For those of you that do not know me, I am the youngest employee of the Rappaport Reiches Capital Management tribe and… a millennial. I understand that word “millennial” does not always come with the best of connotations.
I mean... did you hear about the millennial who walks into a CEO's office?
Millennial: I would like a job.
CEO: Ok, how about $100,000 a year, with 5 weeks vacation, and a company car?
Millennial: No way! You must be joking!
CEO: Yeah, but you started it.
Millennials are presumed to be self-absorbed, addicted to their phones and social media and, most famously, ready to trade in their ability to buy a home for a daily oat milk latte and avocado toast. These generational stereotypes really get to me. It's just not true that millennials think investment diversification means having their parents send them money through PayPal and Venmo.
So, how does one start to spend less and save more? Here are some of my best ideas:
1. Prepare a budget and track your expenses against it. Are there areas that you can cut back on? Can you start cooking at home instead of takeout?
2. Set up an automatic savings plan. Based on your budget and discretionary income, decide on an amount that gets transferred into your savings account every time you get paid. Just set it and forget it.
3. If you receive a raise or a bonus, try to set a portion of those funds aside to help build your emergency fund. Yes, you have worked hard for this extra money, and yes, that trip to Italy may seem like an emergency (especially after this past year), but be prudent and save as much as you can.
4. While studying for the Certified Financial Planner exam earlier this year, I learned that the benchmark for an emergency fund is to have approximately three months (possibly more if you have young children) worth of expenses in a savings account. Once you reach this benchmark, then go to Italy! All jokes aside, once you are comfortable with the amount of savings you have accumulated, continue to put aside money in investment and retirement accounts.
As we find ourselves in the middle of a pandemic, when so many people have lost their jobs, been furloughed or have hours reduced, it has become even more evident that building an emergency fund is a necessity – whether you are a millennial with awful spending habits or not. And I won’t lie, I do enjoy avocado toast as much as the next millennial, but I'm coming to the realization that skipping it now and then was a step into adulthood and a step forward in the money saving process.
I'd end by telling another millennial joke, but my fellow millennials may be mad at me. The jokes hit too close to their parents' home.
So I'll end with an avocado toast joke.
A grandpa walks into the living room accompanied by a scruffy young guy wearing skinny jeans, sunglasses, and eating avocado toast.
Grandson: Who's that?
Grandpa: Oh, that's my hip replacement.
Rhea Ravindran, CFP®
Rhea is a Senior Client Associate at Rappaport Reiches Capital Management. Please connect with her below. She loves to talk about investing, financial planning, and her favorite movies.
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