8 Financial Goals for Every Millennial

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!


Wealth Calculator

I previously wrote about one of my favorite authors and books, The Millionaire Next Door by Dr. Thomas J. Stanley, and one of his key points within the book; Prodigious Accumulator of Wealth.

PAWs or Prodigious Accumulator of Wealth are those who are very penny-wise, live well below their means, save a large percentage of their income, and are not prone to the latest social trends. As the name Prodigious Accumulator of Wealth suggests, PAWs are phenomenal savers, not spenders, regardless of their age and income.

Wealth Calculator

I recently reread The Millionaire Next Door and the wealth calculator got me thinking where I stand based off my currents savings. For those not familiar with this wealth calculation, it’s very simple. Below is the equation.

Age X Gross Income / 10

Let’s pretend our fictitious friend Millennial Mike makes $50,000 a year and is 28 years old. Based off this wealth calculator, Millennial Mike would only be considered a PAW or Prodigious Accumulator of Wealth if he had $140,000 in savings (retirement, checking, savings, brokerage, etc.).

Age (28) X Gross Income ($50,000) / 10 = $140,000

I know what virtually every Millennial is thinking once they see this – no way could I save that much. Well, you may be right, but there is a reason why this term is only coined for extraordinary savers. You probably are not at this number yet, but it gives you a goal. It gives you a target. Aim high, Millennial’s!

Am I Wealthy? Am I a Prodigious Accumulator of Wealth?

Unfortunately, no. I am not an exceptional accumulator of wealth at the moment. I did my wealth calculation and I only have 78% of what I should based off my age. I calculated this for my wife and she is even farther off, as she only has 25% of what she should for her age. I actually consider us to be very diligent savers but we’re obviously way short.

How do you rank in terms of wealth for your age? Did you hit the mark? Or how far off are you?

I want this post to be a lesson for all of us Millennial’s to save more and live on less. That is how you truly grow your wealth. Find your wealth calculation number and circle it. That’s your goal, but it won’t happen overnight and it probably won’t happen in a couple years. It will take several years but stick with it. I know I will.

Roth IRA: As Old As a Millennial

Previously I wrote about the Roth IRA turning 20 this year (in 2018). The Roth IRA first became available in January 1998 when it was signed into legislation (thanks to Senator William Roth of Delaware). 20 years later it is still the single greatest retirement account for all individuals…especially us Millennial’s who are in low tax brackets. Stock market returns are really, really hard to predict. You know what may be even harder to predict? Your tax bracket at retirement!

In my past blog post on the Roth IRA turning 20, I also stated that if you had maxed out your Roth IRA since day one back in January 1998, you could expect to have a total balance of over $194,000 today in 2018! Maxing out your Roth IRA since 1998 would have costed you $81,500, but you would more than double your investment by having a balance of nearly $200,000 today.

We Millennial’s obviously couldn’t take advantage of the Roth IRA since 1998, considering our age and when we actually began working and truly were eligible to contribute to a Roth IRA of our own. I want to use this post to looking ahead and encouraging all Millennial’s to not only opening a Roth IRA, but maxing out a Roth IRA.

Did you know that if you open a Roth IRA today, in 2018, and max it out every year ($5,500/annually), you could end up with close to one million dollars? Based off a 10% annualized return over 30 years, an initial investment of $1,000 with an annualized contribution of $5,500 could net you a total of $922,000! That means you paid $458/month for 30 years ($165,000 net investment) and ended up with nearly $1,000,000.

What if you made the same investment but only for 35 years? Say from age 25-60. You would end up with over $1,500,000 by the time you were 60 and looking to retire (early).

If your timeline were even longer and you could invest that amount for 40 years (age 25-65), you could end up with nearly $2,500,000 by the time you were 65.

The Roth IRA Turned 20 in 2018

The Roth IRA (Individual Retirement Arrangement) first became available in January 1998. 20 years later it is still the single greatest retirement account for all individuals. The Roth IRA was established by the Taxpayer Relief Act of 1997 (Public Law 105-34) and named for its chief legislative sponsor, Senator William Roth of Delaware, hence the name “Roth” IRA.

For the first four years (1998-2001) the max Roth IRA contribution was only $2,000. Over the next three years (2002-2004) the max was $3,000. The Roth IRA saw another $1,000 increase in its max contribution over the next three years (2005-2007) to $4,000. It then again increased to $5,000 over the next five years (2008-2012). Today the maximum Roth IRA contribution still stands at only $5,500, where it has stood since 2013.

