USA TODAY International Edition
For many entrepreneurs, saving comes last
Millennials working to rearrange their financial priorities
Laura Mignott is ecstatic that her New York- based company DFlash is once again on pace to surpass the million- dollar revenue mark this year.
Mignott, an entrepreneur in her mid- 30s with roots in Jamaica, has run a boutique branding agency that tells the story of both start- ups and established brands such as Samsung and Chevy.
Now that the business is on solid footing, Mignott is playing catch- up on her retirement savings.
Most Americans are falling short of the savings needed to retire comfortably. Millennials such as Mignott are no exception. According to a 2016 study by GoBanking Rates that looked at how Americans’ savings differ by life stage, 42% of Millennials indicated they have no retirement savings.
“I wanted to build up the business, so I basically dumped most of my savings, $ 40,000, into DFlash as we kicked off,” she says.
This CEO considers herself an accidental entrepreneur. “I was working a full- time job, then there was the crash of ’ 08, and I got laid off,” she says. “There was a lot of economic uncertainty, and I went through a couple of different jobs.”
Eventually, she cashed out her 401( k) and used part of that savings to help start DFlash with a former business partner. “When you run a business, the idea of saving is so far out of your mind because you’re constantly trying to figure out how to budget,” she says. “Having that emergency savings account helped foster and grow the business.”
Now, she’s turning her attention toward retirement.
“I’ve had some conversations with a financial planner whom I’m about to officially hire,” she says. So far, Mignott has set up a Roth IRA and a 401( k) but also has her sights on investing in some start- ups.
The socially- conscious Millennial says: “I don’t want to invest in the new hot toy. It has to make sense for what I want to be involved in, as opposed to a random idea that sounds awesome.”
There’s also the $ 50,000 in stu- dent loan debt hanging over her head. Her plan? “Let’s put it this way: I don’t want to be 40 and still paying off my student loans,” she says.
If her company can afford to pay her a larger salary in the near future, she projects that she will pay off a good chunk of the debt in a few years.
For Millennials still on the fence about saving for the future, Mignott says use the many online tools available to learn about different types of investments. Then set it and forget it.
“Also, find good- quality experts who give real advice, then take it,” she adds. Most important, “Do not wait.”
Russell Robertson, a certified financial planner and owner of ATI Wealth Partners in Atlanta, says he likes that Mignott under- stands the importance of prioritizing saving for retirement but says she shouldn’t discount her success.
“Laura is not necessarily behind the eight- ball,” he says. “If her company is earning $ 1 million annually with a five- person business, investing in the business over the last seven years has paid off.”
For Millennials sucha s Mignott who think they are late to the retirement- saving party, he offers this advice:
Take advantage of peak-earning years. If you’re freaking out because you didn’t start investing when you were 21, rest assured. “If you are 30, 40 or even 45, you still have 20- 25 years before you’re looking at retirement,” Robertson says. “The upside to starting now is that you can likely save more because you’re earning more and your savings will substantially grow.”
Increase your emergency savings. Typically, advisers recommend saving three to six months of expenses in an emergency fund. But if your portfolio is too heavily concentrated in one area, Robertson recommends saving at least 12 months of expenses to hedge against major losses. Having that cushion gives
you time to figure out what you want to do next.
Automatically increase 401( k) contributions. A lot of companies offer a feature where your contribution can be automatically increased by a certain percentage each year. “If you’re just starting to save, you may feel uncomfortable with a lot of money coming out of your paycheck at once,” Robertson says. Increase your investment by 1% to 2% each year until you reach the maximum annual contribution.
Manage debt differently. “If we assume a conservative 5% return on the stock market and you have subsidized student loans that are 31⁄ 2% or 4%, your money will be better off invested in the market,” Robertson says. “However, if you have a private loan at 8% interest or a credit loan with a 20% interest rate, then they would be the priority because that will be a better return on that money.”
Diversify your investments. Having all of your eggs in one business basket can be risky, Robertson says.
“Being able to invest in other areas — whether it’s the stock market, other start- up companies or real estate — helps diversify your assets,” he advises.