Guest Post: Riya Sander
Many individuals who are in Generation Y are now in their 30’s or are approaching this time in their lives. For many people in this age group, the tumultuous years of early adulthood have passed, and individuals are now starting to settle down, raise a family and focus on their careers.
While many are becoming more serious about life in general by the age, others have very little understanding of important financial planning concepts necessary to secure a stable future.
If you are included in this group, you may want to learn more about this so that you can improve your financial planning efforts.
Let’s look at some of the common financial mistakes individuals in this generation make!
Failing to Save for Retirement
Generation Y has the incredible advantage of having time on your side. Time is a critical factor in the money equation, and this is because time is essential to maximize the benefits of compounding interest, dividend reinvestments and more. When you start saving for retirement earlier in life, you will more likely reach your retirement goal and live a comfortable life in your golden years. You also may have to save and invest less money overall because the money that you do invest can grow more significantly over time.
Ignoring Employer-Matching Contributions
Many employers offer an employer-matching contribution as part of their benefits package. However, in order to take advantage of this benefit, you must be actively contributing to your retirement plan. Employers may match up to three percent of your income, and this means that you may be passing up on thousands of dollars of essentially free money that your employer is offering if you fail to take advantage of this. At minimum, you should be saving and investing enough money to maximize the employer-matching contribution available through your workplace.
Being Unwilling to Take Financial Risks
Many individuals in this generation have a very low tolerance for financial risk, and some are steering clear of the stock market altogether. This is understandable given that individuals in this age group have seen two significant financial busts early in their lives. However, there are safer ways to invest money while still taking advantage of the benefits of investment. For example, you can choose safer stocks to invest in, and you can diversify your portfolio. When you fail to take financial risks, you also fail to capitalize on the possible rewards.
Not Buying Life Insurance
Another common financial planning mistake relates to the avoidance of life insurance. Life insurance provides your loved ones with important financial benefits if you pass away. It may seem unlikely that you may pass away this early in life, but accidents and illnesses can and do happen. In addition, you are not getting any younger, and you will pass away at some point. Life insurance is far more affordable when purchased as a younger adult, so now is a great time to lock in a low rate and to ensure that your loved ones have the financial protection that this type of coverage provides.
Not Maximizing Earning Potential
There are seemingly more ways to earn money than ever before thanks to technology. Many in this generation are so focused on saving money and moderating risks that they fail to focus on the benefit of earning more money. These are individuals who may have significant debt and who have serious financial concerns, but they are not taking advantage of every opportunity to earn money. For example, they may not be asking for annual raises or job hopping as much as previous generations to earn a higher income. Many also are not taking advantage of part-time second jobs that could provide income necessary to eliminate debt more quickly.
Failing to Plan a Will and Trust
Planning a will and trust may seem like something that much older or wealthier individuals would do, but the reality is that wills and trusts can be used to safeguard your family’s financial future. You never can tell when the end will come, and you should take time to set up your finances so that they can easily be passed on to your heirs. Lawyers for wills and estate matters can assist you in this aspect of financial planning and can ensure that your assets are passed to your heirs without hassle when you pass away.
Ready to take charge of YOUR financial future?
If you are like most individuals in this generation, you can relate to most or all of these traits. These are traits that ultimately can damage your long-term financial security, and now is a great time to improve the situation. Create a plan for how you can tackle each of these issues now, and act on your plan to enjoy a better financial future.
Riya is an inspired writer, passionate about traveling, lifestyle and encouraging startups. With spending her years in business administration, she understands the importance of productivity at work. Riya never stopped finding new ways to create her work productivity. Follow Riya on Twitter.