If you invested in a Roth IRA since day one through this past year (January 2008 to December 2017) you would have invested $81,500 of your own money. But how much would you investment be worth today? Based off a 10% annualized return your Roth IRA would have approximately $194,003. More than double your initial investment based off returns.

2018’s 10 Best Mutual Funds for Millennials

Looking for the best mutual funds of 2018 for Millennials? Look no further my Millennial friends, here is my list of the 10 best mutual funds for Millennials. I can’t guarantee that you will become a millionaire via these 10 best mutual funds, but I do know that with consistent investments via dollar-cost-averaging, while holding forever, will certainly get you one-step closer to one day becoming a Millennial Millionaire. Simply stay the course and keep on investing, regardless of market conditions. This is your surest path to wealth and financial independence.

2018’s 10 Best Mutual Funds for Millennials

  1. Target Date Funds (2050, 2055, 2060)
  2. Small-Cap Value Index Fund (VSIAX)
  3. Total Stock Market Index Fund (VTSAX)
  4. 500 Index Fund (VFIAX)
  5. LifeStrategy Growth (VASGX)
  6. Total International Stock Index Fund (VTIAX)
  7. Emerging Markets Stock Index Fund (VEMAX)
  8. REIT Index Fund (VVIAX)
  9. Balanced Index Fund (VSMAX)
  10. Intermediate-Term Bond Index Fund (VBILX)




My aforementioned list of the top 10 mutual funds for a Millennial is made up of all Vanguard funds. I absolutely love Vanguard and their funds, which are the lowest cost funds out there. Keeping your fund expenses low is extremely importing, and that’s what Vanguard has set up to do.

Target Date Funds

Number one on my list of the 10 best mutual funds for 2018 are target date funds. The three biggest players in the “target date funds” space are Vanguard, Fidelity Investments, and T. Rowe Price. They are virtually all identical, except that Vanguard is about 50 basis points cheaper, e.g. about 0.50% less to manager and that is why Vanguard target retirement funds win-out in my book.

Millennial Millionaire

Millennials, you have to start investing now. The best time to plant a tree was 20 years ago…the next best time is today. Same goes for investing. Millennials should begin investing right now and make saving regularly a habit, and prioritize paying yourself first above all other financial obligations.


Cost of Raising a Child in 2017: 9-Month Old

How Much Does it Cost to Have a Baby?

My wife and I are first-time parents and we are now 9-months into the “parenting” process. I made it a goal to track all of our childcare expenses so I could truly report on the cost of raising a child. I invite all of my personal finance readers to follow along our journey as I diligently track all expenses involved in truly raising a child these days in middle class America.

Prior to us having a child I did some research and the consensus was that it costs roughly $14,000 per year to raise a child, which equates to roughly $240,000 (without college). Don’t get me started on how much college will cost for my child

The consensus from my research was it costs $14,000/annually to raise a child in 2017. Well, we are three quarters of the way through year one and we have spent just over $5,000 on our baby girl thus far. It is very early and she is still very young, but we are on pace to spend less than half of that $14k per year average. However, its obvious that what we spend in year one will (and should be) far less than what we’ll probably spend in, say, year 5 and/or 14 and beyond when expenses really increase to raise a child. But I like the pace we are on and currently setting.




How Much Does It Cost to Raise a Child?

We are 9-months in and thus far we have spent $5,220 on my daughter in total. We have lucked out and received a number of hand-me-down clothes and toys, as well as a ton of gifts and gift cards from our baby shower that are still holding us over. We are nearing the end of our baby shower gift cards, but I estimate that we have about $100 left to various stores.

Child Care/Nanny

We use a part-time nanny to watch our daughter two days a week. We consider ourselves very lucky though, as we have a nanny who comes to our house twice a week, a nanny our daughter loves, who really doesn’t costs us that much.

My wife is off two days during the week and then a family member watches her another day, so we only need to “pay” for two days of child care. Thus far we have spent a grand total of $4,160 on childcare/daycare.

Cost to Raise a Child in 2017: 9-Month Old

  • 1st month = $414
  • 2nd month = $105
  • 3rd month = $545
  • 4th month = $643
  • 5th month = $520
  • 6th month = $866
  • 7th month = $650
  • 8th month = $707
  • 9th month = $770
  • Since inception (March, 2017) = $5,220




The 10 Commandments for Individual Investors

Book Review: Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis

I recently completed one of the greatest books on investing, written by one of the most influential investors of all time. That book is Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis.

