What’s Your Millennial Financial Style?

Kid acting like office workerThere’s a lot that’s been said about Millennials, and there’s going to be a lot more. We’re the biggest workforce to date, and a generation who has seen huge changes come and go in a short amount of time. There are a lot of unique characteristics that social analysts are trying to watch, reading the augurs for a glimpse of what the future holds for societal change.

One of the most noticeable changes that Millennials are ushering in is money management. There are a few key differences between the way that youth between 18 and 35 are handling their money, as opposed to how their parents did. Some people see these changes and welcome them as a good thing; others worry about what it will do for the future economy. It seems quite clear that in a group of people even bigger than the baby boomers, there are going to be a lot of different styles and approaches to money. Here are four major personas that we’ve observed in millennial money management trends. You might be just one persona from the list below, or you might see a lot of yourself in several different identities. Wherever you feel like you fit, remember that there’s a smart way to do it, and a dumb one.

The Perpetual Student

There are quite a few of us out there who, for one reason or another, decided to get not just one degree (which is enough to put us over $100k in debt) but another one. Some of us chose this route because we were postponing entering the workforce, hoping for a better time. Others started working, but couldn’t find the passion that they wanted in the drone-jobs that made themselves available and so went back to school with a more focused goal. Others of us are simply getting a degree the first time around. In any case, there’s one sentiment we all pretty much share: we can’t really afford this! At first we tried to save up, working side jobs and putting money away, looking for scholarships and awards. But the truth is that once you see a statement telling you that you’re $100k in debt, and it’ll take you about 40 years to pay it off… well, that’s when you feel like giving up. You start to wonder, when does loan forgiveness kick in? And you don’t mind blowing another $1,000 on an indulgence because, psh, it’s nothing more than a month of student loan payments. If you’re in this boat, here are just a few gems of advice:
Man with new diploma

  • Prioritize the loans! It might feel like the interest payments will never let up, but if you can target the ones with the worst rates first, you’re going to start seeing significant changes in a year or two.
  • Set a plan. I know it feels like you’re not making much progress with those loans yet. But make sure that you set a plan and stick to it. It’s the only way to make progress, and it’s discipline that will serve you long after the loans are paid.
  • If you’re still a student, be strategic. The biggest advice post-grads can give is to consider whether your extra, expensive degrees will actually serve your career goals. Will it actually qualify you for a position that will help you pay off those loans reasonably?

Mr. Cautious and Conservative

You’ve seen what unwise management and rampant consumerism did to your parents because here they are postponing retirement. Whether that’s due to the recession or something else, you don’t want to fall into the same trap that your parents did. So you tend to go easy on your finances. You get by on less because you learned those skills during college and you don’t see the need to change just yet. You’ve built up your nest egg, and now you need to think about the next financial step, but you’re still gun-shy of risk, and so you don’t know how to trust your money to investment. You probably also don’t make all that much money, and studies show that millennials are working for tiny wages, much less than our parents were paid at our age when we adjust for inflation. What to do?

  • First of all, get comfortable with a little bit of risk. It’s part of the process of investment, and it’s really not as risky as you think. Although the market goes through peaks and valleys, it will climb up steadily over longer amounts of time. Even in the wake of the financial crisis, rates recovered and climbed. Eventually, it all evens out. Besides, you’re young! Now is the time for you to not worry about the fluctuations too much.
  • Your savings account is losing money. That’s right, even if you’re getting a few cents in interest (really, banks? That’s the best you can do?) every month, your money sitting there is depreciating, and not growing along with the rest of the market. So think seriously about investing, even if your approach is going to be mega-cautious. There are many conservative investment strategies out there that yield a whole lot more than a savings account.

The Energetic Entrepreneur

Woman posing at PisaAlright, you’ve gotten over the fear of risk. So, people sometimes lose their money in the market. At least they took a shot, right? Young adults today are more likely than ever to wish to go into business for themselves. And contrary to popular belief, it’s not just a whole generation of kids hoping to get stinking rich off selling an app, and then sitting in a pool floatie for the rest of their days. Most millennials are eager to think outside the box, start something new, make a name for themselves, and actually be free to do something they’re proud of, rather than being a cog in a bigger machine that’s probably owned by evil fat cats. I applaud you for taking risks. After all, you’re young and the time is now! However, there are plenty of ways that that idea can backfire on you. Here are some tips to keep your dreams in line:

  • Remember you have to put in the time. The entrepreneurial spirit is a beautiful thing, but it often takes a while to pay off. You might have to weather a few failures, and learn from your mistakes. Take trusted advice whenever you get it, and take precautions to make sure that a business bust doesn’t cripple you financially. Understand how business loans and investor relations work before you get tied up in them.
  • A good idea isn’t enough. The world is full of brilliant ideas that can’t get off the ground. It’s going to take a large amount of grit, savvy, and luck to create a successful business. So educate yourself all you can, and team up with people who offer strengths that answer your weaknesses.

The Free Spirit

Numerous surveys on buying trends show that millennials far prefer to spend their money on experiences rather than items. Perhaps that’s why travel is at an all-time high, and some traditional markets, like housing, are lower. This doesn’t mean that millennials don’t spend! They’re likely to spend more money on a unique experience, in order to support a brand they love, and even to support a cause that they believe in. These individuals are likely to blow their savings on an impromptu trip to the Caribbean, and also to shell out their spending money from the week to help with a humanitarian cause. What’s important to remember here is that these are not irresponsible spenders, although it might look like it to an older generation who valued very different things. Instead, they’re putting their money towards things that are most important to them. Here are some tips to make sure that your money is serving you, instead of vice versa.

  • Remember a balance between practicality and indulgence. Measures you take today to invest can support continuing the lifestyle you love even as financial responsibilities stack up.
  • Do your research. Because companies know that millennials are drawn to philanthropic causes, they’re likely to play up this idea without an actual passion for it. Conversely, some organizations are passionate about their cause, but they can also do more harm than help for some. As an example, look into the buy-one-give-one model of Tom’s shoes and what it does for local economies.


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