We're young and dumb. We don't work hard. We've got it so easy, if only we knew. We expect technology to give us the easy way out. We struggle with the basics of communication. We lack common sense. We spend more than we earn. We're dependent and entitled. How will we ever survive on our own?
Pretty much any article you read today on millennials will be littered with these accusations from prior generations. Fortunately, our grandparents said the same exact things about our parents. And if you talk with your grandparents, I bet their parents ridiculed them the same way. So either this belittlement is just a rite of passage, or we actually are getting softer and softer by the decade.
Debate the toughness/weakness, smarts/stupidity, talent/ineptitude all that you want; the one fact we can all agree on is that millennials are slower to develop than any generation before. For the first time since 1880, young adults from 18 to 34 years of age are more likely to live at home than on their own, according to Pew Research.
This has far-reaching effects, such as delayed earning power, delayed home ownership, delayed marriage and delayed family dynamics. This state of affairs then trickles down to economics, and how we guide millennials through financial planning.
Here are five tips I follow when advising this unique demographic:
1. Pay Yourself First
Once your millennial client has secured his first big-boy job, encourage this simple, but timeless mantra. Create a budget in which the young professional can aim to save 20% of gross income, broken down month-to-month or even weekly.
They're going to want to spend this money they never had before. That's fine, but only if they have prioritized responsibilities first.
Millennials are sadly misled as society has taken the liberty of redefining what's necessary. The luxuries our parents or grandparents once splurged on are now considered the status quo. Like Ben Franklin once said, "Beware of expenses – a small leak will sink a great ship."
2. Stay Liquid
If cash is king, it's a deity for a young professional. I promote six months of income or expenses for my client's "rainy day" emergency fund, or as I prefer a "sunny day" opportunity fund.
This is a goal that won't be achieved overnight, so coach them to stay patient. If your millennial client really wants out of the house, let them know it's okay to rent first. They can't afford to become house rich, cash poor already. Your client should be able to walk away from the closing table with that cash cushion still intact.
3. Purchase Disability Insurance or "Income Insurance"
