Attention Millennials – Here is your game plan for retirement

A few months ago I got an email from a reader as a follow-up to this post:

You make a lot of great points in your previous post–I especially like how you said to own the banks themselves instead of mutual funds. Timing the market can also be a pitfall for eager first-time investors, so I’m glad you included the second and third bullet points as well. For the new post, I’d love to hear about how you learned this advice. Was it through making financial mistakes and correcting them, watching others make them, or just thinking logically? Essentially, if you could go back to your 20s, what would you do differently?

Thanks for all the questions.  I always find it interesting to hear from readers what they take away from my articles but also what they want to read more of.  Let’s dig into some answers to these questions…

On timing the market…

I guess I learned from my own experiences in my 20s, when I first got serious about investing using big bank mutual funds at the time, that money in the market that stays in the market tends to make money. I found the longer I held those mutual funds the more my portfolio value grew.  What I didn’t realize in my 20s was the financial haircut I was taking from owning those big bank mutual funds (via fund fees) over many years.

This is why I left the mutual fund industry.  Have a read.  If you own mutual funds now, while there some good products on the market, some of them charge horrific fees so the punch line is this:  high fees kill portfolios.

My advice to Millennials?  Ask about the money management fees associated with the financial products you own and seriously question if you’re getting value for money.

On making financial mistakes…

You don’t learn in life unless you make a few mistakes, this is my thesis at least, and I’ve made my share.  The key is to take some time to reflect as to learn from your mistakes so you don’t repeat them.  Easier said than done I know…

When it comes to personal finance and investing I’ve learned over time to challenge my assumptions, take time to reflect and question if I have enough information to make a good decision.  You don’t know what you don’t know so I think it’s important to assume you don’t know as much as you think you do.  Take time to ask questions, read books, read blogs, do the math and strive to find out more before making any big financial decision.  For example, don’t assume home ownership is better than renting.  That could be true for some people but not for you.  Don’t assume that all financial institutions are always after your best interests – these businesses are in the BIG business of making money for shareholders and that money might come from you.

You’re never going to get things right all the time but if you can avoid making major financial mistakes with loans, cars and houses you’re probably already on your to some level of financial wealth.

On what I’d do differently…my advice to Millennials

I don’t have enough white space on this page to write about all my mistakes thus far so I’ll share three below that should help most Millennials today and as they get older:

  1. Don’t be in such a rush. You’ll find that with time comes experience and with experience comes maturity.  How you see the world today is definitely not how you’ll view things a few years from now.  When it comes to big financial decisions, especially home ownership, simply don’t rush them.  There is no rush and you’re not missing out.
  2. Pay yourself first and don’t stop, ever. I’m not saying cut to back on coffee or tea or other small pleasures in life if you don’t want to.  What I’m saying is pay yourself first, $25, $50 or even $100 per week and never stop.  Your savings rate will be one of the biggest factors in determining your financial success regardless if this money is in cash, a mutual fund, an Exchange Traded Fund or a stock.  Just save where you can and when you can and don’t touch the money.  Your future self will thank you.
  3. Invest in you. Get a degree.  Work in a trade.  Try to educate yourself and prepare yourself for a job that’s in demand, keep learning and never stop.  I’m finishing up my second degree this year.  I’m even tempted to change careers eventually – maybe work in the financial industry as a Certified Financial Planner because I’m passionate about personal finance and this job should stay in demand.  We’ll see what I do but I know I need to keep learning and challenging myself, by investing in me.  I think you should consider doing the same.

Attention Millennials – that’s your game plan for retirement.  These things will help you now and for years into the future. 

Thanks for the questions folks.  Keep them coming.

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14 Responses to "Attention Millennials – Here is your game plan for retirement"

  1. Hey MOA,

    All really great, realistic points here. I now wished I had done #1 instead of rushing, to dollar-cost average the large sum of money I’ve pumped into the market in the past couple of months. In hindsight, it didn’t really make any sense and I could’ve spread out my investments. However, from the experience I know now what’s better… Been following the other two very consistently!

    Best regards
    DB

    Reply
    1. Thanks – glad you liked the tips. Again, just my perspective but I certainly wouldn’t have rushed into home ownership when I did in hindsight. Such is life. I also paid 3% interest on a car once. That doesn’t make any sense borrowing money, paying interest on a depreciating asset – does it? I think if Millennials can avoid making big money mistakes they’ll be just fine.

      Good luck with the journey!

      Reply
  2. Great points Mark. Not only is not rushing in to things great advice (although it can make for good stories 🙂 ) but with big decisions like buying a house, the things that the previous generation did are not the best guide.

    The world was different 10, 20, or 30 years ago. A great decision for your parents might be a life-long burden for you. A lot of things are very different now and all the rules have to be rewritten. Except the three you mentioned.

    Reply
    1. Thanks Richard. Absolutely right about the world being different…”factory” jobs that could last you a lifetime, you had to worry less about the future. Not so much now, you really need to be taking matters into your own hands, saving, investing including your human capital included.

      Reply
  3. Some very important and valuable points Mark. It also lead me to your other thread on the notes to yourself, which I had not seen before. Reflecting on the past and actually writing about it is a very worthwhile exercise for anyone serious about improving and moving forward positively.

    You are obviously walking the talk with your finances, investing in yourself and motivating others with your blog and leading by example. I just wish more people would read, listen and act more productively and responsibly with their own finances. There are so many good resources so easily available nowadays with the internet. Decades ago it was more difficult.

    Good luck to all the people out there who are already doing positive things with their finances and those who are looking to.

    Reply
    1. I find part of the beauty of this blog Deane is, it’s a living diary. The ability to document, reflect and learn from the past to shape my future is important to me. I guess it’s part of the reason why I enjoy it. I’ve made my share of mistakes, personally and financially but I hope I’m better person because of it. At least that’s the plan 😉

      Thanks for your contributions to the site.

      Reply
  4. Ditto here on the mistakes personally and financially. Fortunately we’ve been able to learn and roll on from them, and have mostly made good decisions and choices.

    Reply

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