When asked to define what constitutes adulthood, 40% of of millennials (aged 18 to 26) cited Financial independence, according to a Bank of America report issued on October 6. it was reported by Reuters under the headline “For millennials, adulthood now defined by financial freedom.”
As Bank of America executive Michele Barlow puts it, “It’s not so much that young adults are having trouble with adulting: they’ve simply redefined it.”
With so many millennials still living at home (often because they can’t afford to leave), it seems they view adulthood as being able to land a job and not depend on their parents for financial help. About 14% surveyed named moving out on their own as their top priority, while getting married, starting a family and getting an education were all cited by 7%.
This study is music to our ears here at the Financial Independence Hub. Of course, our definition of Financial Independence (or the contraction, “Findependence”) is a bit stricter than merely landing a job and no longer being financially dependent on parents. We tackled this early on: see the highlighted post, Merely leaving the nest does NOT constitute true Financial Independence.
Still, getting rid of debts, landing a job and no longer being dependent on the Bank of Mum and Dad is a huge step TOWARDS Financial Independence and ultimately what we used to call Retirement. While not quite synonymous with the outdated term Retirement, we view Findependence as having sufficient financial resources that you do not have to depend on employment income to make your daily and monthly expenses.
How do you know when you’re truly findependent? This is covered in chapter 3 of the new book I wrote with Mike Drak: Victory Lap Retirement. There we define Financial Freedom as occurring when all sources of passive income (pensions, investment income, annuities, etc.) exceed your non-discretionary expenses. At that point, you may choose to continue to work but because you want to, not because you have to. We call it “earning a playcheque.”
You can also see an 8-minute clip BNN aired last week with my co-author about Victory Lap Retirement here. See also LSM Insurance’s review of the book last week, and Retire Happy’s review by Sean Cooper from late September: Will your Retirement be your Victory Lap?
Millennials should plan for Financial Independence, NOT Retirement
Shortly after the Hub launched almost two years ago (Nov. 4, 2014), Alan Moore of XY Planning Network wrote a guest blog that recapitulated an argument I had made in my own blogs: that for Millennials, Financial Independence is a more accessible and realistic goal than traditional Retirement. Click on the highlighted link: Why Millennials should plan for Financial Independence, NOT Retirement!
I will be citing these arguments and articles in Ottawa tomorrow, where I’ll be giving a talk entitled Financial Independence: Advice for Millennials. It’s part of T.E. Wealth’s Capital Ideas Wealth Management Conference 2016, at the Westin Hotel: my session is from 1:15 pm to 2:15 pm.
For a sneak preview of some of the points, click on this article I wrote about marketing to millennials for the Financial Post in August. Click on “Sorry Boomers, Your Days as the Financial Industry’s Target Market are Numbered.” See also a T. E. Wealth article from June entitled Financial Planning for Millennials.