Advice to Young Adults: Change Your Mindset!

Posted: Updated:

Orthodontist with college loans equaling one million dollars! Unthinkable? Fortunately, the majority of young adults escape that financial trap. But many develop a mindset that accepts debt, ignores saving, and promotes a declining future lifestyle.

Josh Mitchell with the Wall Street Journal recently wrote about an orthodontist who accumulated more than $1 million in student loan debt. Incredible! What's even more astounding is at least another 100 Americans are in the same boat. While I hope you are not in this predicament, don't fall prey to the financial thinking that jeopardizes your future security.

Some Debt Is Unavoidable

Life situations happen that make debt unavoidable. And that’s not all bad. Debt calculated to help you reach a goal can be helpful. For example, you may incur student loan debt now to obtain a degree that sets you up for future. And locking in a mortgage today, at still relatively low interest rates, can decrease your expenses down the road. This doesn't mean you should attend the most expensive school that accepts you or that you should buy the most expensive home you fall in love with. The key is to keep your debt load as reasonable as possible so you can begin paying it off and accumulating savings at the same time.

New Mindset - Don't Wait to Save

According to journalist Ali Malito with Marketwatch, a Fidelity study suggests that by age 30, young Americans should have saved the equivalent of one-year's salary - and they should double that amount by age 35. I'll bet this statement will touch some nerves! This means you should start saving in your early 20s.

Some of you may now be doing a mental tally and thinking: "If my annual salary is X and my savings should be twice that, I'm behind! I need to step up my savings!" That’s the mindset that leads to success.

Others will make excuses for the shortfall. My favorite: "I need to live my life now. Once I settle down, I won't be able to live downtown or travel the world."

What they don't realize is that living more lavishly now may mean lowering their living standards later. Do your future self and family a favor - be prudent today.

Tying your savings goals to specific ages creates nice milestones for which to aim. Done correctly, these goals should lead you to appropriate long-term goals, such as retirement.

When planning for your retirement, you will be considering all sources of income, such as pensions and social security. But be careful, pensions are guaranteed by your employer. The Pension Benefit Guaranty Corporation typically provides only minimal protection if a company fails or no longer exists.

Social Security - I Don't Think So

Will Social Security be around when you retire? Probably. But to count on future benefits being equivalent to today's offerings is wishful thinking. Social Security and Medicare are "kick-the-can" problems that will soon run out of road. Over time, the road will be shut down for a complete overhaul that will require significant changes.

Eventually the government will fix Social Security, probably through a combination of reduced benefits, delayed benefits, and higher taxes. So, the less your retirement relies on pensions and Social Security, the more secure you should feel.

Plan More; Save More

If you want to calculate your future retirement needs to estimate what you need to be saving today, be conservative. Don’t assume pensions and Social Security will be as promised. If it turns out they are, that’s an added bonus!

Regardless of your age, save and save early. Increase the automatic savings to your retirement plan. Make contributions to a Roth IRA, IRA, and/or a Health Savings Account. If you have significant debt, make a plan to reduce your debt quickly and follow that plan. Then start saving.

At the very least, don’t get $1 million in student debt!

Bill Wendling, CFA, is a Senior Portfolio Manager with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at bedelfinancial.com or email Bill.

  • Perspectives

    • Can You Recession-Proof Your Investments?

      October was a painful month for stock investors! The S&P 500 stock index dropped 6.8 percent for the month with international stocks faring even worse, down more than 8 percent. These sharp, negative moves sparked many conversations about a coming recession. Should you sell now? We have had a nine-year-plus bull market! This has allowed many investment portfolios to experience tremendous growth. However, during this time, we have also heard many calls for...

    More

Subscribe

Name:
Company Name:
Email:
Confirm Email:
HTML
INside Edge
Morning Briefing
BigWigs & New Gigs
Life Sciences Indiana
Indiana Connections
INPower
Subscribe
Unsubscribe

Events



  • Most Popular Stories

    • (Image courtesy of Trader's Point Creamery.)

      Trader's Point Creamery 'Bringing Our Brand Back Home'

      Zionsville-based Trader's Point Creamery says it is dialing back its nationwide distribution footprint. In an open letter to its customers, the organic dairy farm says "over time, we have felt the tug back towards the place and production scale that fueled our vision in the early days." It is renewing its focus, the letter says, on being an Indiana and Midwest brand. To maintain a more personal connection with its customers through...

    • Can You Recession-Proof Your Investments?

      October was a painful month for stock investors! The S&P 500 stock index dropped 6.8 percent for the month with international stocks faring even worse, down more than 8 percent. These sharp, negative moves sparked many conversations about a coming recession. Should you sell now? We have had a nine-year-plus bull market! This has allowed many investment portfolios to experience tremendous growth. However, during this time, we have also heard many calls for...

    • (Image courtesy of JA of Central Indiana.) From left to right: Mark Shaffer, Tiffany Sauder, Blake Koriath, Chad Amos, Matt Waggoner, George Giltner, Erin Dettwiler, Cynthia Carrasco, Tiffany Fletcher, Kiamesha-Sylvia Colom, Tamara Cypress, Jennifer Burk

      'Best And Brightest' Earn Honors

      Winners of Junior Achievement of Central Indiana's 2018 Indy’s Best and Brightest awards have been announced. They include honorees who are 40 and under and recognized as "rising talent and the next generation of leaders in our community." Junior Achievement of Central Indiana Inc. focuses on educating and inspiring youth in career exploration, employability/life skills, entrepreneurship, financial literacy and philanthropy. It involves hands-on, experiential learning...
    • Study Takes Stock of Climate Change's Impact on Tourism

      A researcher at Purdue University says a first of its kind study shows how climate change could affect the state's tourism industry and stakeholders -- particularly small businesses. One example, study lead author and Associate Professor of Hospitality and Tourism Management Jonathon Day says is the state will begin losing some of its "sweet spot" days where the temperature is between 65 degrees and 85 degrees. He says, over time, milder months...

    • Scale Computing Eyes Global Growth

      Fresh off a $35 million round of funding and a partnership with global tech giant Lenovo, the chief executive officer of Indianapolis-based Scale Computing says the stage is set for even bigger things in the future. "I think we're on a path to hopefully be looking towards an IPO in a few years," said Jeff Ready. "You never know how these things go, but we're growing very quickly and big partners like Lenovo help us get there and this funding will help, too."