Financial Planning for Generation Y


As a member of “Generation Y,” you are a young adult in your late teens, 20s, and early 30s, born between 1980 and 1994. Also called “Millennials” or “Echo Boomers,” you grew up amidst booms in the stock and real estate markets, only to see each of those “bubbles” burst. More educated than any prior generation, you attained those credentials during a time of skyrocketing educational expenses.

In coming of age, many events and trends reinforced the uncertainty of your times. You saw the political and ideological divisions of the 2000 Presidential election, with its re-counts, “hanging chads,” and court decisions.  You witnessed on September 11, 2001, the single largest loss of life from a foreign attack on American soil. In the working world, increases in efficiency and agility added value to corporations, but destabilized the careers of your parents and others.

Adept with the many tools now available through the technological revolution, you have more information — and more choices — than ever before. However, with change occurring at a dizzying pace, you are also faced with a great amount of uncertainty and complexity. Your success depends on your ability to make good choices as autonomous, independent adults. In regards to your financial well being, here are seven action items to help you do that:

Develop a Sense of Ownership

With the term “ownership,” I am referring to accountability for your own quality of life and satisfaction. Your college years probably followed a clearly defined path. Now, no longer insulated in an academic setting, you will need to make many meaningful decisions yourself. Ask questions, seek out advice from those you respect, and question conventional wisdom when it does not ring true to you. In doing these things, you will carve out your own path — one best suited for you.

Consider Your Career Choices

first-jobObviously, your livelihood will play a large and important role in attaining financial peace of mind. In pursuing employment opportunities, it is important to know your own tastes and priorities. What tasks or purposes give you fulfillment? How do you want to balance work with personal or family life? Do you prefer an urban, suburban, or rural setting? Compensation is certainly important, but there are many other variables involved in choosing a satisfying career path.

Additional formal education and credentials may at certain points serve you well in your career. However, you should be careful in pursuing such credentials, ensuring that the advantages exceed the costs based on your situation and priorities. Regarding that graduate degree you are considering: Is the prestigious, “name” school necessary, or could you achieve your desired goal through a more affordable local institution or part time program?

Examine Your Inflows and Outflows

Look closely at your paycheck stub. There are many transactions taking place there, and each has a purpose. With every paycheck, you are likely paying state income taxes, as well as Social Security, Medicare, and other federal income taxes. In addition, you may be paying for health insurance to cover your medical expenses, and for disability insurance to cover an extended absence from work due to injury. Be aware of where your money is, where it is flowing to, and why.

Start Budgeting

Identify your financial situation and face it head on. This means acknowledging the balance and interest rate on your student loans and credit cards, and identifying your spending habits and where they might be reduced. Where possible, make extra payments (above and beyond the monthly minimum) on debt that you have, targeting high interest rate accounts first.

Get Educated

With the ample information now available online, set aside a bit of time to educate yourself on financial matters, particularly those that will affect your decisions. What investments are suitable for someone at your age and career stage? What are the key components of a mortgage, and what type might be suitable for a first time home buyer? Are you getting a tax deduction for your student loan interest payments?

Start Saving

Start saving as soon as possible. It is often helpful to set up separate accounts for specific purposes, i.e. an account for emergencies, such as a job loss or major illness (sufficient to cover at least 3-6 months of living expenses), an account for a down payment on an automobile or first home, or an education account for you or your newborn child. This way, you can visualize each goal, track your progress towards it, and celebrate your ‘little victories’ as you reach your milestones.

Don’t Forget the Long Term

Visualize yourself in retirement. What will you look like, and what would you like to be doing? Take advantage of your employer’s 401(k) plan, and any matching provisions, as these are great vehicles for tax deferral and retirement savings (and a perhaps happier reduction in your paycheck than the taxes mentioned above!). Roth IRAs are another useful, tax-advantaged vehicle. Your best ally in accumulating wealth is the length of your time horizon, so the sooner you begin, the more you will reap the benefits of compounding.

Michael Green
About Michael Green
Michael Green graduated from Catholic University with a degree in Politics. After graduation, Michael moved on to the University of Notre Dame for a degree in law. It’s an experience he draws from frequently as a financial planner. Since school, Michael has served as a bank trust officer, and for a long period as the Director of Planned Giving at his alma mater, Catholic University. His work put him in touch with the specific needs and concerns of the affluent, and gave him a particular expertise in charitable gift planning. Mike is a Certified Trust and Financial Advisor, a Registered Paraplanner (RP®) and a Certified Financial Planner. Mike works with the investment team at Pinnacle Advisory Group as a Wealth Manager.