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Facing Financial Difficulties?
Discover 8 smart strategies for millennials to secure long-term financial stability.
Hey Millennials!
Welcome to the Gen Y Financial Times tribe! We’re excited to have you with us. A big warm welcome to our new subscribers. I’ve got some amazing news to share this week. Thanks to your help, we’ve doubled the number of weekly subscriptions and free downloads of my book “Breakable Habits.” Your support and enthusiasm is changing lives.”
Let's start off this week with a big shout out to one of our readers, Charlene, a 32-year old HR manager at a tech company in Chicago, who read the first issue of Gen Y Financial Times, and sent us this inspiring email: “I just wanted to say a huge thank you for your first issue. The practical financial insights and strategies you shared have truly transformed my life. I’ve already started implementing the budgeting tips and investment strategies, and I feel more confident about my financial future. I look forward to every issue!”
So nice to hear from you, Charlene. We hope others feel the same way.
Each week, we painstakingly sift through thousands of media sources to bring you the most crucial information, emerging trends, and actionable advice that directly impact your life and financial well-being. This newsletter is your essential guide to staying informed and ahead. Our mission is simple: curate, educate, and save you time. Let’s get started!
Top Stories This Week
How to Determine How Much You Should Contribute to a 401(k)
Why You Need to Start Investing Now
Dave Ramsey on Wealth Perceptions
Raising the Retirement Age
How to Get Your Retirement Savings on Track in Your 30s
Bitcoin Ownership Among Millennials
The Struggles of Millennials and Gen Z
Book Review: "Millennial Money Makeover" by Conor Richardson
TikTok
How to determine how much you should contribute to a 401K
by Kyle Cardoza
Our Take: How Does a 401 Calculator Work?
A 401(k) calculator works by using the information you input about your current savings, contributions, and investment returns to project the future value of your retirement account. Here's a breakdown of how it works and a real-life example:
How a 401(k) Calculator Works:
- It takes your inputs such as the current 401(k) balance
- The calculator then uses compound interest formulas to project how your account will grow over time, factoring in your regular contributions
- It may also account for factors like inflation and taxes, depending on the sophistication of the calculator.
- It takes your inputs such as the current 401(k) balance
- The calculator then uses compound interest formulas to project how your account will grow over time, factoring in your regular contributions
- It may also account for factors like inflation and taxes, depending on the sophistication of the calculator.
Real-Life Example:
Let's use a hypothetical scenario for Sarah:
Current age: 30
Retirement age: 65
Current 401(k) balance: $20,000
Annual salary: $60,000
Salary increase: 2% per year
Contribution: 10% of salary
Employer match: 50% of contributions up to 6% of salary
Expected annual return: 7%
Using these inputs in a 401(k) calculator, we might see results like this:
- At age 65, Sarah's 401(k) balance could grow to approximately $1,614,000.
- Her total contributions over 35 years would be about $378,000.
- Her employer's total matching contributions would be around $113,000.
- The rest (about $1,123,000) would come from investment growth.
This example demonstrates how the calculator factors in Sarah's initial balance, her ongoing contributions, her employer's matching contributions, and the compound growth of her investments over 35 years.
Why You Need to Start Investing Now
by Meghanmakesmoney /
Our Take:
Here's a real-life example of compound interest that demonstrates its power: Let's say Sarah starts investing $200 per month in an index fund at age 25. We'll assume an average annual return of 7% (which is a reasonable long-term estimate for stock market returns). Here's how Sarah's investment would grow over time:
After 10 years (age 35):
Total contributions: $24,000
Account value: $34,818
After 20 years (age 45):
Total contributions: $48,000
Account value: $103,186
After 30 years (age 55):
Total contributions: $72,000
Account value: $243,994
After 40 years (age 65):
Total contributions: $96,000
Account value: $526,097
This example illustrates several key points about compound interest:
- Time is a crucial factor. The longer the money is invested, the more dramatic the effects of compounding.
- The investment grows much faster in later years. Notice how the account value more than doubles in the last 10 years.
- The final account value ($526,097) is much larger than Sarah's total contributions ($96,000). The difference ($430,097) is all thanks to compound interest.Starting early makes a huge difference. If Sarah had started at 35 instead of 25, her account value at 65 would be only about $226,000—less than half of what she accumulated by starting 10 years earlier.
This example demonstrates why financial advisors often stress the importance of starting to save and invest as early as possible. The power of compound interest can turn relatively small, regular investments into significant wealth over time.
