In my line of business, we talk a lot about wealth management. The idea, of course, is that financial planners and wealth managers assist you in creating a road map for your money that helps you grow savings for lifestyle goals like retirement, purchasing a home, or sending your kids to the college of their dreams. The term “wealth management” often begs the question: What does “being wealthy” mean? And when do you need a financial planner to help you manage your wealth?
A recent study has shown that the definition of being wealthy rises as people age. Bloomberg states that Boomers tend to view $2.4 million as a requirement to be “wealthy” whereas millennial’s view wealth as a $2 million requirement. That’s a fairly large discrepancy – and it’s pretty clear what’s causing it. The younger we are, the more likely we are to view our financial future with a sense of optimism. We also tend to be more short-sighted in our financial planning, and believe that a smaller amount of wealth will last longer.
As we age, we become more realistic about our finances. We start to see the big picture, and that honest truth is that we often need a lot more money than we realize.
Despite the discrepancy in what quantifies “wealth” among generations, one thing stays the same: people view wealth as several consistent things. They believe that wealth is:
Many people also say that being wealthy equates to taking time for themselves in their daily life. According to the same survey, the majority of millennial’s believe that they will be wealthy in the future. However, the same optimism doesn’t translate to Boomers and other generations.
The key to building wealth is saving a lot, and saving early. The sooner you can start to prioritize saving in your budget, the sooner you can begin to take advantage of compound interest. I’ve discussed this in previous blog posts, but to review:
Compound interest is essentially a snowball effect. As a snowball rolls down a hill, it grows in size. Even if you start with a small amount of money invested, it picks up more and more snow with each revolution. By the time you reach the bottom of the hill, the snowball has grown significantly, and will continue to grow faster the more you have invested.
This demonstrates the importance of saving early on in your financial life. Although many millennial’s feel positively about their opportunity for wealth, they won’t be able to capitalize on these goals if they don’t prepare now.
This wealth study by Bloomberg also indicated that most people, unsurprisingly, felt more secure in their finances when they worked with a financial advisor on constructing their financial plan. Many millennials have yet to employ their own financial advisor, and it’s time to rethink that trend.
At Sherman Wealth, many of my clients are millennial’s. I enjoy working with families and young professionals to both clearly define their goals and help them build a plan that moves them in the right direction. When advisers have the opportunity to work with millennial’s to grow their wealth, they have a leg up on pre-retirees who focus on financial planning as they near retirement: time.
When you implement a financial plan early in life, you have time on your side. With time, your wealth can grow significantly, and working with a financial adviser can help you make the right money moves early on to set yourself up for success in the long run.
In my recent video reviewing MarketWatch’s article on what you need saved for retirement by the time you’re 35 years old, I stressed the importance of saving early. It’s critical to start growing your wealth, even as a millennial who has many years until retirement, through targeted savings and a smart investing strategy. The critical thing to remember is you’re not just saving for retirement – you’re saving for all future goals like buying a house, sending your kids to college, or living well throughout your life. Saving is truly the only way to ensure wealth in your future, which means that saving is the only way to ensure options, freedom, and a lack of worrying about money as you age.
If you’d like to discuss your saving strategy, schedule a consultation today. Building a comprehensive financial plan that prioritizes saving while mitigating the impact of taxes and investment fees is key to growing your wealth and building a financial future you can rely on, and I’d love to help.