Does the Generation Y face similar financial problems as their parents? What kind of frustrations are they facing with their financial and investment experience.
Lets us take a look at what the younger generation can do to be financially free:-
1. How to get started
If you hear them, you will realise that they are not sure how to get started, even to the point of going out there to find a job. The older generation would say as long as I find a job that gives me good pay I will be fine but Generation Y would like to have a job that not only gives them good pay but also something that they like and can enjoy.
Then again if they have a job, they will wonder “where do I get started?”. Pay off my student loan first? Buy stocks? – What stocks to buy? Shall I put my money into mutual funds or start a small business? Shall I commit to real estate investment? Things get complicated these days as there are so many investment opportunities out there in the market place. When given with too many choices, the less likely are we to make a decision and we normally ended up not doing anything at all.
I would encourage young people to start with enhancing their knowledge by reading. Remember that you do not have to know everything about investing to get started. Investing gets easier once you start. There are lots of easy ways to start, like putting your savings into a low risk mutual fund account. From then on you should try to understand your personal barriers and your risk level. Are you game to take risk? Are you comfortable to long term commitment?
2. Change the mindset
Know what you spend and how you spend your monthly income. Do not do a guessing game with your hard earned money. Most of the young generation do not know specifically where their earnings go.
You will be surprised that if you make a notation of what you spend daily, you will definitely find a chunk of your money being spent away on “rubbish”. This is definitely a waste of hard-earned money.
Two important things; one, get to know where your money is going; two, make it go where you want.
Change that mindset, you have to be bothered with where your money goes otherwise you will end up having no money.
3. Put up a personal budget and plan
Once you realised that you have been wasting your money, you would want to re-look at what you have been doing and put up a plan. Write a list of the constant (fixed) monthly expenses. Tally that with your net income and see how much you have left. Then, re-adjust your variable expenses to fit into your earnings. Ensure you apportion 20% of your income to your savings first. Read about “Pay Yourself First” to learn more.
From this exercise you will definitely find out where all your money has been going and you will be able to change the tune to put a greater portion of your earnings into investing. Money investment will give you greater satisfaction in the long term.
4. How to invest
There is a difference of being rich and wanting to be rich. A lot of us are caught into the frenzy of hot stock tips, day trading and other fancy alternative investments. Those investment tips are well written and very tempting and motivating and they put you in your dream world. The world of wanting to be rich. They are designed to sell magazines and are not really good investment advice.
Usually the buy-and-hold, long term strategy investment, as advised by Warren Buffet is the best bet. Patience is the virtue of life. Do not get caught up in the “hot tips” lifestyle, you cannot afford to get burn, not even once in your lifetime.
Buy stocks with fundamentals, the ones you can hang on to for long term with good dividend yield. Avoid penny stocks that can give you high percentage of earnings but with no solid hold. Use your head not your heart whenever investing is concerned.
5. Live a debt-free life
The best principle of life is still to “live a debt-free life”. A very simple rule – live within your means. Do not overspend. Ensure that your budget is well planned out and live within your budget. Forget about living up to the Jones. Ironically, the grass is always greener at your neighbours. The envy of seeing your friends living in huge bungalows, driving exotic cars and living in sheer luxury is something but you may not be aware, people living in this lifestyle might be living on edge.