Considerations for how to achieve financial independence
Millennials are beginning to slowly understand the seriousness of not being financially literate and prepared.*50% of millennials in America have student loan debt, are planning on taking on debt, or are currently paying it off, this up and coming generation of indebted college educated young adults are in for life long payments and indentured servitude to the mess their brought upon themselves. Financial independence is seemingly one of the least interesting hobbies and focuses for millennials today, likely ranking on the bottom of the totem pole with online shopping, gaming, and streaming movies and music being the top three for the majority of college students. Are millennials not drawn to being financially literate and responsible because they find it uninteresting or is it because mindless activities like movie watching, video game playing, and social media time wasting are clouding their judgement? I believe that in order to prepare this next generation for the future and help them avoid becoming wage slaves they must be more conscious of their spending, saving, and investing. The easiest thing millennials can do for themselves is change the way they spend their money, thereby taking the first baby step towards securing their financial futures.
The items and activities that millennials spend their money on today certainly blow the minds of the generations that came before them. For example, the most recent well-known food trend, “Avocado Toast”, spells out the exact reasons why millennials are doomed for financial failure. Spending $10 on slices of toasted bread with a thin spread of avocado paste has taken Millennial food culture by storm and is a revered meal by many.
Baby Boomers and older generations cannot understand how people in debt can afford to spend good money at restaurants for food as unsubstantial as avocado toast, let alone paying for food at the rackets that are today restaurants. When you’re making money on your own and paid off the loans, then and only then should a millennial even begin to consider spending money on things like avocado toast.
It’s not just the food that they go overboard on either. Items like iPhones, gaming computers, speakers, electric long boards and much more are nonessential purchases for the most part. Non-essential products are those that are not necessary to get a job done or really fulfill any part of our lives so why have them? The answer stems from the belief that those purchases are deserved and reasonable to have. When you are in debt you do not deserve things, you OWE things and, in this case, very expensive things like in the form of interest paid on your loans. The unspoken rule of being financially independent is that you do not live outside your means and you spend as little money as possible as if your life depended on it, which it will overtime.
Once the spending sprees stop, then and only then can you begin to save your money. Having money in a savings account is a foundation to financial independence because it can ensure you won’t have to use a credit card to incur debt on necessary payments.
That being said, the idea of leaving money in an account just sitting there is like a kid and a cookie jar for a millennial because the urge to spend is so great that they can convince themselves of making nearly any purchase in the moment. It’s said that hindsight is 20/20 so why can’t that same thinking be applied for the present? When you begin to think about the long term or future repercussions of your choices made today, you will being to have a greater respect and understanding for leaving money aside at all times.
Emergencies happen and when a millennial gets in a car accident with no insurance how are they expected to pay for the repairs considering they spent their last weeks’ check from Chipotle on a new Bose Bluetooth speaker? Saving the money, you earn today for the future is applying the principles of good money managing.
Money saved is multipurpose and aside from paying off debts should be used to secure your own future after all is said and done. For example, investing in a Roth IRA can ensure that money which you have deviated from your other pool of savings can grow tax free.
There is pandemonium over digital currencies and crypto-currencies today and millennials are particularly engaged in the buying and selling of these highly risky coins. Considering crypto currency trading is essentially trading high risk currency with little regulation and no preventative means to protect investors from market manipulation, these coins are perhaps one of the worst investment modes any young adult could ever participate in especially when 50% of them are in debt.
Despite the fact that younger people can handle more risk than those who are older than them and can come back after experiencing great losses, I believe that if you put money away in a Roth IRA to accumulate funds over a great number of years, you can save enough to be able to make larger payments in the future and not be tempted to spend much of your pay check. This is a future oriented goal that millennials should consider just like the other examples because a future oriented mindset will prepare you for any disaster that comes your way and for any success to be had in the future.