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Is Retirement Harder for Millennials?

 

Is retirement harder for millennials?
If you asked me about my Roth IRA at this moment in time, I would just give you a look of distress. The follow-up would be some grumbling noises since I wouldn’t want to discuss it. Then I would quickly change the subject. Anyone see the new Captain Marvel news?!

Saving for retirement is hard. Then it’s easy. Then it’s not so bad. Then it’s hard again. The tough part is having to actually see the money disappear from my hands every month.

Not long ago, my retirement savings were automated. I hadn’t gotten a Roth IRA yet and all I had was a 401k with my employer. I didn’t think anything of it. Countless articles and people older in age would tell me with terror in their eyes to sign up and contribute to my 401k.

Well-intended advice that falls short.

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I was contributing to my 401k! #responsible Every two weeks when I would get paid, money would automatically get taken out and put into my 401k which had an employer match. Easy, breezy.

Not anymore. Since I changed jobs, my new position doesn’t offer a 401k plan. Saving for retirement has become a very conscious thing. In my current situation, I can’t do automatic transfers to my Roth IRA, it has to be done manually.

Physically seeing the money go out of my bank account and into something I won’t access for the next 45 years? It’s freaking hard. 

Then I think back to a conversation I had with my dad about his retirement. He, along with many people from his baby boomer generation, didn’t properly save for retirement. My dad is 57 years old and only has a small amount in his 401k.

Luckily he has a healthy pension to look forward to as well as a decent size monthly social security check. Retirement will happen for him when he hits 67. One of the lucky ones.

While many baby boomers are having trouble dealing with retirement, a new focus is on millennials. Is retirement harder for millennials? How the heck are we going to to do it?

Student loans

Many people are graduating university with over $30,000 in student debt. The class of 2016 graduated with an average of $37,000 🙁

This increasing debt is causing shifts in life. With a high loan payment every month, little financial literacy, and a small salary, stashing money away for retirement isn’t a big priority for people. Pushing off investing until the late twenties and early thirties, they’re losing out on the power of compound interest.

High cost of living

Everything seems to be making leaps past the inflation rate: higher education, healthcare costs, homeownership and more.

More materialism

Everyone wants the biggest house, nicest wedding, brand new car, and cool new iPhone 7. There’s a reason the minimalism movement has gained popularity in the past few years. Materialism has been ahead of it and some people don’t want it anymore.

People are moving into big houses they can’t afford, buying new cell phones they don’t need, and generally not being conscious of their spending. Constant advertisements and things like Amazon Prime two-day shipping, one-click ordering and Amazon’s Dash button make getting things super easy. The barrier to entry with spending has been lowered.

Longer life expectancy

Longer life expectancies make the traditional retirement age of 65 more unlikely. Social security payouts are going to be a lot smaller for millennials than they are currently for baby boomers.

Are you ready to live well into your 90’s? Retirement planning is going to involve 25-35 year forecasts with our money.

With pensions being a thing of the past (even the U.S. military is cutting them), higher costs of living, and more debt, is retirement harder for millennials? I don’t think so. In a way, retirement is easier for millennials.

Millennials have resources at their fingertips that didn’t exist for previous generations: hundreds of personal finance websites and blogs offering money management insight, mobile apps for brokerage accounts, and even robo-advisors like Betterment and Wealthfront taking care of investing for you.

What do you think about millennials and retirement? Do you think retirement is harder for millennials? 

Money Realizations Through Comfort Zones

Often times, the best way to figure out how to cut expenses is to go outside your comfort zone.

Comfort zones. You usually hear about them from some motivational TED talk or those inspiration junk food posts on Instagram. They’re most often used to help people toss their fears and worries and try new things.

Could stepping out of your comfort zone force you to get better with your money and see what type of expenses matter? I think so. Actually, scratch that, I know so.

It’s possible to have money realizations through comfort zones. It’s even more likely when you step out of them.

Before I stepped into the world of personal finance, I always thought I was good with money. I didn’t have credit card debt, didn’t have a car payment, put money into savings every month, and my student loans were manageable.

