Question No. 5: Finance advice for a millennial
Q: what Finance advice do you have for single millennial people who aren’t planning on having kids? what should they do to set themselves up for retirement/future if they don’t have kids to look after them?
—Millennial Without Kids
Perspective #1: jean
Dear Millennial Without Kids--
Disclaimer! I am not good at money stuff. But I want to be good at money stuff. So while I can’t give financial advice, I can share some tips that my friends who are slightly better at money stuff have given me. Maybe we can embark on these goals together?
I have heard it is good to invest in index funds. The Little Book of Common Sense Investing says to invest in mutual index funds, preferably the S&P 500, and to keep it there for the long term, at least 10 years. Apparently, Warren Buffet also abides by this investment strategy? Low risk, long term growth.
I have also heard it is good to invest in real estate. If you have good credit, you can get a bank loan with a good mortgage rate to buy property, and then you can sell it down the line (or flip it sooner) for a profit. In fact, some people say this is the best kind of investment you can make.
I have also heard there is a crazy boom around crypto these days. And not just crypto like Bitcoin, but crypto like NFTs. NFTs are not cryptocurrency, but people are using cryptocurrency to make, buy, and sell NFTs, which seem to be turning a crazy profit for some people (see Beeple, NBA Top Shot, Paris Hilton!). I don’t know if any of it is a good idea, or how long it will last, but if you are wanting to embark on a HIGH RISK venture, this is something you could look into. Also, if you are a digital artist, it’s maybe not so high risk, but a way to make an actual living?
Do you have a Roth IRA or 401k? That, plus Social Security (assuming it’s still around), seems to be the actual way to plan for retirement. I had a 401k through work. I imagine many workplaces provide this, and some unions for freelancers (like the Hollywood industry unions). If not, you can open and contribute to your own. I’ve heard great things about Roth IRAs for years and how we should all have one, but I have yet to verify if this is the case. Some type of non-taxable retirement fund, though, seems wise!
I’m sorry I couldn’t be more helpful, but I am just figuring things out one day at a time!
Yours truly!
Jean
Denny, Sunnie, or Jean — Denny and Sunnie are retired Korean American boomers who are also ex- husband and wife. Jean is their daughter.
PERspective #2: Rose
Dear Millennial Without Kids,
I am not going to lie, I am delighted to have an excuse to give a little financial advice at this time in my life. This is a very new thing for me, having spent most of the first four decades of my life thinking as little about money as I could get away with. There were two major changes that precipitated this shift for me: 1) I went to business school and finally learned many practical concepts that I had somehow (perhaps intentionally) avoided soaking up along the way; and 2) a friend told me about their experience using the YNAB method, and I decided to give it a go.
No, my advice is not to get your MBA and start using a specific budgeting app. There are a zillion ways to get to what is at the core of those two specific actions—knowledge and awareness. Perhaps you already know the basics about the time value of money and the ways that debt can help you build wealth if you use it right. If so, congrats! You are miles ahead of where I was just a couple of years ago. If not, then find a way to educate yourself in whatever way suits you—Khan Academy videos, Call Your Girlfriend episodes, anything. Armed with some basic level of knowledge, the next step is awareness. What are you actually spending money on? How predictable is your income? What kinds of savings have you done so far? I used the YNAB method to get a handle on all of this for myself, but I really think any system for monitoring, planning, and sorting your money flows will do the trick.
I like to joke that YNAB has changed my life, but in a way, it really is true. I am not sure that budgeting has dramatically changed my financial position, though I think it is likely that I spend less or at least more consciously than I did before tracking. But the most marked change is the awareness. I cannot overstate how empowering it is to feel confident about what my true money needs really are, and knowing with certainty that I could go X amount of time without any income if shit hit the fan. The simple act of erasing the mystery around my financial picture has been transformational. Could this be helpful for you, too? If you have a firm grip on your expenses, you can set realistic savings goals for yourself (e.g., x% of your income), and consider investments you could make to build wealth (e.g., investing in a vacation rental property). I have never been able to get myself excited about retirement savings specifically—there is no guarantee we will live long enough to enjoy it!—but I can absolutely get excited about the prospect of freedom from a j-o-b. When I frame it this way to myself, suddenly money is a tool—a freedom-giver—and I am motivated to pay attention.
I hope this is helpful, and good luck!
Sincerely,
Rose
Rose is a gray haired and wise future version of one of the many middle-aged Sarahs in Flyover Country.
perspective #3: delta
Dear Millennial Without Kids,
First, a reminder that even if you have children, you can’t guarantee that they will be able to care for you as you age. Your question presents a good planning exercise for us all, whether we have children or not.
I think of the answer to your question in two parts: your finances, and your holistic plans for your older age. Consider your assets: your monetary savings and various types of investments are assets; your health is also an asset, as are your friends, community, and wider network. Envision a long game that is partly but not purely financial. (And don’t forget that, financially speaking, the other side of the coin of not having children is that you will also bypass the expenses of having children; this is money you may choose to save for your older age.)
Financially speaking, start saving in a regular way that is meaningful for you even if it doesn’t feel like it’s adding up to a lot; it will add up over the years. Save a regular amount that works for you and that gets you into the habit of saving; when you get comfortable with a level of saving, you might consider saving more. You may want to speak with a financial adviser about investing for your age relative to when you want to retire, and how to hit on the right mix of bolder investments and lower-risk selections so the money you are saving can grow steadily in the background. Your employer may provide access to a retirement savings account (and may match some portion of your contributions); if you are self-employed you can look into options like an IRA, a solo 401k, and other financial products.
To get a sense for the firm financial costs of older age — and how those costs vary depending on your needs — look into the cost of senior living options in the area where you live, or where you want to live. Investigate senior communities that factor in some level of senior independence and that have some services and costs included; you might also research the cost of a full-service caretaking environment, or the cost of hiring a caretaker to come to your home to provide daily support or care. Remember as well that you won’t be aging alone. Think about your relationships with the people close to you: these are the people who will be aging alongside you. You might even think creatively about the possibilities of aging in place together; what would it look like to live together with friends and other families in a community, and plan for the hire of caretaking support for that community at large?
As you consider your assets holistically, think about managing the health of your body and mind now and in the future. (I’m specifically thinking about Ruth Bader Ginsburg, and her pushups.) Your health is an asset just as your financial assets are assets. The longer you are able to stay independent, the more manageable your monetary costs will be. Today, this means regular exercise, a healthy diet, visits with a primary care physician, getting all the usual tests at the usual ages, and staying on top of your personal risk factors.
One’s first impulse can be to focus on the financial aspect of aging and retirement, but you won't be able to simply buy your way to health or independence or caring relationships with the people around you. All these intertwined qualities come together to shape your elder years. There are few guarantees whether you have children or not, but the thoughtful planning you do now will serve you well at any age.
Warmly,
Delta
Delta is a curious observer and dedicated student of humans and their intriguing ways.