5 Things Baby Boomers Could Learn from Millennials
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ebt is an alarming trend around the globe. According to Fortunly.com, the global debt is now three times the size of the collective GDP of all the countries in the world. Credit is an excellent tool to achieve strategic goals on both national and personal levels. Abuse of credit, however, does not end well. Sooner or later the debtor must pay what is owed, and many American Baby Boomers are about to suffer the consequences in retirement. A recent study reveals that 64% of American adult employees are on their way to retiring broke. Forty-five percent of them are set to leave the workforce without any retirement savings at all. Viable options, such as using a Home Equity Conversion Mortgage, have proven to be effective in delaying the need to claim Social Security benefits, but they are merely short-term solutions. Baby Boomers must explore all avenues to spend their golden years free from financial distress. Future generations like Millennials are facing similar retirement planning struggles, and they might be able to share some possible solutions.
The Genius of the Millennial
For better or for worse, the worldview of Millennials has been shaped by the events they experienced during their formative years. The members of this generation were coming of age when 9/11 happened and they grew up seeing the United States involvement in perpetual wars in the Middle East. When the 2008 financial crisis wiped the wealth of millions of American families, many Millennials either just entered the workforce or were next in line. Also, the ballooning student-loan debt in the United States has been placing countless Millennials in a deep financial hole. The Millennial Generation saw the fragility of wealth first-hand at a young age, and they are using this knowledge to overcome their financial challenges and prepare for retirement. While Baby Boomers may not have the luxury of time to dramatically re-calibrate their financial habits, it is never too late to make a plan. Below are five millennial practices Millennials and Boomers might use to address debt. that help them properly manage their finances.
1. Embrace Frugality
Millennials love to enjoy life, but they are hardly guilty of overindulgence. Actually, these young adults put a premium on experiences more than material possessions. They are willing to give up certain luxuries, such as brand names, in order to stay on the right path toward financial freedom. Baby Boomers who are used to extravagance might find it difficult to transition to a humbler lifestyle. But some habits can be overcome. Start small to score easy victories. Jot down all expenses, and stop spending on unnecessary products and services. Calculate basic living expenses, and then see what guaranteed “paychecks” you have to cover that. If you don’t have enough, include more in your plan; if your plan already covers basic expenses, it’s time to plan for “playchecks!”
2. Save, Save, Save
Like earlier generations, Millennials usually struggle saving cash; they are more determined and more proactive, though. Everyone has money problems, but the resolve of the Millennial Generation in terms of accumulating assets (slowly but surely) is laudable. When it comes to saving, it must be done with strategy. By and large, there are three funds to be built to attain financial freedom: the rainy day fund, the emergency fund, and the retirement fund. As a general rule, one fund should be built first before the others, but saving up for each is easier said than done. Once needless expenditures are out of the way, however, bank deposits should grow more quickly even when the income stays the same.
3. Stay Away from (New) Debt
Everyone, even the wealthiest individuals, are burdened by some kind of debt. However, only those addicted to it experience financial ruin. Post-retirement debt creates an inconvenient imbalance between income and expenditure. Apart from reducing the number of liabilities, staying away from new financial obligations matters too. Millennials pay with plastic, but they do not share the affinity of older generations for credit cards. Many millennials actually use consumer credit just to increase their FICO scores. Baby Boomers are not strangers to credit card debt. The process of paying it off might feel eternal, but there is always a light at the end of the tunnel.
4. Invest Conservatively
Unlike previous generations, Millennials are not too crazy about the stock market. They buy stocks, but they tend to gravitate toward less risky investment vehicles such as bonds. Less risky assets usually come with lower returns. Baby Boomers, compared to Millennials, should take more caution, as one economic crisis could jeopardize their dream retirement. As Baby Boomers approach their golden years, they should evolve into conservative investors. After all, they have less economically productive time to recover and regain whatever money they might lose if the stock market crashes.
5. Adopt Technology
Last but not least, Baby Boomers should adopt technology, specifically fintech. Electronics are just as good a tool for accessing finance-related information as they are a means of communication and a source of entertainment. Millennials are more receptive to modern technology because they grew up in the age of the Internet. Baby Boomers have to be more open-minded to adopt savings apps, digital wallets, and other wonderful innovations that make it easier to master financial management at any stage of life.
Baby Boomers and Millennials face the same retirement challenges. But they are both under unique circumstances. The next generation of retirees might feel like building a sufficient retirement savings is fighting a losing battle. However, with the right training and tools, financial professionals can effectively convince and meaningfully assist Baby Boomers in taking the key steps to stay afloat post-retirement.
See you after step one,
Tom Hegna