Well I wasn’t so good at money. I didn’t have credit cards so I wasn’t actively help build my credit as much as I could. I saved money but never considered combing through my expenses to see where I could cut back. And small purchases that added up were what killed my bank account every month. Things weren’t so good after all. Wha oh.

In a change of pace, I moved to Thailand for a new job and everything suddenly became different. I’m sure you’ve read the typical internet story of someone going out of their comfort zone and ~*~realizing their true potential~*~. Well this one is about how my view on money and monthly expenses changed.

When compared to western standards, Thailand has a low cost of living. Moving here caused me to get out of my comfort zone money wise. As time passed on, the expenses I had in my previous situation didn’t seem so necessary.

My entertainment “fun” budget got drastically altered. I no longer had Hulu, Amazon Prime, and Spotify. Money spent on movie rentals and tickets were tossed. These were all individually small expenses that I justified under “having things that bring me entertainment and joy”.

My food budget changed. With a time consuming full time job and a long commute, I used to eat out a lot. Having food expenses that were out of whack made budgeting confusing. Constantly seeing the smiling Thailand street vendors and the act of intentionally eating better finally made my food expenses become more under control.

The biggest thing I got rid of was my auto insurance. I really don’t like driving cars. Good public transportation is a better fit. It’s what made me so resistant towards the common act of people my age financing new cars when they really shouldn’t.

Now my monthly expenses total less than what I was spending back in my previous situation in the U.S. Thailand is great but I know I’m not going to stay here for super long so returning to the U.S. (and having a higher standard of living) is a given. My mindset, however, is here to stay.

My perspective towards “need” expenses has changed a lot.

Being here, in this new place, caused me to question expenses I normally would have shrugged off.

Hulu subscription? Oh, well it’s only $8.65 a month and I get to keep up with my favorite shows! Spending $8 eating out? Oh, it’s not that much, plus I’m in a hurry! Paying more than I needed to for auto insurance (because it’s not like I could have negotiated it or anything).

I mention this because so often people say they can’t save much money because most of it goes to bills and expenses every month. For some people that may be the situation, so growing income would be a better focus to have. For most people, they can cut their expenses more.

We have to periodically remind ourselves of what is essential. Excess often lies in familiarity and comfort.

Has your mindset towards certain expenses changed? What things are worth and not-worth cutting out? 

I’ll Never Stop Telling People to be Frugal

Frugality is not one size fits all. Money management is centers around understanding your behavior habits towards money. Frugality makes you conscious+better at understanding your behaviors and getting financial confidence

Frugality is not one size fits all. It’s something more. It’s a mindset used to be conscious of spending and priorities.

Every person’s financial journey comes to a point where they put more emphasis on either saving more or spending more. These two opposing perspectives are not mutually exclusive. Frugality isn’t something that has to be tossed aside in favor of making more money. They can co-exist.

Throughout my varying levels of frugality (broke college student frugal, entry level salary frugal, all encompassing general broke-ness 🙂 ) there have been critics about my level of frugality. Every step of the way. Some were simple joking around while many were bitter comments on my lifestyle.

Last summer

My car squeaked as I pulled into the driveway to park. Along with the periodic squeaking, my car would do a series of beeps when I turned the ignition off.

Why don’t you just get a new car already? You have a job, stop being cheap. 

My older brother looked in disdain at the car. Like others, he keep insisting I needed to get rid of my 12-year old car with 190,000 miles and go ahead and get a new car. Not another used car, not a pre-owned car, but a ~new~ car.

You want to buy a new car because then you know everything is brand new and you don’t have to worry about constant repairs. 

This was mentioned to me over and over by several people. Buying a new car was a “good” buy, they said, because it was reliable and making the monthly payments would help my credit score.

Being a person who focused on the “making more” approach, the thought of getting a new, better car started to creep up.

Why not get a new car? If I focus on making more money then I will be able to afford a car payment. A new car would be more reliable…

BOOM. Lifestyle inflation.

