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Millennials (also known as Gen Y) typically encompass people born between the early 1980s and late 1990s – i.e. people currently aged between 25 and 40 years old.
This is a unique and important phase of life. For many, 25-40 is the age when you start a career, get onto the housing ladder, forge a long-term relationship and start a family.
All of these milestones involve money. Yet generating the income and wealth you need to achieve them is not always straightforward. In this guide, our Norwich financial planners offer a financial planning guide for millennials in 2023, helping you gather the information you need.
We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at no cost to you:
The importance of early goals
For many young people, understandably, there is less urgency in establishing a clear set of financial goals. After all, retirement seems a long way off.
Maybe you are still enjoying the rush of getting a paycheque and using it to explore your newfound freedom as a young adult, such as enjoying lavish holidays with friends.
Whilst it is important to use some of your money for fun, many young people later regret not starting a financial plan sooner.
By the time you enter your early 30s, or even before this, you may be facing some large expenses that you wish you had more money for – such as a wedding or mortgage deposit.
Consider taking a bit of time to imagine yourself in 5-10 years. Where would you like to be doing? Where are you living and who are you with?
This process might reveal some short/mid-term financial goals to work towards. For instance, if you want to save for a mortgage deposit, how much might you need? If the figure is £30,000, say, then over 5 years, you might need to put aside £6,000 a year (£500 a month) to reach it.
For some young people, a yearly sum like this might seem like a lot. Try not to worry. The point of this exercise is to try and focus your mind and discern what is possible and the options you might have to achieve your goals.
Explore your financial tools
With some goals in mind, how can you best move towards them?
This is where you could start considering different saving/investment “vehicles” to speed up your progress. Let us take the £30,000 mortgage deposit again, as an example.
A monthly saving of £500 might seem steep if you are setting this aside completely out of your own pocket. However, one option might be to use a lifetime ISA (LISA) to assist your savings.
In 2023-24, you can put up to £4,000 into a LISA each year and the UK government will “top up” your contributions by 25% – up to a maximum of £1,000.
Over 5 years, therefore, this would add up to £5,000. When you subtract £5,000 from £30,000, you end up with a £25,000 target instead for your mortgage deposit. This might lower your monthly saving to £416.67.
You may be able to reach your goal sooner, however, if you team up with someone else to buy your property (e.g. a spouse, sibling or trusted friend). Each individual is entitled to their own LISA allowance.
So, if each of you saved £4,000 per year into your LISAs (£8,000), you would get a joint £2,000 “bonus” from the government towards your first property purchase. This potentially gets you to £30,000 in three years with each of you contributing £333.33 per month.
Consider the bigger picture
Although it may seem very far away, be careful not to neglect your retirement.
Yes, it is true that you naturally start to build up a State Pension when you begin employment (i.e. by growing your National Insurance record). However, the future income you will get is unlikely to cover all of your living costs in retirement.
For instance, in 2023-24 a “comfortable retirement” might cost £20,000 per year. Yet the full new State Pension only provides £203.85 per week – or, £10,600.20 per year. In other words, you need to also think about building up your own retirement savings alongside your State Pension.
If you are employed, then you will likely be enrolled on your employer’s workplace pension scheme. In 2023, your employer must contribute at least 3% to this pot and you must also contribute 5%. However, this is not guaranteed to give you the future retirement you might want.
Speak with a financial adviser to gain a clearer picture of what you might need for a comfortable retirement. Starting a plan early in your career will give you more time for your pension contributions to grow (using compound interest) – potentially taking pressure away from your monthly retirement savings in the future.
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at no cost to you: