If you are anything like me, then setting goals is a great motivator to keep you on track. I have been doing this for several years now, both financially and professionally. My company makes me set yearly goals so I’ve adopted that mindset and set goals for my family’s financial future. Here is my list of 8 goals that I think all Millennial’s should have (and eventually celebrate).
1) Create an Emergency Fund (3-6 Months)
I’ll admit this took me forever to finally take seriously and accomplish. It’s really easy to let all other spending and debt repayments get in the way. My wife and I finally accomplished this just before we turned 30 and it felt great. We have approximately 5 months’ worth of living expenses saved. It’s shocking how comfortable you feel, financially, with that amount of money in savings. We both have Roth IRA’s and those are NOT included in our calculations – you shouldn’t include it either.
2) Payoff Student Loans (Before 30)
I accomplished this goal just before my 30th birthday and it felt amazing. Don’t let anyone tell you student loan debt is good debt. It’s not. So many people are drowning in student loan debt and think its okay because eventually their college education will pay for itself. That may be true, but your best path to financial success is paying off your loan as soon as possible and not keeping it around because you get a tax deduction. Pay it off then go out and celebrate. You deserve it.
3) Buy a Home (You Can Afford)
I have been a home owner for over 10 years now. Our first home was a smaller starter home that we lived in for 6 years. Over those 6 years we had enough equity to move up in home and purchase something larger our family could grow into – and possibly live in forever. Honestly, we did over-reach on our 2nd house, but it also forced our hand at budgeting and getting our financial house in order. It ended up being a blessing in disguise and we’re better off for it. Keeping your mortgage payments to 20-25% of your take home pay makes it much more manageable and a whole lots less stressful. If you keep it under 20% you will really be stress-free.
4) Saving $100,000 for Retirement (This is Just the Beginning)
It took my wife and me about 7 years to reach $100,000 (total) in our retirement accounts. I have a 401(k) with company match and she is independent with a Roth IRA. My balance was able to grow significantly faster with the company match. Hitting that 6-figure mark in our account was a great feeling. But it’s only the beginning because we (Millennial’s) need so much more than that to retire. This just reinforced to us that diligent saving and compounding interest really does pay off.
Are you wondering what it would take to reach $100,000? Simple. Just save $400/month for 13 years with an assumed return of 7% and you’ll be at approximately $100,000.
5) Save the Max for Retirement
I am honestly not quite there yet but I should be next year. We have been maxing out my wife’s Roth IRA for a few years now, and I opened a Roth IRA a couple years ago and have maxed it out both years. Now we are trying to rework our budget so I can hit the max in my company 401(k), which is $18,500. We keep pushing ourselves to live on less and every raise goes to the retirement account – not living expenses. We’re getting really good at this! By next year I am very confident that we will be saving nearly $30,000 of our own money (not including company match) for our retirement.
6) Save for College (529 Plans)
I opened a 529 college savings plan just days after my daughter was born. Remember the aforementioned goal #2 (paying off your student loan?). Well, I want to do my best to ensure neither my wife nor I or our daughter have to incur any type of student loan debt. The future cost of college projects to be extremely expensive (as if it’s not already) but we are trying to minimize that burden by saving monthly into our state sponsored 529 plan.
7) Payoff Your Home
This one is going take me a while to hit. It is a lofty goal but one that means a lot to me, and everyone for that matter. Living without a mortgage payment feels like a fantasy to virtually everyone. I want to make that a reality. But here is my struggle, any extra money I have now goes to retirement savings and college savings. We have even opened up a taxable brokerage account with Betterment to help potentially bridge the gap to early retirement. All of my financial energy goes towards those goals at the moment. Honestly, I would prefer to have a pile of cash in 15 years that I can do anything with (retire, work part-time, etc.) then living without a mortgage payment. As it stands now, with no extra principal payments, I will be mortgage free just before I am 50. I am going to see if I can shave off another years though.
8) $1 Million Retirement Portfolio (You and Your Spouse)
This should be every Millennial’s second biggest goal. Reaching $1,000,000 in your retirement account will feel utterly amazing. In actuality, not many people will even achieve this. However, if you are reading this blog then you have obviously taken your finances head-on. And you probably know that a million dollars doesn’t really go that far any longer. It certainly won’t for us Millennial’s once we reach our 50’s and 60’s. A million dollar portfolio will only generate $30,000 to $40,000 annually in retirement. I can’t live on that and I am sure you can’t either. Reaching one million dollars is a mega-milestone, but you should want more. Like twice or three times that amount for retirement. Make it happen!