Millennials are spending more money on coffee each day than saving for retirement
Nielsen Media Research has defined millennials as between 21 and 37 years old in 2018. By this age, most are out of school and working, or trying to get a job, and are most likely renting a place to live. Life is expensive and there are many ways that these young millennials can prepare for the future financially. I have two millennial children, Chase and Jake—I hope they are reading this.
While the numbers in the chart below are not exact (for simplicity, it does not take into account the impact of taxes, and 12% is a high rate of return), they give you a good idea of how coming up with a couple of extra dollars each day can make an enormous difference in the long run, particularly if you start saving at a young age.
Next time you consider running to Starbucks for a $4 latté, think about this chart and consider redirecting that coffee cash to your savings:
There are many financial advisors, books, lectures, podcasts, etc. that talk about ways to save money and set up retirement. I have not seen or heard anyone better than financial expert and very good friend David Bach. He has written eleven national bestselling books, including nine consecutive New York Times bestsellers, with over seven million books in print, translated into 19 languages.
His runway #1 bestseller The Automatic Millionaire spent 31 weeks on the New York Times bestseller list. He is one of the only authors in history to have four books simultaneously on the Wall Street Journal, Business Week and USA Today bestseller lists.
His book Smart Women Finish Rich is one of the most popular books for women ever written, having spent over a decade on the bestseller lists. His other bestsellers include Smart Couples Finish Rich, Start Late Finish Rich, The Automatic Millionaire Homeowner, Start Over Finish Rich, Go Green Live Rich, Fight For Your Money, Debt Free For Life, The Finish Rich Workbook, The Automatic Millionaire Workbook, and The Finish Rich Dictionary.
In this post, I want to give some top recommendations from David Bach. These recommendations are for anyone to try, especially the young millennials who are out on their own, making money.
PAY YOURSELF FIRST, MAKE IT AUTOMATIC – This is the most simple and easy way to save money. When you get your paycheck, take one hour a day of your income and stick it into a savings account, preferably a high yield online savings account.
For example: If you work 40hrs/week and make $20/hour, you make $800 for the week. Putting in one hour a day from that week into a savings account amounts to $100. This is not a number set in stone, but a guide. You can start by putting in $20 or $50, just something at every paycheck.
FIND YOUR LATTE FACTOR – Stop wasting your money on small items every day (for example specialty coffee or lottery tickets)
START AN EMERGENCY FUND – Put aside six months of living expenses. You never know when you might lose your job, have a medical emergency or a car problem. This will also alleviate a lot of stress.
SET UP A DREAM ACCOUNT – Set aside money for something special, like a trip that you have been dreaming about or a new dress that you have been wanting to buy.
Sean “The Money Wizard” at Coachella
“I grew my net worth by over $100,000 in 2 years — and I started by saving just $5 a day”
It’s a slow and steady climb to the seven-figure club.
Sean, who goes by “The Money Wizard,” is a 28-year-old blogger and financial analyst.
He grew his net worth by more than $100,000 in two years and is on track for early retirement.
Sean found that one of the best ways to start building wealth is to save small amounts of money every day — he started by saving $5 a day and is now saving about $100 a day.
His calculations reveal that if you save and invest $30 a day, earning a 7% rate of return, you can become a millionaire in 30 years.
If you are married or starting a family, here are some other suggestions that David has to help you become financially successful:
Don’t buy a home if you move a lot. If you think you’re going to move in the next three years, you should not be buying a piece of real estate. David and other experts say you shouldn’t own unless you plan on staying in a home for at least five years. This is because, thanks to their high start-up costs, houses don’t usually make great short-term investments. The longer you can wait, the more likely you are to regain what you paid in transaction costs and be able to sell for a profit.
Don’t buy a new car – David, as well as Kevin O’Leary and Suzie Orman, all say it’s the worst investment. The moment a car comes off the lot it depreciates, decreasing in value by 20-30% in the first year. Within five years a new car loses 60% of its original value.
In May, David is coming out with his newest book, The Latte Factor. The Latte Factor® is based on the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, bottled water, fast food, cigarettes, magazines, and so on can really make a difference between accumulating wealth and living paycheck to paycheck.
We don’t even realize how much we’re actually spending on these little purchases. If we did think about it and change our habits just a little, we could actually change our destiny.