Email FacebookTwitterMenu burgerClose thin

5 Financial Planning Tips for Millennials


Millennials — generally defined as adults born between 1981 and 1996 — face some unique challenges when it comes to financial planning. While the oldest millennials are entering midlife and potentially their peak earning years, the youngest may just be getting settled into their careers. As a result, financial planning for millennials can span a wide variety of needs, goals and solutions.

For more help with financial planning, consider working with a financial advisor.

Why Is Financial Planning Important for Millennials?

Generally, it’s easier to manage money and reach your goals when you have a strategy in place. Millennials can benefit from financial planning to make sense of their individual money situations.

Here are some facts and figures that illustrate the importance of financial planning for millennials:

When you add in factors like continued high inflation and rising rates, which can make obtaining a mortgage more expensive, the uphill climb many millennials face to get ahead becomes even steeper. If any of this sounds familiar to you, it can all be overwhelming if you’re not actively planning for these kinds of financial situations.

Financial Planning for Millennials: Top 5 Tips

If you’re ready to create a financial plan, it helps to know what to include. Talking to a financial advisor may be a good idea if you’re not sure where to begin or you want expert advice on how to shape your money plan.

Regardless of whether you’re working with an advisor or going it alone, these tips can help you get closer to your financial vision.

1. Clarify Your Goals

When you’re talking about financial planning for millennials, it’s important to identify what your goals are. Goals can be short- or long-term, broad or narrow.

For example, your personal financial goals list might include:

  • Buying a home if you’re still renting
  • Paying off the last of your student loan debt
  • Starting a business that allows you to escape your 9 to 5 job
  • Retiring early (or simply starting to save for retirement)

Thinking about your goals can give you perspective on how to approach financial planning. Once you have the bigger picture sketched out, you can begin to fine tune the details and develop individual action plans for achieving each goal.

2. Understand Your Spending

You’ve probably heard about the importance of budgeting hundreds of times already. A budget allows you to control the flow of money in and out each month. While you might know how to make a budget, it’s also helpful to understand why you’re budgeting and how it relates to your financial goals.

For example, if one of your goals is to save $10,000 for emergencies then you have to ask yourself how your budget helps you hit that target. Including a line item in your budget for saving is a simple fix for ensuring that you’re funding your emergency savings consistently.

If your budget is out of whack, there are generally two options — cutting spending or increasing income.

Cutting expenses might be the easier option but it requires you to take a deeper dive into where and how you spend your money each month. By analyzing your spending, you can get a sense of how well it aligns with your priorities and where you might be holding yourself back from reaching your goals.

3. Don’t Just Save Money — Invest It

financial planning for millennials

Saving is an important financial habit to develop. But saving alone may not be enough to help millennials reach their financial goals. That may be especially true for older millennials who experienced the fallout from the 2008-09 financial crisis and the subsequent recession.

Younger millennials have an advantage when it comes to investing since time is on their side. The younger you are when you start investing, the more time you have to benefit from compounding interest. However, it’s not too late to invest if you’re in your 30s or 40s.

Here are some tips for making the most of your time in the market:

  • If you have a 401(k) or similar plan at work, consider whether it’s feasible to max out the annual contribution limit.
  • Contribute at least enough to your workplace plan to get the full company match if possible.
  • Consider using a traditional or Roth IRA to supplement (or replace) a workplace retirement savings plan.
  • Carefully assess your personal risk tolerance and weigh that against the amount of risk you need to take to reach your goals.
  • When comparing investments, look at the fees you’ll pay against your expected returns. Remember that past returns are not an indicator of future performance.

If you’re maximizing tax-advantaged accounts, like a 401(k) or IRA), you might also branch out to invest in a taxable brokerage account. Taxable accounts can offer a wider variety of investment options which can make it easier to diversify and potentially generate higher returns if you’re comfortable taking more risk.

4. Pay Off Debt

There’s a lot of debate about whether it makes sense to invest or pay off debt first. Whether you prioritize investing over debt or vice versa, it’s important to account for both in your financial plan. How you approach this can depend on where you are financially.

For example, if you’re 28 and not earning a lot yet you might want to focus on paying down student loans or other debts as quickly as possible so there’s less strain on your income. On the other hand, if you’re 41, you might be more concerned with how to max out 401(k) contributions since retirement is much closer on the horizon.

There’s no single way to approach debt repayment. Some millennials might say that it makes more sense to go after student loans first since that might be your biggest debt. Other millennials might prefer to get rid of the most expensive debt and leave low-rate student loans for last.

Again, if you’ve gotten a firm handle on spending it can be easier to find the money to eliminate debt. If you’re still struggling, then you might consider options for making your debts less expensive or at least easier to manage. That might include:

Talking to a credit counselor or financial advisor could give you a better idea of which path may best fit your needs.

5. Get a Jump on Estate Planning

If you’re in your late 20s, 30s or 40s you might assume that an estate plan isn’t something you need just yet. However, this is one aspect of financial planning for millennials that shouldn’t be ignored.

Estate planning can cover a number of things, including:

  • Drafting a last will and testament
  • Creating a trust
  • Purchasing life insurance or disability insurance
  • Creating an advance medical directive
  • Establishing legal and financial power of attorney

Those are all things your loved ones might be grateful to have in place if you’re married or have children. Even if you’re single or part of a dual-income, no-kids relationship you can benefit from having a will and life insurance at a minimum.

A will allows you to direct how your assets should be divided after you pass away. Life insurance provides a death benefit to the person or persons you name as beneficiary. Your policy could cover funeral and burial expenses or pay off any lingering debts.

For example, say your parents co-signed $100,000 worth of private student loans on your behalf so you could go to dental school. You could purchase a life insurance policy for $150,000 that would allow them to pay those loans off and cover any final expenses should something happen to you.

Bottom Line

financial planning for millennials

Financial planning for millennials can look very different from financial planning for Gen X, Baby Boomers or even Gen Z. The most important thing to remember when deciding how to approach your financial situation is to just get started. Taking that first step, even if you’re unsure of what’s next, can help you get closer to the financial life you dream of living.

Financial Planning Tips

  • Consider talking to a financial advisor about how to handle financial planning as a millennial. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • In addition to a 401(k) and IRA, you might also be able to invest through a health savings account (HSA). These accounts allow you to set aside money on a tax-advantaged basis for eligible healthcare expenses. You may have access to an HSA if you have a high-deductible health plan. If you’re not sure whether your plan qualifies, you can ask your employer or contact your insurer if you’re self-employed and have a stand-alone policy.

Photo credit: ©, ©, ©