My frugal mindset quickly snapped in. I didn’t want to buy a new car. My 12-year old, 190K+ mile car was running fine. There was the repair I would have to do ever so often but the repair costs didn’t come close to what I would have been spending on a monthly car payment.

At the time, I was working my first full-time job out of university. With lots of student loans and an entry level salary to boot. I didn’t want more debt. I didn’t want to buy a new car because it was “the right” thing to do. I didn’t want to have a more costly “nice” apartment, mindlessly go to the movies every two weeks because “it was something to do” and charge $12 drinks to my credit card. I didn’t want any of that.

I want to pay off my student loan debt in a timely manner and focus on the writing and design projects I did in my free time.

During my first year out of college, several things weren’t a priority to me:

  • Going to the movies
  • buying a new, “nicer” car
  • getting a ~cool~ apartment that took 40% of my pay
  • Mindless hookups and hangouts
  • “get together” lunches and dinners
  • extravagant vacations
  • shopping
  • and many more…

Frugality stems from deciding what you really value and want in life. For me? I wanted to be debt-free. I didn’t want to buy a new $29,000 vehicle and have payments hanging over my head for six years. Student loan debt was not something I wanted to carry around with me throughout my twenties.

I wanted to live a life on my terms. Working a job I enjoyed, being debt-free and having time during the weeknights to work on my writing and design projects. Weekends being able to be used for adventuring and being active, both physically and creatively.

Although, as many know, building your ideal life can take time. So frugality helped me implement strategies to get there.

For over a year after college, I lived without a massive rent payment, didn’t go to the movies or get drinks or brunch constantly, and I aimed to live a more simple life.

I would come home from my job, exhausted, then got to work on my passion projects. Every month I saved a good chunk of my income, threw it towards debt repayment, some towards retirement and some towards my emergency fund.

All the while, family and various people kept commenting on why I wouldn’t buy this or do that. I nodded my head politely and went on my way.

One day, an opportunity presented itself: moving to Southeast Asia, Thailand to be exact, to teach English.

Leaving my full-time job, moving to Thailand and teaching English for a monthly salary of about $850 USD? It seemed crazy, until I looked at my current situation and saw it could actually work.

Due to my frugal ways in the months leading up to leaving the U.S., I was in a good financial standing to take the plunge.

I didn’t have a car payment, wasn’t bound by an apartment lease, and I hadn’t succumbed to lifestyle inflation after graduating university. With steady progress made on my student loan debt, a moderate amount of savings. and not a lot of personal possessions, I was able to quit my job, move abroad and experience a new lifestyle.

People are different. They have different personalities, goals, and lifestyles. So why does frugality still carry this stereotype of being cheap and missing out on fun?

I didn’t clip coupons, reuse paper towels or do any of the other extreme measures people often associate with frugality. I made it work for me.

Following the various personal finance advice of cutting lattes, cable didn’t entirely fit for me. Neither did the opposing advice of “don’t focus on spending less, but making more”.

If I had focused on making more while ignoring the spending less, I would probably be sitting here with a hefty car payment to my name.

Frugality helped me understand the importance of being money conscious. It helped me understand how delayed gratification can sometimes be a good thing.

The debate between spending less and being frugal or instead focusing on making more money is a hollow. It assumes money management is about following rules. It isn’t.

[tweetthis]Money management isn’t about following rules, it’s behavioral. [/tweetthis]

I’ll never stop telling people to be frugal. If you are not conscious with your spending, do you think making more money is the ultimate answer? It most likely isn’t.

If money management were as easy as just following what financial experts said, then everyone would be great with following a budget and saving 10%, 20%, or 30% of their income. Making more money would be the key towards solving our money woes.

Making more money does have it’s place. It’s easier to put more towards retirement, save 50% of your income, and ramp up your emergency fund when you’re making $60K versus $30K.

