Retirement is something everyone looks forward to, but something that most of us dread preparing for. Financial experts advise you should start saving for retirement as early as your 20s. How crazy is it to think that you need to prepare at least 40 years in advance?
Think of it this way: the sooner you save now, the more comfortable things will be later. Imagine how difficult life would be in your 40s and 50s if you just then realize you’ve entirely neglected a long-term savings plan. Learn as much as you can now to have an excellent idea for the future.
A 2017 report from Bank of America Merrill Lynch discovered that under half (48%) of millennials felt “very positive” about having enough money in their later life. Furthermore, millennials often spend about four hours at work stressing over finances each week. Other research shows 63% of millennials and 53% of overall employees think that money-related anxiety hurts their ability to do their jobs. It’s plain to see that finances are a huge source of stress for younger people. We spoke with Chart Westcott, the Co-Founder and Chief Operating Officer at Ikarian Capital, who provided essential personal finance advice for millennials to keep in mind:
Start a retirement plan as early as possible. The sooner you start, the better. You can opt for a 401(k) or an IRA. Invest as much as possible into each account. If you start investing 8.8% of your income with a company match at age 25, you’ll have more than enough to retire when you reach retirement age.
Get a pay raise. Imagine if you’re 25 and you received a pay raise for an extra $2,000 a year. That adds up to an additional $80,000 by the time you’re old enough to retire. According to PayScale.com, only 37% of millennials have ever requested a raise. Remember the worst thing anyone can say is “no.”
Pay off debt as soon as possible. Student loans are ruining the financial goals of many millennials. Take up an extra side job or two. Do whatever it takes to pay off your loans on time. Paying off your debts will feel like a huge burden is lifted off your shoulders. You’ll then be able to think of finance more freely.
Track your personal finance. Most millennials have no idea how much they’re spending. Download an app such as Spending Tracker to measure your income and cash flow. You might think you’re pretty good at saving your cash, but tracking your income can dramatically change your perception. You’ll soon identify areas where your money is leaving your pocket. This information can help you keep sight of what’s important and where you can cut costs.
Keep learning. If you want to grow and develop your career, you need to take the effort to learn new things. Stay updated on industry trends and take classes to learn new skills. Make yourself a valuable worker. Spend time outside of work diversifying your skill set.
Set goals. Billionaires such as Shark Tank’s Daymond John and Robert Herjavec swear that “Think and Grow Rich” by Napoleon Hill have helped them make a fortune. This personal finance book allows readers to envision a prosperous future by using positive reinforcement and goal setting to motivate them. Similarly, when Prudential Retirement showed employees photos of what they might look like at age 65, 60% more workers either began a retirement plan or increased their contributions. Develop a few personal financial goals to reach every year.
Learn about investing. The stock market is something most millennials often take for granted. The average annual return rates for stocks is 8%. Imagine if you could increase your yearly income by 8% each year. A $1,000 deposit compounded by 8% over 20 years will result in a balance of $4,661. That number will go up to $10,063 in 30 years and $21,725 in 40 years.