A Millennials Guide to Investing
On the whole, we humans have a tough time saving money. No surprise there. It's not natural for us to put money aside to be "enjoyed when we retire." Not only does retirement feel too far away to be a reality, it's also associated with limitations such as health risks. On top of that, depending on how set in our ways we are by that point, we might not even have the desire to enjoy traveling the world or buying the latest tech. It seems that it would be more enjoyable to spend the money now, wouldn't it?
With that in mind, why don't we go ahead and spend that money on investments? But not traditional investments like mutual funds or bonds. Rather, let's spend it on investments in ourselves that, over the long run, will a) increase income and b) decrease expenses. Things like industry memberships, a great haircut, photography classes or healthy food. Expenditures that are direct investments into you as an individual. Investments that will pay off down the road, not with higher savings but with higher income.
Here's the reasoning:
Fewer people are actually retiring
With machines slowly supplementing tasks that are hard on our bodies and improvements in healthcare, we are living longer. And while someone with a manual labor position might have to retire at 65 because of physical limitations, the increasing number of employees who's creativity is their primary skill is reducing the need for retirement altogether. And it's probably a good thing too, considering the future of Social Security, the rising retirement age and projected interest rates.
By the time us Millennials reach retirement age, it's a safe bet that a majority of the workforce won't retire. They might pivot. They might switch careers ten times over their working life. But they probably won't retire. Besides that, it's natural to want to work — in fact, few people actually retired pre-WWII. Work is healthy and natural.
Higher income opens opportunities
A higher income over the course of your entire life makes a lot more sense than a lower income over 40 years. The benefits of a higher income are many including less worry over financial obligations, increased ability to give, and opportunity to pursue your interests.
Traditional investments have low yields
The idea that we can "put our money in and watch it grow" has become a less-viable option in the last twenty years. We yield maybe 1%, often less. Putting several hundred thousand dollars into an account over the years looks a lot like that same several hundred thousand dollars when you take it out at retirement. However, if you're investing in yourself and looking for opportunities to increase your standard of earning, you'll find that you can do far better than a 1% gain.
We're not ditching savings
To be clear, I'm not suggesting that we ditch savings. I'm saying we need to rethink our investment strategy. I think of it this way: investments are meant to compound your money while savings are meant to catch you when you fall. So savings should definitely be a part of your financial plan. If they aren't, you'll take a hit one day and you'll have to fight to keep your head above water.
Whether you think that this particular shift in strategy is wise or not, I would urge you to give it some thought. After all, if the system's broke, fix it. And the system's broke. At the very least, I hope that this might spark some conversation around the idea of investing in yourself because no matter what industry, location, community or company you're a part of, you're the constant.
I'd love to hear your thoughts in the comments below because I'm sure there're a lot of perspectives that I haven't considered.