However, it’s not the be-all answer (check out #26 on Broke Millennial’s post). Being frugal, no matter how much or how little you earn, is important. [tweetthis]Frugality targets behavior and willpower, big components to understand on the path towards financial confidence.[/tweetthis]

Everyone should be frugal in some aspect. It doesn’t have to involve obsessively clipping coupons, reusing paper towels or living without toilet paper. It’s flexible.

Frugality is adjustable. Make it fit your lifestyle. 

 

Do you practice frugality? How have you analyzed your behaviors and habits towards money management? Let me know! 

 

 

Weird Things I’ve Done to Save Money

Weird things I've done to save money. I lived in my car, stocked up on fast-food condiments and more.

What weird things have you done to save money? The personal finance blogging world often throws around different ways to save money. Cut cable! Brown bag your work lunch! Unplug things when not in use!

What do you value most? What are you okay with getting rid of? I’ve heard of people even going as far as taking toilet paper from public bathrooms in order to save money. Ummm, okay, not for me.

Saving money all comes down to your own personal taste and priorities. It’s always funny when I see articles about saving money and in the comment section, there’s usually some disapproving comments about how saving money on this or that isn’t worth the effort, dumb, and so forth.

Why would you do that to save money! It’s not even worth it!

What? That’s crazy! No way I would do that. 

Well, if there is a thing living in Thailand so far has taught me, it’s that 1. hot water is not necessary for a shower 2. 20-30 showers are not a necessity and 3. Many Thai people either don’t have internet at their home or their internet isn’t fast enough to sufficiently stream Netflix *gasp* *chills* 

Let’s go through some of the ways I’ve gone about saving money.

1. I lived in my car for my first year of college

Probably the most extreme thing I’ve done to save money. During my first year of university, I didn’t get enough financial aid to cover room and board for the school year. Rather than take out some private loans (with crazy interest rates), I decided to live in my car.

It wasn’t ideal but I made it work. I hung out in the university library a lot, which had air conditioning, wi-fi, and big desks to work on (the necessities 🙂 ).

2. Getting a job that provided a free meal

Going through university usually means the rite of passage of working low-rung, minimum wage jobs. When I arrived at my college town, I started looking for jobs. I quickly found one at McDonalds (you want fries with that?) and got a free meal with every shift.

Usually I got to add extras to the food and even take some home. It made living the broke college life a little easier.

3. Saving condiments from eating out

Most of the saved condiments came from McDonalds that I took after finishing a shift.

4. Dollar Menu loyal

Sadly, the McDonalds dollar menu no longer exists in most places. Back in college though, it was alive and well. There were McDoubles, side salads, sundaes, small fries, large drink, pies, and 4 piece chicken nuggets, all for $1.00 each. I would usually pair up a “main dish” with fries or a salad for $2.17.

5. I kept store cups

I only kept a McDonalds cup. I would keep it in my backpack, order my food, then take it out and fill it up. It’s stealing, I know, I know. The habit died when I graduated from university.

6. Not washing my hair as often

This can be gross for some people, but it worked for me. I usually washed my hair around two times per week while in university.

7. Getting a “dumbphone”

The opposite of a smartphone. At one point a few years back, I decided to cut more expenses and felt I needed to get rid of my “expensive” $38.50 cell phone bill. I opted for a flip phone and got on a $10 a month plan for several months.

I now realize my “expensive” cell phone bill was probably half the cost of what most paid for theirs. You live and you learn.

8. College campus move out days=gold

At the end of the semester or school year, lots of students would throw out or leave a bunch of the school supplies, appliances, furniture and more (that their parents probably bought them).

Me and a friend went through at the end of one year and gathered up a bunch of school supplies, a small table, and a microwave.

Looking back at the somewhat weird things I’ve done to save money, it makes me curious as to what others have done. During my serving days, I know a big one many people seem to do: ghetto lemonade.

Ever heard of it? It involves getting the free water, then asking your server for more lemons (I can confirm, waiters hate this), then adding sweetener and the lemons to your water. Wha-la! DIY lemonade.

What weird things have you done to save money? 

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