If you do a search for the best books on investing, Ellis’ Winning the Loser’s Game is always in the top 5. It’s a great, timeless classic on personal investing that is simple and concise. Ellis tells great, and often very funny, stories to convey his points, as well as compelling data to support his claims.

Charley Ellis lays out the most important investment lessons for individual investors. Those looking to save, invest and retire wealthy through diligent saving and investing in low cost index funds must read this book. He lays out the easy and successful ways to get rich (slowly) through proper investing. It is required reading for all my Millennial personal finance readers. Regardless of your investment knowledge, the sound money management skills laid out in this book are a must read for all audiences.

10 Commandments for Investors

One of my favorite parts of Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis is his 10 commandments for individual investors. Below are the 10 commandments for investors, which is a great guide for Millennial investors.

1) Save, save, save. Invest and save for your future happiness and financial security, as well as an education for your kids. This is the foundation of financial freedom and one day becoming financially independent to do whatever you want, whenever you want.

2) Stop speculating. The more you read up on investing the more you hear every reputable financial advisor insisting you only invest in low-cost index funds. Well some people just have to “play the market” to satisfy and emotional itch. If you do, try to limit yourself to 5% or less of your portfolio and be sure to track your performance carefully. You may stop “playing the market” faster than you think.

3) Don’t invest for tax purposes. Don’t believe in tax shelters or tax-loss harvesting. Don’t do anything in investing primarily for tax reasons. You absolutely should invest in a Roth IRA (or Traditional, but I strongly prefer Roth) and maximize contributions to your tax-sheltered 401(k) every single year. But, outside of these accounts, don’t overthink it.




4) Don’t view your home as an investment. A home is not a good financial investment and never was. But a home can certainly be a fine investment in your family’s future and happiness. Your goal should be buy a modest home that you can afford and that your family will love. Then, pay the mortgage off and live there forever. That’s when your house becomes a good investment.

5) Just say “no” to commodities. Dealing with commodities (oil, gold, silver, corn, livestock, etc.) is really only price conjecture. It is not investing because there is no economic efficiency.

6) Be very leery of stockbrokers and mutual fund salespeople. Their job is not to make you money, but to make money off you. Now not all stockbrokers and mutual fund salespeople are bad, but you must be very careful and watchful when dealing with one.

7) Don’t invest in new or “interesting” investments. Stick to the basics, total stock indices, REITs, emerging markets, etc.

8) Don’t invest in bonds just because you heard they are conservative and safe. Bond prices fluctuate nearly as much as stock prices do. And bonds are terrible against one major risk – inflation.

9) Come up with goals and write them down. And then stick to them. Write down your long-term investing goals (retirement and college), home payoff, retirement income and net worth goals. It’s best to review these goals annually to ensure you are on track.

10) Don’t trust your feelings. When you feel overjoyed, you’re probably in for a bruising. When you feel disenchanted, remember that it’s darkest just before dawn, so don’t take any action. Less is better when it comes to investment activity. Set it and forget, and keep investing.




How Much Does it Cost to Have a Baby?

Are you and your spouse considering starting a family? If you’re like me then you are doing your due diligence prior to beginning this magical, lifelong journey that is parenthood.

I did a lot of research prior to us having our first baby and it was really hard to find any great info. My health insurance gave me an “estimate” based off my standard PPO or high deductible plan. My estimate was $3,000 for everything. But, it was a bit off…and we didn’t have any complications whatsoever.

Hospital and Delivery Cost to Have a Baby

I have made it a point to track all of our child care expenses for my Millennial personal finance readers. And now I finally have all of our medical bills back for the birth of my baby girl, so I can now post exactly how much it cost us to have her (delivery, hospital stay, anesthesia, and baby).

Item

Total

Insurance

Net Total

Delivery $1,654.00 $581.88 $1,072.12
Lab Work $96.00 $91.97 $4.03
Hospital Stay $17,213.80 $14,561.79 $2,652.01
Anesthesia $6,176.00 $5,906.12 $269.88
Baby $4,288.56 $3,750.16 $538.40
Baby’s 1st Dr Check $300.00 $268.04 $31.96
$4,568.40