By Sydney Sekese, CFP® professional and member of the Financial Planning Institute

This article is dedicated to the youth (irrespective of age) considering that the month of June is regarded as a youth month. A major financial aspiration which is quickly catching on and evolving into a trend among youngsters across the world is FIRE (Financially Independent, Retired Early).

In other words, FIRE refers to a situation where an individual has built their net worth to a point where it is enough to sustain them and their lifestyles for as long as they are expected to live. And by extension of this fact, it means that they no longer have to depend on their day jobs, thereby allowing them to retire early and gain greater control over their time. 

Utopia refers to an imagined community or society that possesses highly desirable or nearly perfect qualities for its citizens. Youngsters are mostly driven by the desire to reach for tangible and intangible goodies with disregard for the future.

I would like to suggest that youngsters should break down their long-term utopias into simple desires, because simple desires produce simple and practical utopias. For example, if you are hungry, you dream of lavish banquet, if you are cold you dream of a toasty fire, if you are faced with infirmities, you dream of eternal youth. So, the youngsters are challenged to think of their simple desires and utopias, and to structure the behaviours accordingly.

 A practical and typical journey that youngsters may experience involves desires in the following fashion:

DesireRealityPractical action  
Your first pay chequeYour money isn’t your money as the net income is often overlooked.Pay yourself first by putting away a reasonable amount of money into a savings account for emergency events.  
You start budgetingYoungsters often spend money that they don’t have and end up being indebted.From the moment you start earning a salary (or income), you have to start adding up income and expenses in a traceable and practical method.  
You buy your first carThis becomes your first major debt with initial deposit and regular monthly repayments.You need to do your homework, extensively compare various options and make allowance for maintenance and insurance costs.  
You buy a houseThis is another major step that requires diligence and sound mind.You need to consider all the options available and all the related costs. It may be feasible to accumulate a sizeable deposit to manage the bond repayments. It may also be wise to rent instead of buying a house.  
You are offered creditThis comes in many forms from retailers to bogus schemes.Examine the extent of the credit offered and make a distinct view of whether it is good or bad credit.
You get into debtThis often occurs due to overspending and having less control of your income and expenses.Depending on the level of debt that you are exposed to, you need to take necessary steps to get out of debt as soon as practical. The first step begins with acceptance that you are in debt.  
You retireMost of us overlook this aspect only to be disappointed later in life.In S.A, the retirement funding landscape has recently been favourably improved. You can take advantage of up to 27.5% of income that can be tax deductible. Tax free investments were also introduced to encourage the culture of saving.  

Youngsters have vast opportunities and challenges to reach their ultimate utopias. They may be regarded as innovative, entitled, overly confident and obsessed with social media. Perhaps they are not to blame for their demeanor. This generation has the advantage of their parents who have done all they could to ensure that their children and the children’s children live a much better life.

In an article by Ronald King, he mentions that the traits of millennials such as their value for family and community, their love to travel and their desire to maintain a healthy balance between work and pleasure mean that they need to understand, value and practice wise investing to reach these goals.

Final Thoughts

There is indeed financial utopia for the youth provided they prioritise their efforts towards achieving their financial goals. For example they cannot retire early unless they are Financially Independent (the FI in the FIRE)

Leave a Reply

Your email address will not be published.