News
Dave Ramsey says 'very few people' who look like they have money actually do — claims vastly expensive cars, vacations on social media are rarely signs of real wealth. Here's the true test
Moneywise - VISHESH RAISINGHANI
According to Dave Ramsey, false indicators of wealth and social pressures lead many Americans into debt, while true wealth focuses on giving, legacy, and lifestyle choices.
Our Take: Key Points
💸 False Indicators of Wealth: Visible signs of wealth like expensive cars and vacations often do not reflect true financial health.
📉 Debt from Appearances: Many Americans incur debt to maintain an image of wealth, exacerbated by social media pressures.
🧠 Money Dysmorphia: 29% of Americans feel financially insecure despite their actual situation, with Gen Z experiencing significant pressure to keep up appearances.
💳 Overspending Consequences: Over half of surveyed individuals admit to overspending to impress others, leading to debt and financial strain.
📈 High-Income Struggles: Even high earners live paycheck to paycheck due to lifestyle inflation and debt.
🏆 True Wealth Defined: According to Dave Ramsey, true wealth involves giving, leaving a legacy, and having lifestyle options.
🎁 Charitable Giving and Inheritance: Regular Americans contribute significantly to charity, and many expect to receive or have received inheritances.
#FinancialHealth #DebtManagement #TrueWealth #MillennialFinance #SocialMediaPressure
Raising the Retirement Age: What Does It Mean?
Physicians on Fire by Jorge Sanchez, MD
#RetirementAge #SocialSecurity #LifeExpectancy #Healthcare #EmploymentChallenges
Raising the retirement age sparks negative reactions because most people don't want to work into old age. Even a small increase cuts into what should be their golden years. Doctors, aware of the physical toll of prolonged work, see this as detrimental. Currently, the retirement age is set at 67 for those born after 1960, with early benefits available at 62. However, starting benefits early reduces future payments, which is problematic since retirees aren't earning income.
Physicians, often starting careers later, typically retire at 65, later than the national average of 63. Raising the retirement age responds to increased life expectancy and financial strain on Social Security, which faces challenges due to an aging population and a declining birth rate. Social Security relies on current workers' taxes to fund retirees, but fewer young workers mean funding issues. Raising the age can stretch resources but doesn't solve all financial problems. Additionally, there's a physician shortage, as fewer young doctors replace retiring ones, compounded by expensive and lengthy training.
Raising the retirement age may benefit Social Security but doesn't address employment or healthcare crises. Early retirement funds are reduced if accessed before 70, disadvantaging physically demanding jobs and marginalized workers. It also limits job opportunities for younger people, increasing financial pressures.
In summary, raising the retirement age helps Social Security but imposes hardships on those in physically demanding jobs and marginalizes workers, without fully addressing underlying issues.
Our Take: How raising the retirement age could affect millennials:
- Delayed retirement: Millennials would have to work longer before being eligible for full retirement benefits. This could mean working into their late 60s or even 70s.
- Financial pressure: With a higher retirement age, millennials may need to save more or work longer to ensure financial security in retirement. This could be challenging given existing financial pressures like student loan debt and high housing costs.
- Generational tension: There's already a debate about retirement age, with 51% of Millennials and Gen Z advocating for lowering the retirement age, according to one survey. Raising it could exacerbate generational tensions in the workplace.
- Inadequate retirement income: Research suggests that about 38% of early millennials (born in the 1980s) will have "inadequate" retirement income at age 70. Raising the retirement age could worsen this outlook.
- Changing work patterns: Millennials might need to adapt to longer careers, potentially requiring mid-career retraining or shifts to less physically demanding roles as they age.
- Health considerations: Working longer could have health implications, especially in physically demanding jobs.
- Social Security concerns: Many millennials (41% in one survey) already doubt the availability of Social Security when they retire. Raising the retirement age could further erode confidence in the system.
- Workplace dynamics: With multiple generations working together for longer periods, there could be increased intergenerational challenges and opportunities in the workplace.
- Lifestyle adjustments: Millennials might need to adjust their long-term life plans, potentially delaying major life decisions or altering their expectations for their later years.
- Potential benefits: On the positive side, a higher retirement age could lead to longer earning periods and potentially larger retirement savings, if millennials are able to remain employed and save effectively.
Overall, raising the retirement age would likely pose significant challenges for millennials, potentially exacerbating existing financial pressures and altering long-term career and life plans.
CNBC Money Report - By Cheyenne DeVon,CNBC
Our Take:
If you're in your 30s and concerned about your retirement savings, you still have ample time to get back on track. Here are some strategies to help you achieve your retirement goals:
Focus on Your Savings Rate
Instead of concentrating solely on your account balance, which can be affected by market volatility, pay attention to your savings rate. This is the percentage of your pre-tax annual income that you save for retirement each year. Fidelity recommends a savings rate of 15%, including any employer match.
