7 Secrets of Financially Savvy Gen Ys
Generation Y is the term used to describe individuals who were born approximately between 1981 and 2000. This is a tech savvy generation that has been impacted by world and social events during formative years for them. For example, many grew up or came of age at a time when others were making a fortune off of the stock market, but many were also paying close attention when the global markets collapsed in 2007 and 2008. This is also a generation that has been impacted by high levels of unemployment and a tight job market that makes it difficult for younger and relatively inexperienced individuals like them to get a job in their fields. Clearly, this is a generation where some individuals have struggled financially, and others have seen their friends and peers struggle. Despite this, some in this generation have become very financially savvy, and some lessons may be learned by paying attention to the efforts these savvy individuals make.
Save a Portion of Each Pay
In recent years, it became a highly publicised fact that many individuals were simply not saving enough money. Stories in the media about those impacted by job loss and foreclosure also were filled with details about individuals who had little to no savings. Financial experts generally state that savvy individuals need to have at least three months’ worth of expenses of savings available in liquid assets, and savvy individuals generally will exceed this with at least six to nine months’ worth of expenses. Saving a portion of each pay is a great way to increase a savings account balance, and some of the most financially secure in this age group have made saving a regular habit.
Do Not Get Overextended Financially
Younger adults in Generation Y who are financially secure also have gone to great lengths to avoid taking on debt. They understand that some debt is necessary to establish a solid credit rating, but they keep low balances on their credit cards, or they pay their balances off in full each month. These are individuals who generally live below their means so that they do not have to turn to credit cards for purchases. They also make it a practice to save up for items they want to buy, such as furniture or electronics, rather than charging the balance with the intention to pay it off later.
Buy a Smaller House than You Can Afford
Many in Generation Y saw friends and family members lose their homes due to foreclosures. This may have been because their adjustable mortgage payments escalated quickly and to an unaffordable level. It may have been because of job loss or other factors. Ultimately, the lesson learned by savvy individuals who were paying attention was to purchase a smaller house than what is actually affordable and to ensure that payments are manageable even in a worst-case situation.
Many in this age group have also grown up hearing about how older generations are woefully unprepared for retirement. They may have seen parents or grandparents stress about their finances in their older years. Through these observations, some of the most well-prepared individuals have learned to take advantage of the benefits of compounded interest and starting earlier in life rather than waiting until later to invest.
Pay Off Student Loans
It is unfortunately common for many adults to have high payments on student loans, and there are some instances when individuals are still paying on their own student loans when their children enter college. While the interest rate on student loans may be more affordable than credit card rates in many cases, the fact is that this is debt that is a regular part of a budget until it is paid off. Because of this, some financially savvy Generation Yers have decided to delay buying a house or making other major financial moves until they have paid off their student loans.
Create a Diversified Portfolio
Some in this generation have also seen their friends and loved ones struggle because of poor investment decisions. For example, many have seen others close to them suffer when the stock market collapsed in recent years, or they may have heard heartbreaking stories about others who have lost life savings because they had all their money in stocks. A diversified portfolio is a great way to minimise risk with investment, and those who are most secure in this age group make an effort to invest funds in different types of assets.
Be Cautious, Yet Take Measured Risks
Generally, Generation Y is a generation that is known for being financially cautious. Some in this age group are so cautious that they are afraid to use credit cards at all, and they may have no plans to ever purchase a house or to invest in the stock market. However, this type of mentality can be detrimental, and it can interfere with the ability to build a solid credit rating, to save for the future and to achieve financial stability and security in the future. The most financially savvy individuals are indeed cautious. These are individuals who have learned from events around them, but they still take measured risks for financial gain.
While these are practices that financially savvy individuals in Generation Y have adopted, the fact is that these are wise steps that most individuals can benefit from following. Those who are not secure with their financial situation may consider how they can incorporate these tips into their lives.