With rising interest rates and inflation, millennials are increasingly worried about covering daily expenses, let alone saving for a house or retirement. However, one asset manager suggests that financial advisors can offer valuable assistance.
“When you’re younger, you need to be disciplined about your spending, and it can be tough,” said Myron Genyk, CEO and co-founder of Evermore Capital Inc., to Wealth Professional.
“You can’t be too careless. Not buying lattes is a cliché, but now there are numerous streaming services that each cost around $20 a month. Additionally, you have expensive cell phone plans. The amount we spend on telecommunications and entertainment is much higher than when we were younger. This has become a significant part of younger people’s budgets.”
Genyk outlined a five-step process that advisors can use to help younger clients manage their finances:
1. Assess Financial Situation: Advisors need to help clients take stock of their financial situation, including net worth, personal balance sheet, bank accounts, pensions, real estate, and liabilities such as mortgages, student debt, and credit card balances.
2. Set a Budget: Advisors can help clients create a budget to cover household spending, debt repayment, retirement funds, and other expenses.
3. Determine Financial Goals: Advisors can assist clients in setting financial goals, whether it’s paying off high-interest debt, saving for retirement, or funding children’s education.
4. Create and Implement a Savings Plan: Advisors can help clients develop a plan for saving and investing, including contributions to RRSPs and TFSAs, and ensure they stick to it.
5. Annual Review: Advisors should review the plan annually to see if the goals or budget have changed and make any necessary adjustments.
Millennials might find their goals and resources don’t align, but with effort and adjustments, they can still achieve their goals.
“You may need to make sacrifices when you’re younger. You can’t afford everything you want, so make a conscious effort to save for a down payment every month,” Genyk advised, sharing his personal experience.
“For us, it was $3,000 a month, so we did everything we could to hit that mark. But it came at a cost. We didn’t have cable, we didn’t go out with friends every time, and we lived in an affordable apartment. We were always conscious of our budget and focused on saving and meeting our goals.
“These sacrifices can be uncomfortable, but when you look back, you feel good about them. It’s the right thing to do.”
Genyk also mentioned other ways advisors can help clients adjust their financial strategies.
Besides cutting expenses, more Canadians may follow the European model of renting instead of buying a home, and Genyk noted that “there’s no shame in renting.”
Millennials can increase their income by asking for cost-of-living raises or finding better-paying jobs, as employers are seeking good talent in the current tight labor market.
Advisors can encourage younger clients to start saving in their 20s and 30s, giving their money 40 years to grow. Genyk estimated that contributions could double within a decade, helping fund future goals. Early savers can invest more in stocks for growth, switching to safer bonds later on.
For older clients with more disposable income, Genyk warned against lifestyle inflation and suggested investing extra money to strengthen retirement funds.
Parents should encourage millennial children to be financially independent rather than relying on parental support. This can start with finding a job in high school and learning to manage finances independently, gaining a sense of accomplishment in achieving their goals.
Earlier this year, Genyk pledged to donate the first three months of revenue from his Evermore Retirement ETFs, Canada’s first target-date ETFs, to the Canadian-Ukraine Foundation. This foundation provides humanitarian aid to Ukrainians in Ukraine and those who have taken refuge in bordering countries, as well as supporting displaced Ukrainians in Canada. Despite being a start-up, Evermore has contributed $9,300 to help those from Genyk’s ancestral homeland.
