (house, taxes, etc.), 30% goes to discretionary items (meals, vacations, etc.), and 20% towards savings.

Don't get too fancy when investing

You probably hear many of your contemporaries brag about the killing they had made when they invested in the latest trends like cryptocurrencies. However, it pays to keep in mind that it is also likely that they have made losses they have forgotten or didn't bother to mention.

If you want to try risky investments, play it safe by not betting more than you can afford or are willing to lose. Determine your level of risk and focus on investments that match your level of risk.

Over to you

One of the most critical aspects of financial planning and wealth management is figuring out the magic number and knowing where to start. Once you figure out your ultimate financial goal, planning the rest should come easy.

 

About the author

Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends

 

 

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