Although financial planning has a reputation for just focusing on retirement planning, there’s so much more to it. While older clients often start working with a financial planner to get ready for retirement, younger clients typically have different priorities.
Here at Guiding Wealth, we’ve noticed some significant differences between our millennial clients and those from older generations (Gen X and baby boomers). Millennials tend to have different financial priorities, and they often approach long-term goals, like retirement, differently.
So let’s talk about some of the most common considerations we’re seeing with our younger clients. Successful financial planning for millennials involves understanding their values and helping them identify realistic goals that match. Once those goals are set, it’s easier to make a plan to reach them.
Financial Planning Consideration #1: Saving Habits
There’s a stereotype that says older generations are much better at saving their money than younger people. And that might technically be true if you just look at the numbers. But the reality is so much more complex than the data shows.
Many Gen Xers and baby boomers did tend to save more of their income — but that’s partially because it was far easier for them to do so. Millennials have grown up in a much different economy. They’ve dealt with extremely high student debt, inflation, an unstable housing market, and wage stagnation.
Many of the millennials we work with are doing their best to save money. They know their priorities, have a clear budget, and follow it to the letter. And yet, some people will still say they’re not saving “enough” because their situation doesn’t match that of an older client.
But that’s simply not the case for many younger financial planning clients. They’re doing everything they can to manage their money well. So as financial planners, part of our job is to recognize the unique challenges that younger clients face and help them adapt to the challenges they’re facing.
Financial Planning Consideration #2: Spending Priorities
Now that we understand the dramatic differences in saving habits for people of different age groups, let’s look at spending. Again, this is another instance where you can find countless articles about how younger people are spending too much on coffee and avocado toast.
And while that may be true for some millennials, it doesn’t define the entire generation. Yes, younger people tend to have different spending priorities than their parents and grandparents. But overall, millennials are actually spending less than older people. According to CNN, spending for baby boomers rose 2.2% in May of 2023 compared to the previous year. Millennials, however, spend 1.5% less than the previous year.
What millennials spend money on is different from older generations too. As the oldest millennials become part of the “sandwich generation,” they’re often spending more on things that make their lives easier, such as housecleaning services, dog walkers, and grocery delivery. Older millennials also tend to buy fewer pieces of clothing, choosing quality over quantity.
A good financial planner takes the time to understand every client and recognize that they each have unique needs and priorities. As we here at Guiding Wealth work with more millennials, we’re helping them make financial plans that allow them to care for their kids and aging parents while still making progress toward their own long-term goals, like retirement.
Financial Planning Consideration #3: Investing Methods
Should millennials be investing in the stock market? It depends on their goals and resources.
For some millennials, especially younger ones, it’s enough to simply contribute to their 401(k) and focus more on immediate financial concerns, such as paying student loans or saving for a home.
Other millennials are prioritizing their investments and working with planners to build a diverse portfolio that can help them meet their retirement goals. Neither option is necessarily better — it’s all about making a financial plan that matches your values and top priorities.
Focus on Making the Next Best Decision
So if you’re a millennial, what should financial planning look like for you? The best place to start is by reminding yourself that you don’t have to do exactly what your parents and grandparents did. Your world is different from the one they grew up in, and it makes sense that your financial decisions will be unique as well.
Financial planning isn’t about following a set of traditional rules. When you’re in your 30s, your spending and saving habits probably won’t match those of your retired parents, and that OK. Instead of trying to figure out how to make your finances more like theirs, focus on making the best decision for your life right now.
Maybe you aren’t interested in saving for a home yet. Perhaps you’d prefer to keep renting and have the flexibility to move more easily or travel. Maybe you’d like to start expanding your family, or maybe you’d prefer to make a plan that allows you to retire early. The “right” answer is the one that matches your values.
Perhaps you aren’t really sure what your financial priorities are. A financial planner can help with that too. When you work with Guiding Wealth, we’ll help you identify the things that matter most to you and align those values with realistic financial goals. Then, we’ll help you make a plan to reach them.
If that’s what you want, we’d love to work with you. Schedule an appointment online to get started.