Adjust Savings Rate Based on Age
If you're starting your retirement savings in your late 30s, you may need to save more aggressively compared to starting earlier. According to Anne Lester, a retirement expert and author of "Your Best Financial Life: Save Smart Now for the Future You Want," beginning at 39 requires a higher savings rate than starting at 32 or earlier. Fidelity suggests saving 18% if you're starting at age 30 and 23% if you're starting at age 35.
Utilize Auto-Escalation
One effective method to increase your savings rate is through auto-escalation. This feature allows you to automatically increase your retirement contributions by a certain percentage each year. For example, you could set your contributions to increase by 2 or 3 percentage points annually until you reach your target rate.
Save Windfalls
Mentally prepare yourself to save a portion of any financial windfalls, such as raises or tax refunds. As Anne Lester points out, these windfalls are a painless way to boost your retirement savings since you're not sacrificing any existing income.
By implementing these strategies, you can improve your retirement savings and work towards achieving your financial goals.
According to Odaily, recent data disclosed on platform X reveals a significant disparity in Bitcoin ownership between different generations in the United States. The Baby Boomer generation, despite holding 51% of the nation's wealth, equivalent to $78 trillion, has less than 10% of its population invested in Bitcoin.
On the other hand, the Millennial generation, which owns just 9.2% of America's wealth, has over 50% of its population holding Bitcoin. This suggests that Bitcoin represents an asymmetric opportunity for the Millennial generation.Instagram
Our Take: This suggests that Millennials view Bitcoin as a significant opportunity to grow their wealth, likely due to its potential for high returns and the attraction of digital and decentralized assets. Baby Boomers, on the other hand, may prefer traditional, more stable investments.
YouTube
The Struggles of Millennials and Gen Z: Why It's 8-10 Times Harder Than Before
Florida Real Estate TV
Discover the shocking reality that millennials and Gen Z face in today's economy. From low incomes to skyrocketing housing prices, this YouTube video delves into the challenges they endure.
#MillennialStruggles #GenZChallenges #EconomicReality #YoungGenerational Hardshps #IncomeInequality #HousingCrisis #FinancialBurden #EmploymentIssues #YouthEconomy #GenerationGap
Book Review
“Millennial Money Makeover: Escape Debt, Save for Your Future, and Live the Rich Life Now”
by Conor Richardson
"Millennial Money Makeover" focuses on guiding millennials through financial challenges such as escaping debt, saving for the future, and living a prosperous life.
Our take: Implementable Takeaways for Millennials
Debt Elimination: Prioritize paying off debt to achieve financial freedom.
Savings: Consistently save and build an emergency fund.
Investing: Start investing early to take advantage of compound interest.
Mindset: Cultivate a positive financial mindset to sustain wealth.
Compared to other financial books for millennials, "Millennial Money Makeover" offers a comprehensive and actionable roadmap with a strong emphasis on mindset and practical steps, distinguishing it from more theory-based approaches.
Quote for the Week
"Millennials who invest in their financial education today will enjoy financial freedom tomorrow.”
Retirement Savings Quiz for Millennials
At what age can you start contributing to a Roth IRA if you have earned income?
Last week’s quiz question: What is a commonly recommended percentage of income to save for retirement?
Answer: A commonly recommended percentage of income to save for retirement is at least 15%. This guideline helps ensure that individuals build a substantial nest egg to cover living expenses, healthcare, and other needs in retirement. Starting early and saving consistently can maximize the benefits of compound interest, making it easier to achieve financial security in later years. Adjusting contributions based on personal financial situations and retirement goals is also important to meet specific needs.
Use this quiz to check your knowledge on retirement savings and ensure you're on the right track to securing your financial future! The answer will be in next week’s issue of the newsletter.
Thank you for reading this edition of Gen Y Financial Times. We are thrilled to have you as part of our growing community dedicated to achieving financial success. Whether you’re just starting your financial journey or looking to refine your strategies, our newsletter offers valuable insights tailored specifically for you.
Your journey to financial freedom doesn’t have to be a solo endeavor. Let’s learn, grow, and succeed together. Stay tuned for our upcoming issues, packed with even more valuable content and opportunities to engage with our community.
Remember, your feedback and participation are what make this newsletter truly special. Feel free to reach out with questions, suggestions, or to share your own financial success stories.
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Best Regards,
The Millennial Financial Times Team 💖
July 16, 2024
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