Financial Wellness for Millennials

Learn how to build the future you want — even as your financial life becomes more complex. 

Key takeaways:

• Millennials have faced more than their fair share of economic uncertainty — but there are plenty of opportunities to reach your financial goals. 

• Creating the lifestyle you want starts with a priority-based budget that makes room for what’s most important in your life. 

• You can also set yourself up for lifelong financial security by making a plan to save for retirement and leveraging the equity in your home to build your wealth. 

As a generation, Millennials have seen more than their fair share of economic uncertainty. Between coming of age during the 2008 financial crisis and seeing tuition and housing costs soar, it’s no surprise that the average Millennial has $27,251 in non-mortgage consumer debt.

But there’s still a bright financial future ahead. As many Millennials move into their peak earning years, they’re more able to pay off their debts and reach their financial goals.

And, as part of a financially scrappy generation, you have plenty of opportunities to set yourself up for financial success.

Your secret weapon? The wisdom that comes with age. 

“Many Millennials are at a time in their life where they know what they want their future to look like,” says Reid Segar, district manager at Northwest Bank. “You have a strong sense of who you are and you know your core values. That gives you purpose and direction when it comes to financial planning.”

Here, we’ll share the steps you can take to build financial habits that work for your life today. By making smart financial decisions, you can accomplish your goals tomorrow.  

Translating your values into financial plans

Even with a strong sense of what your ideal future looks like, it can be hard to figure out how that should impact your financial habits now. Take some time to explore what really matters to you. For example: Do you want to save for a child's education? Do you value vacation travel? That’s where budgeting comes in: It helps you clarify your priorities so each dollar supports you in a meaningful way. You may find ways to redirect your spending that make room for more important priorities — for example, trading in a higher-loan vehicle for one with lower monthly payments so you can save more for a house. 

While different households have different budgeting styles, Segar recommends following a priority-based budget that puts these three categories first:

• Essential costs: Groceries, bills, housing and transportation

• Security-based spending: Saving for retirement, paying for insurance (premiums, copays, deductibles) and emergency savings

• Support costs: Childcare expenses, saving for postsecondary education and caretaking for parents

With these big three covered, use your core values as a guide to determine how you’ll spend the rest of your money — whether that’s adventuring out in the world, treating yourself to nights out on the town, or investing in your fitness. 

Getting more from your home

The rise in housing costs has made it more difficult to become a homeowner. But for the 55% of Millennials who do own a home, there’s a significant silver lining: Paying down your mortgage over time helps you build home equity.

Home equity not only contributes to your overall net worth, it provides an important source of credit. A  home equity loan or home equity line of credit (HELOC) can increase the resale value of your home — for example, with a kitchen or bathroom renovation — while making it a more enjoyable place to live.  

Home equity can help you reach other goals too. Home equity loans and HELOCs typically offer lower interest rates than unsecured loans, which means you could use your HELOC to consolidate higher-interest debt, like credit cards or student loans. 

And, even if you don’t have plans to tap your home equity right now, taking out a HELOC means you’ll have access to extra cash when you need it — for example, if you need a relatively low-interest way to augment your emergency fund.

• Learn more: How to Make the Most of Your Home Equity

Shoring up your retirement savings

When it comes to retirement, Millennials face a reality different from the generations that came before them. 

Housing and medical expenses keep going up, and the shift from pensions to defined contribution plans, like the 401(k), puts the onus on employees to fund their own retirements. Many who retire from their full-time careers are scaling back and choosing semi-retirement before fully retiring. At the same time, people are living longer, which means your retirement fund probably needs to last longer than it would have a couple generations ago. 

That’s why Segar recommends finding added support to take control of your financial future.

“Retirement is about more than just the numbers; it’s about quality of life," he says. "An advisor can sit with you to map out what you really want out of your retirement, and how much you’ll need to get there."

An advisor can predict how your net worth will grow based on your current savings habits. They'll help you estimate what your budget will look like once you retire. If you’re on track, you can rest easy knowing you’re making great progress toward your goal. And if you need to increase your retirement savings, now is a good time to make a plan — instead of having to play catch-up later. 

Adjusting your investment strategy

As you inch closer to retirement, it’s not just your savings plan that changes — your investment strategy shifts too. 

Investors usually get more cautious as they approach retirement. When you’re just starting out, you can generally ride out ups and downs in the market, since you won’t need the money for decades. As you age, though, shifting to a more conservative investment strategy helps reduce your exposure to market fluctuations so your money is there when you need it. 

Consider checking in with your financial advisor annually to catch up on the status of your portfolio. You’ll be keeping your finger on the pulse of your portfolio’s performance, and you can adjust your holdings to suit your needs. 

Get help mapping out the next phase of your life

As your life and your finances grow more complex, new questions will emerge. You may wonder: Am I making smart financial decisions? We’re here to help. Northwest Bank's dedicated team of financial experts will help you set up a strategy that works for you, and they'll connect you to the right financial solutions you need to thrive. 

The best part? It’s free. Find a Northwest Bank financial center near you to start building your ideal future today.