Freedom Financial Asset Management: A Millennial’s Guide to Saving

Many millennials are seeing their salaries rise each year, but not seeing the same jump in their retirement savings. As pensions are being phased out, proper management of money becomes an absolute necessity to young workers hoping to retire one day. Over the broad time horizon from when a millennial begins earning money and when they will retire, millions of dollars are on the line.

Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t, pays it.” Compound interest could be the tool that allows you to retire early and comfortably. That’s why Freedom Financial Asset Management created this millennial’s guide to retirement saving.

moneyCreate a Budget

Budgets are a great way to get organized and see where your money is going. A budget does not need to be complicated. By getting down on paper what money you have coming in and where that money is going, you can begin to gain control of your spending. From there, you can redirect frivolous spending to retirement saving.

Understand Cash Flow

Most millennials need to learn the basics of cash flow because cash flow goes hand in hand with budgeting. At first, positive cash flow will mostly come from your paycheck, and later, return on investments can also generate positive cash flow. Money coming in will then be used for many things, including paying off bills and investing.

Don’t Get Caught Without an Emergency Fund

One of the easiest ways to get into financial trouble is to be without an emergency fund. Cash coming in is quickly spent on rent, investment, and debts. This means that if a medical emergency or expensive car issue comes up, you could be forced to use your credit card or cash out of an investment prematurely.

The high interest rates on credit card debt can leave you struggling to pay the bills each month. By being proactive and allocating a certain amount each month to your emergency fund, you can avoid this trap altogether. Try to save between three to six months of living expenses.

Sean Fox, co-president of Freedom Financial Asset Management says, “Start with the level of expense that causes you to rush to a credit card. Is it a car repair bill for $250? A medical bill for $500? That is the amount to start with. Have at least that available and keep building”.

Pay Yourself

Freedom Financial Asset Management wants you to build savings right into your budget. Try to cultivate the same attitude about saving as you would a rent bill. Paying rent is important, but that money goes to someone else. Make it a priority to pay yourself as well.

Fox says, “Create a simple budget line item for savings in the expense column to treat as a mandatory bill.” Many times, people who get bonuses or raises simply increase their lifestyle and spend more on entertainment and liabilities. Make sure as you make more money you invest more as well.”

Don’t Leave Money on the Table

Many employers offer a 401(k) or another retirement plan. These plans are tax deductible. Paying the full amount into this should be your top priority every month. Many employers offer to match your contribution up to a certain amount. Not contributing enough to receive the full match is equivalent to not collecting free money.

Freedom Financial Asset management wants you to know that even if your employer does not offer a match, there are important benefits to the 401(k). The tax benefits alone can potentially save you thousands of dollars.

Even self-employed millennials can access a retirement savings plan. SEP-IRA and a Self Employed 401(k) are two options available. These plans don’t require high initial investments and will have no or few fees associated with setup and administration.

Harness Compound Interest

The true power of compound interest lies in a long time horizon. Investing young and consistently will lead to you to significant savings.

Predicting for even a modest rate of return, over many years, a small monthly investment into a broad-based index fund can return massive numbers. Even if you can only commit to small amounts, start early to allow the compound interest to work its magic.

Take this example:

A monthly investment of just $100 with a conservative 7% return over 40 years would turn a $48,000-dollar investment into around $264,000. Given the same parameters with 10 fewer years to grow $36,000 turns into around $122,200.

Freedom Financial Asset Management wants to you to enjoy your golden years. Educate yourself, build good spending habits, and take advantage of retirement plans and compound interest so you can live the life you deserve.

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67 thoughts

  1. Good advice, Ula. Sounds much like Dave Ramsey. I would add one more thing. Try to pay cash for things, rather than using credit cards. Credit cards are just an easy way of buying something you can’t afford, for the most part. If you have loans (for cars, school, whatever else) and/or credit card debt, pay that off as soon as possible. You’ll be surprised how much more money you’ll have at the end of the month when it’s not going to those credit card companies.

  2. I’m definitely with Einstein on the importance of cmpd interest! Luckily back in school my headmaster made me take business organization (I wanted to study only science subjects) and that’s where I learned about compound interest and investing in general. It makes a huge difference over time – I’m a big believer in ethical stocks with high dividends (like alt energy or green buildings).

  3. Girl, not enough people talk about emergency funds. Honestly. I have yet to meet another person who has one, or even heard of it. Which brings me to the question, how much is enough? I have heard anywhere from 3 to 6 months of expenses, which to me sound a little excessive… I mean that money could be invested instead of just sitting there. What do you think?

    1. I agree with you that sometimes it’s better to invest if you’re able to, because you can always get more in a long run ☺🌹

  4. Love the 8th wonder of the world comment, very powerful. I have always struggled with the emergency fund set aside, especially with interest rates being so low for so long. My personal strategy is to max out my Roth IRA each year and if an emergency were to occur I would be able to pull funds out of that account. Obviously I would then lose future growth opportunities but I also would not have to worry about paying off interest and my money is earning while it is in the account.

  5. Great tips, Ula. Amen to creating and living within a budget! Taking advantage of compound interest at a young age is very important. However, debts need to be paid off first! Imagine the saving/investment potential with no car, credit card, student loan, or any other debt payment coming out of your pocket every month. Even if it takes a few years to get the debt paid off without investing, you will still end up ahead in the long run.

    Save Strong, everyone!

  6. Glad to see people are preaching these very valuable lessons.

    “You either master money, or, on some level, money masters you.” – Tony Robbins

    Stay Hungry, Stay Humble

  7. this is great advice thanks for introducing this company they definitely know what they are talking about. I was wondering if you could comment on my last blog a bit of advice for it it seems like I could present better or may be add more examples like this article? Thank you in advance if you do.

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