How Millennials Can Benefit from Working with a Financial Advisor
As a Millennial, you may not think you need a financial advisor until you’re older, when perhaps all of your debt is paid off and you have a sizable nest egg in the bank. But doing so is like holding off on going to the gym until you have a six pack of abs and can run a six-minute mile. It doesn’t make much sense.
It’s true, there are some financial advisors out there who only want to work with older, wealthier families. But there’s also a rise of financial advisors who cater to the unique challenges you face as a Millennial. That’s the case at Scarborough Capital Management.
As a financial advisor in Annapolis, MD, it’s exciting to see so many young people get an early start on their financial planning. And at Scarborough Capital Management, we want to help them get started making smarter financial decisions and working toward their financial goals.
Financial Obstacles Millennials Face
Millennials face all sorts of financial obstacles they don’t have to overcome alone. Some of these concerns include:
Student Loan Debt
One-third of Millennials have student loan debt. Even among older Millennials, ages 33 to 40, only 32 percent have paid off their student loans; the other 68 percent are still paying down their debt more than a decade later. This student loan debt often causes Millennials to delay getting married, buying homes, pursuing more fulfilling career opportunities and even having kids.
A financial advisor can help you get in front of your student loan debt by helping you:
- Create a written budget that allows you to live below your means and make extra debt payments (while still having some fun along the way)
- Sort through repayment plan options
- Explore your options, such as refinancing, consolidation, deferment or even forbearance
Job Loss During COVID-19
The U.S. has experienced a huge unemployment spike due to COVID-19. At the height of the pandemic, the unemployment rate hit 13 percent – and a Pew Research Center study found that 35 percent of 18- to 29-year-olds and 30 percent of 30- to 49-year-olds say they or someone in their household had lost their job during the pandemic.
Having a financial plan in place can help prepare you for the unexpected risk of a job loss so it doesn’t completely derail your life if it happens.
Many Millennials are trading the stuffy 9-to-5 work lifestyle for one of freedom and flexibility through self-employment. In fact, one in three Millennials plan to look for a new job once the pandemic ends if their employer no longer offers any work from home benefits. Some of these individuals may look for a new employer, while others may start their own business to get the flexibility and work-life balance they’re after.
While this is inspiring to see, entrepreneurship is not without its challenges. Many self-employed Millennials find themselves suddenly responsible for:
- Paying quarterly, estimated tax payments
- Securing their own health insurance
- Finding clients
- Building a reputable business
- Budgeting, planning and projecting future income
- Setting up a business retirement plan
At Scarborough Capital Management, our financial advisors in Annapolis, MD can help you get your business finances off on the right foot.
Even though wages have increased in recent decades, this increase hasn’t kept up with inflation. Soaring rent, home prices and college tuition are three of the biggest culprits that make everyday living expenses especially tough for younger folks. Following a budget and a well-thought-out plan can be the key to getting ahead.
Almost 90 percent of affluent Millennials view becoming debt-free as a marker of personal success, according to The Balance’s Affluent Millennial Money Study. But achieving this goal can be harder than you may think.
Whether it’s credit card bills, student loans, personal loans, medical debt or a mortgage, debt can breed insurmountable anxiety that causes stress, fear and financial insecurity. Working with a financial advisor can help you see the big picture and create a plan to reach your goals.
Budgeting and Living Within Your Means
When your paycheck seems to get eaten up by rent, health insurance and debt payments, it’s easy to feel hopeless. Tracking your spending and making sure you live below your means is key to accomplishing your financial goals and still having room in your budget for socializing, traveling and all the other fun things in life. Are you sure that’s a task you can take on yourself? Do you want to?
On top of daily financial obstacles like paying off debt and managing employment, many Millennials also have major concerns about retirement. Some of these include:
Social Security Not Being There
In a TransAmerica study, 76 percent of Millennials said they were concerned about Social Security not being there for them when they retire. While we don’t expect Social Security to disappear completely, it could look a lot different for Millennials than it does today. For example, the full retirement age may creep up (as it already has) or the wage base may change.
Because it’s impossible to know for sure what Social Security will look like years from now when it’s time for Millennials to retire, it’s important to create a retirement plan early on. Figure out how much you need to save. Then you can create a plan for retirement, regardless of what Social Security looks like down the road.
As the average life expectancy continues to increase, more and more Americans plan to work at least part-time in retirement. Some plan to do so because they don’t think they’ll have enough saved, while others see it as an opportunity to slow down and focus on work they’re passionate about.
While working in retirement isn’t always a bad thing, it can affect your Social Security benefits and taxes. Working with a financial advisor beforehand can help you plan for these changes, so you’re not blindsided later down the road.
On the opposite end of the spectrum, we’ve talked with many Millennials who plan to retire early.
At the end of the day, retiring early comes down to the math: If you save enough in a short amount of time, you may be able to live off your investment accounts and not have to worry about working another day in your life.
While this is definitely possible, and the number of people doing so is increasing, it’s a goal that could be easier to reach if you establish a plan early on. There are other important retirement factors to consider when retiring early, such as health insurance, which can be extremely expensive when it’s not supplied by your employer and you don’t yet qualify for Medicare. You’ll also need to make sure you save enough to cover you for a longer period of time, most likely. Instead of the typical 20- to 30-year retirement, your money may need to last 40 years or longer! Remember, in most cases, you face penalties for withdrawing from retirement funds before age 59-½.
More than any other age group, Millennials are also interested in investing according to their values. In fact, some say Millennials spurred the growth of sustainable investing throughout the 2010s and are the reason why it’s so popular today.
If social investing is something you’re passionate about, make sure you work with a financial advisor who understands that passion and will help you build a portfolio you can be proud of. At Scarborough Capital Management, we can help. Read our recent blog post: What is Social Investing? 3 Steps to Get Started.
How Millennials Can Benefit from Working with a Financial Advisor
Whether you’re a Millennial, a Gen-Xer or a Zoomer (Generation Z), you don’t need to wait until your financial life is together to seek financial help. At Scarborough Capital Management, our financial advisors can help you address the financial pains in your life (like debt and planning for a potential job loss) and chart a path toward your goals, whether it’s retiring early, buying a house, becoming your own boss or all of the above!
The financial advisors at Scarborough Capital Management are no strangers to the unique challenges you face as a Millennial. If you’re looking for a financial advisor who understands your frustrations, hopes and dreams – and is passionate about helping you build the life you want to live – let’s talk. Schedule a conversation with our team to see how we can help.