The Best Investment Millennials Could Make
Updated: Jan 18
Taking the first few steps in the real world can feel daunting and scary. You will receive many conflicting pieces of advice as you finish school, move into the professional world, and start to make the first of many major life decisions. Setting aside money for a rainy day is important, but so is investing in your financial future. I would argue that the single best investment you can make in the very beginning is to invest in yourself.
Unless you are starting off with a substantial portfolio, investing in yourself first will yield far more than the rates of return on the market. Your portfolio and its value will matter significantly less if your affairs are not properly taken care of from the very beginning. There are a few things that would give you a higher rate of return than any security could offer you.
Invest in Yourself first
You have already gone to school and earned that degree, but there is still so much more to learn. Continue taking the time to invest in your education. For some of you, this means taking additional classes. You might finish a few online courses, read some books in your area of expertise, or learn a new skill entirely. Some of the things you learn could contribute directly to a promotion or a better job.
What do better jobs and promotions have in common? They both come with a better salary. In the first few years of your career, your salary is more important than the worth of your portfolio. Imagine what you could do with a few thousand dollars extra each year. With extra income flowing to you each month, you will ultimately have more money left to invest at a later date.
Master Your Cash Flow
Many millennials lack the basic knowledge of how to spend and save their money. Their paychecks are spirited away each month, and nobody seems to know where they went. Dealing with the dreaded B-word feels like a chore each month. Unfortunately, creating a detailed budget is exactly what you need to do if you want to be financially successful long-term.
Here’s the good news: a budget can and should be low maintenance, otherwise it will be very easy to abandon. What you could do instead, is layout a budget only periodically and systemize your finances where you could just go on autopilot mode while staying on track.
Taking the time to thoroughly understand and track your money allows you to figure out just what you can save or spend in the years ahead. As you continuously invest in yourself and climb the ladder in your workplace, you will find it easier to expand your spending accordingly. Resist this urge and leave more leftovers for your future investments. Once you have some discipline in this area, it will be easier to make these contributions later on.
Build Good Credit
If you don’t already have credit, this is the perfect time to start building it. Good credit is essential for those who want to make large purchases such as a home or a newer vehicle. When you have a good credit score, you are apt to receive lower interest rates on these types of loans. A lower interest rate right now could save you thousands of dollars over the duration of your loan period. Particularly when it comes to your mortgage, the savings for even a one-percent difference can be staggering.
Building good credit doesn’t have to be difficult. Open up a small line of credit that you use for miscellaneous purchases like groceries. Make sure that you always pay the balance at the end of the month. Only try this method if you know that you are capable of paying the balance when your credit card statement comes in the mail.
Credit can take some time to build, so you will want to start early. Remember that it can also become damaged very easily if you are negligent with paying your debts. If good credit can save you money, carelessness in this arena can definitely cost you.
Shift Your Mindset
As a society, we are often conditioned to look for home runs. We are impressed with portfolios that reach toward the sky. Sometimes, this can lead to disappointment with your current state of affairs. Everyone has to start somewhere when it comes to their investments. Even if you are only attempting to deposit a few hundred dollars here and there, it is something worth celebrating.
Instead of looking at the numbers, you should fix your eyes on the small wins. It is far better to be consistent and disciplined with your investment strategy than to depend on luck alone. Waiting for a windfall to come your way isn’t the best investment strategy. Chipping away at your investment goals in small increments might not feel like it is making a huge difference. However, those small chunks of change do eventually compound over time.
You can see major changes if you hold on for the long haul instead of trading securities around and trying to beat the market. Take it slow and steady instead of growing frustrated that your account isn’t growing as fast as you would like it to.
The Best Investment
Ultimately, the best investment that a millennial can make is to better themselves before moving on to other tasks. Maximize your earning potential, learn how to save your money, and build your credit if you want to successfully build your account over time.
Instead of getting caught up in the numbers, you need to take a step back and evaluate what can truly benefit you in the here and now. Shift your mindset from what tradition dictates and follow these simple steps to give yourself a financial boost for years to come.