I’m constantly blown away by the number of people in their late 20s and early 30s who have no real savings or investments, and are living the high life, but on a week-to-week basis. I’m not referring to low-income earners who’re trying to raise a family and make ends meet, I’m talking about young singles and couples with no kids and hefty annual paycheques. People like me.
But they’re not like me. Finn and I are millionaires.
I get the creeps just writing that, we’re conditioned not to talk about money or what we’re worth. Finn recently wrote an article for SmartCompany about the fear he had about being criticised after being on the Nat Geo documentary Under Cover Angel because the show labelled him a young millionaire.
But hey, I’m a tall poppy and I’m proud of what we’ve achieved. We each came into our relationship with modest savings and worked hard to continue to grow that wealth little by little over the years.
I remember when we became millionaires, the day the balance of all our savings and investments tipped over. We went to Vue De Monde in Melbourne for their 10 course degustation and matching wines to celebrate the milestone. I ended up throwing most of it up when we got home (sorry for the overshare) and we both agreed that while it was fun to celebrate in style, we were glad we’d waited to spend $999 (each!!!) on a meal until we could actually afford it, but that we wouldn’t be going back there (or anywhere like there) in a hurry. We’re much happier eating street food in Bali or Mexico than we are paying that kind of money on a single meal. Each to their own.
What really frustrates me about this whole scenario though, is that being a millionaire in 2017 actually means jack sh*t.
A million dollars in investments would probably produce around $30,000 to $40,000 in annual income. Not bad, but with our recent survey showing that 73% of Gen Y are living on over $50,000 a year (and many on significantly more) it’s certainly not retirement money these days.
We know our generation are having kids later (approximately 67% of Gen Y are childless), earning more and living at home longer, so logic would say there is a huge opportunity for gen Y to be capitalising on the years they’re spending earning income with little financial commitments, but we’re not. We simply don’t have the big picture in mind…
What’s your ‘number’?
Most Gen Y haven’t stopped to think about what their ‘number’ is. What I’m referring to is your financial freedom number. The total value of your wealth that would mean you’d never have to work again (I don’t think many would choose that option, however knowing you’ve got enough to survive on for the rest of your life is a pretty epic feeling).
What total investable wealth do you need to produce the income you require to live a reasonably comfortable lifestyle without necessarily having to work?
Essentially, creating a passive income stream.
We start having this conversation with WE members once we’ve worked through establishing good cash flow management, savings and investment patterns, and a member has managed to start to reach some of their short term goals, and have their long term goals well on their way.
We help them to work out their ‘number’.
It may take many, many years to achieve this number, and in our previous experience (managing the investment portfolios of high-net-worth retirees), this was always the retirement planning discussions we were having. How much is enough? Working that number out and then doing everything we could to get there before they retired permanently.
Times have changed. In many cases, we earn significantly more than our parents did at our age and we’re marrying and having kids much later (if at all). Yet, many of us are squandering this opportunity to be stockpiling the extra income. Our discretionary spending is through the roof, appearing wealthy takes preference over actually being wealthy and as a result many Gen Y haven’t even started regular savings, let alone investing toward a ‘number’ that represents financial freedom to them.
What’s the block?
As Gen Y, we’re excellent at living in the moment, following our passion and not settling for anything less than what we really want. We’re blessed. As Australians, we’ve grown up in a time free of any real human challenges. We’ve always had a roof over our head, food on the table and a good education. We get to spend time thinking about how we can be better versions of ourselves, and how we can be truly happy. What we’re not very good at however, is looking to the future, particularly when it comes to our wealth.
My call to action…
Gen Y. We’re not getting any younger. It’s time to take responsibility for our financial futures and spend some time focusing on the bigger picture. Establish what that number is for you, where you are now, and start taking action toward achieving it.
Stop waiting for the pay rise, the business sale, or meeting a rich partner and own your financial destiny.
The longer you leave starting the harder it is to catch up.
If you’re interested in learning about how WE, Australia’s most experienced Gen Y financial advisers, can help you become a millionaire, book a FREE 1 hour Financial Kickstart session today.
Article by Sarah Riegelhuth
Disclaimer: all information contained within this article is of a general nature and should not be relied upon when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.