Top 5 Questions I’m Asked As A Millennial Financial Advisor

“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffet

Buffet is the master of money metaphors. I like this quote because it sums up the importance of creating a financial plan. But knowing why a financial plan is important, and knowing how to create one are two different things.

So to help you create a financial plan that lines up with your goals…

Here are my answers to the 5 questions I get most as a LearnLux financial advisor.

How do I use my paycheck to make progress with ALL of my goals?

There’s a lot competing for your money. Bills, retirement, student loans, vacation…how do you cover it all with your one paycheck?

Start with a plan. That’s all a budget is – a plan that tells your paycheck where to go.

Here’s how to get set up:

Step 1: Review your budget. Tracking your income and expenses tells you what’s left over for important goals. Don’t have a budget? Use an interactive digital app to create one and easily keep it up to date.

Step 2: Define your goals. How much do you need, and when do you need it? Write down the details of your most important goals.

Step 3: Rank your goals by importance, starting with your financial health. That means having health insurance, at least $1,000 saved for emergencies, and saving at least enough to get the full match in your employer’s retirement plan.

Step 4: Tell your money where to go. Set up automatic transfers for savings and investment goals, and use autopay for bills and minimum debt payments.

Still not sure how to divvy up your paycheck? Try the 50-20-30 rule.

How do I get started investing?

Want to travel the world, start a business, buy your dream home, or retire when you’re 45. We all want to live our best life – now, and in the future.

Investing can get you there. But when you’re just starting out, it can feel…well, complicated.

Here’s what you need to get started investing:

• Well defined goals. There’s no need to belabor how important a plan and clear goals are. But it’s really hard to know how and where to invest without both.
• Learn the basics. Index funds, volatility, risk tolerance, bulls and bears…skip the jargon, and take an online course with everything you need to know about investing.
• Start now. A common mistake is waiting until you have “enough” to invest. Do this instead. Start now, even if it’s a small amount. If you’re worried about the stock market going down, consider a strategy called dollar cost averaging. It’s a fancy term that means investing a set amount on a regular basis. As in, investing $100 each time your paycheck hits your bank account.

How much cash should I keep in my savings account?

First, earn a little extra by keeping your cash in a high-yield savings account.

As to what you should do with your cash – it depends.

Have you saved at least $1,000 or one month’s income for an emergency fund yet? If you’re already there, aim to save 3-6 months of income total for emergencies.

Once you’ve hit your emergency savings target, use extra cash to make progress with other goals like investing, paying off debt, and even vacation. If you’re unsure where to start, work with a financial advisor to create a plan that makes the most of your cash.

How much do I need to save for retirement?

Millennials are curious how their 401(k) balance stacks up their peers’. But how much you need to save depends on which version of retirement you choose.

• Do you want to retire at 45 or 65?
• Will your lifestyle in retirement cost more or less than it does now?
• Do you plan to retire completely, or would you prefer an interesting part-time gig?

The younger you are, the harder it is to predict the future and answer these questions.

So if you’re wondering what your 401(k) balance should be by now, here are some helpful guidelines:

• Contribute at least enough to get your company’s full match (free money!). If you can afford to contribute more, aim to save 15% of your income to stay on track for retirement.
• How much you need to save for retirement is personal, but there are rule-of-thumbs that can help you assess your progress thus far, like this one from Fidelity.

If your numbers don’t line up perfectly, that’s okay. Set yourself up to reach your version of retirement by doing three things – start now, have a plan, and adjust along the way.

What’s the fastest way to pay off student loans?

Stuck. That’s how Millennials feel about student debt.

Six-figure loan balances and high monthly payments hold us back from other goals. Which is why there’s a collective interest in paying them off asap.

The best strategy depends on your situation, but here are a few worth looking into:

• Make extra payments. Paying more than the minimum can save you thousands in interest and shave years off your loan payments. Use calculators, like these from Student Loan Hero, to create an early-payoff plan that fits your budget.
• Consider refinancing. A refi can save you money and help pay off your loans faster, but it’s not the right move for everyone. Use calculators, like this one from SoFi, to research this option while rates are near all-time lows.
• Ask your employer for help. More companies are offering to help pay off their team’s student debt as an employee benefit. It’s usually a monthly benefit – say $100 – over a certain number of years, or up to a lifetime maximum.
• Take advantage of cash windfalls. Being smart about using cash windfalls – like tax refunds, bonuses, or that $20 check from Grandma on your birthday – can help you pay off your student loans faster, but it comes with obvious trade-offs.  

About Anthony Carlton:

Anthony is a Financial Advisor at LearnLux where the team is building digital tools that help employees create a plan for their money. For more information on COVID-19 and your finances, head to https://info.learnlux.com/covid-19 where you can signup for a LearnLux individual account free of charge through July 15th. Connect with LearnLux on Instagram and Twitter.