The following article examines five young people and their financial plan (more like their lack of planning). They are then offered some preliminary advice about how to improve their situation. Unfortunately, in every case I found the advice to be overly simplified. Here’s the article
And here are some overarching strategies that apply to all the case studies:
1) Emergency fund. Start here first and make it a priority to build an emergency fund that can cover non-discretionary expenses for 3-6 months.
2) Save more. If you can’t save more now, earmark any future raise toward saving. When asked about a rule of thumb for how much to save, I’ll often respond with “Save as much as you can”. Young people and millennials are unlikely to have pensions and with the questionable future of Social Security, the burden to save is placed on their shoulders much more than previous generations.
3) Automate. Make sure any savings are set to occur automatically. The mental anguish of writing a check every month or year to a retirement account can be surprisingly difficult. Many times it is our own biases that create obstacles to reaching our own goal and simple processes like automating our savings can have a huge impact.
4) Disability. Life insurance is commonly discussed when a couple has children. But disability insurance is rarely brought up. What’s odd is that people are more likely to file a claim for disability insurance than life insurance. And it doesn’t apply just to physical injuries, either. We’ve had several clients and prospects tell us about their long term disability that affects their ability to do a desk job as a result of a bad car crash.