Billionaires can afford to live in the exclusive mansions neighborhoods – and many do, including Bill Gates’ $147.5 million dollar mansion in Washington – yet frugal billionaires like Warren Buffet choose to keep it simple by living in the five-bedroom house in Omaha purchased for $31,500 in 1957.
Knowing that you’re making a conscious decision to live frugally in order to put a down payment on a house or save for retirement can make you feel one of two ways: elated (because you’re watching your savings/retirement/401K accounts grow)… or deprived, because you feel like your friends and co-workers are living large while you tough it out. The benefits you’ll reap from sticking to a budget may not come along for some time – but when it counts, you’ll be way ahead of the game. Read on to examine the benefits of developing your own personal finance road map – and why it’s the most important thing you can do for yourself.
Play Now, Pay Later
Some Americans in this age group cite their upbringing as having formed them to live on credit, and feel entitled to living comfortably – no matter what the cost. However, other Gen-Y adults grew up seeing their parents over their heads in debt – from the house-poor double income family, to multiple cars, boats and vacation homes and lack of disposable income… some Gen-Y-ers are determined not to make the same mistake. Today, the “play now, pay later” mentality is a total turn-off for many. Seeing the economy take it’s toll on a nation, as well as an understanding of our crumbling Social Security system has given new life to the age of frugalism – and saving money in your 20’s is paramount to a comfortable existence during retirement.
Reap What You Sow
While learning a lesson from your elders is all well and good, let’s consider the facts about Generation Y. Fidelity Investments states that on average, 20% of Gen-Y-ers carry more than $10,000 in debt spread across three credit cards. Millions of 20 to 29 year old adults have experienced lack of job security, wage freezes, minimal savings, a steady decline in readily-available health insurance benefits, rapidly increasing debt, and an increase in the cost of living.
March 2011 saw the national unemployment rate reach 9.7%, according to the Bureau of Labor Statistics. At some point during the recession, 37% of all Americans ages 18 to 29 have been either underemployed or unemployed. Knowing the obstacles is only half the battle: putting your education to work for you by developing sources of passive income, or perhaps moving a hobby (such as blogging) into a viable income source can act as a safety net. Multiple streams of income – whether it’s two jobs, developing web-based money makers through affiliate sales, or doing some freelancing on the side – will keep you actively working to improve your financial portfolio.
Harness Your Success
In an age of instant gratification, people all over the world took a big hit when the global economic downturn hit in 2007. From rampant lay-offs and high unemployment rates, to the commodity price collapse, bank failures, and fuel prices shooting through the ceiling, the economy crisis hit hard. Leveraging the economic downturn is a very real possibility for 20-something-adults who can learn from the mistakes of former generations. A study by the Pew Research Center shows that more than half of Millennials have begun to watch their spending closely –55% are tracking their expenses and trying to save more money. Taking stock of your talents and contacts– from the education or college degree you received (and are still paying off student loans for, but can’t get work in your chosen field) to networking connections or family friends – can help develop other opportunities which will springboard your success.
Do you have the desire to start your own business? Create a non-profit organization? Register a trademark to a green invention you’ve created, or even learn an eco-friendly trade? Now is the time. Take a pro-active approach to your future and plan for success. Becoming financially literate, creating a career roadmap, establishing a budget, and living within your means is an excellent place to start a strong future.
What tactics are you using to move forward following the economic crisis? Share your goals and personal finance success stories with us here!