Tax refunds, according to Forbes.com, this year, are mostly likely to go towards debt repayment, savings or wait for it… plastic surgery. Figuring out how best to use your windfall this tax season can be daunting, especially for the bourgoning millenial generation. The world is seemingly theirs for the taking, should they be so inclined.
The other day I sat down with my good friend and financial advisor, David Benjamin of Bethesda, Maryland to discuss some of the most common financial concerns of the millennial generation.
So, unlike Gen-exers who, myself included, never cared or worried to much about much of anything, The millennial generation, having come of age during difficult financial times, seems much more tuned in worried about the future.
What would you say are the biggest financial concerns of your millennial clients?
Today’s rising generation struggles with finding a balance between saving for the future and living in the now. For example, I hear this question all the time;
“My parents always tell me to start saving for retirement early. I can barely afford to pay rent, service my student loan debt, and maybe go to the movies. Should I be saving more?”
Obviously this is not the recipe for everybody, it’s a pretty good guideline. I think the hardest part is accepting that your student loans will be with you for the next 20-30 years.
The second question I hear often is regarding investing.
“My grandparents left me a little money that I will probably use in the next few years towards, wedding or home down payment. How can I invest this money so that it grows before I need to spend it?
You should look at an FDIC insured cash account or CD. Typically online banks will have the best rates. I know this isn’t very sexy, but if you were to buy a stock or fund that lost money and you were counting on that cash for an important purchase you could be disappointed if the investment was down and you took a loss.
Any general advice to help millennial get ahead?
Cut your overhead. It seems like younger people pick the neighborhood they want to live in and then “compromise” on getting an apartment that didn’t have granite countertops. But often even the cheapest apartment in that trendy neighborhood is out of their budget. I also see recent grads living at home with their folks for a little while after college, but driving a Mercedes or dining out a lot. Wasn’t the purpose of living at home to save up some money? Just because you made a sacrifice to live at home doesn’t mean you deserve to splurge.
What’s the best thing you think millenials have going for them financially?
The are very savvy consumers. They grew up with the Internet at their fingertips,so doing their homework on purchases comes quite naturally. Furthermore they evaluate the value they receive on subscription services. If they aren’t watching a lot of tv, they cut the cord. If they aren’t using the gym, they quit and reallocate those funds towards something they will get a return on their investment from.
When investing, what should they be considerate of?
Frankly, for the past decade the markets have been extremely volatile. If you assume the average person starts to “tune in” at age 18, many Millenials have been hearing about the markets for about the last ten years. With the economy sluggish and markets wild during their entire adulthood, there becomes a tendency to be more conservative. If things improve over time, I think that bias towards conservative investments could hurt their investment returns over the long run.
Perhaps the best solution would be to embrace moderation this tax season. Instead of throwing all your chips in one basket, why not divide your refund into thirds. By contributing equal amounts to the three most popular areas; pay off debt and repair your credit contribute to investment portfolio and for the love of Instagram, get some plastic surgery.
No matter what, remember that all the money and beauty in the world does not, I am told, buy happiness. Alas, that is something we must find on our own.
May happiness be your companion always my friends. Until next time, be well!