This piece originally ran on Forbes
We all know to pay yourself first, have an emergency fund, you can snowball or avalanche your way out of debt. There are plenty of personal finance clichés and idioms, and for good reason. For the most part, though worn out, they’re true. This list, however, is not generalities. It’s five things you – as a millennial – need to understand about money in 2017.
1. Other people will be happy to spend your money
There’s no Hallmark card to convey “Happy You’re Getting Married, But This Destination Bachelor Party and Wedding In Another State Is Too Rich For My Budget,” because it feels like bad manners to turn down such invites. So the mid-twenties to early-thirties seems like an endless cycle of birthday parties, bachelor parties, bridal showers, weddings, baby showers and not to mention Kickstarter requests, brunch dates and happy hours, which drain both your bank account and, often, vacation time.
Here’s the secret: other people are happy to spend your money for you.
It may be your best friend’s/cousin’s/college roommate’s special day that only comes along once in a life time (or so they hope), but it’s a day that will be on repeat for you. Participating in a wedding, while an an honor, can cause a slow creep towards danger zone for your bank account. This leads to either a wildly awkward conversation or ignoring the problem and just financing the expenses on a credit card.
Don’t do the latter.
2. Just using one investing or savings app isn’t sufficient
Using apps to automate your financial life, increase your savings and start investing became all the rage in the last few years. There’s nothing wrong with using apps to give your money a little boost – but you shouldn’t solely rely on them to get the job done.
Digit is one such app that works well to help save money you probably weren’t going to tuck away in the first place – but it shouldn’t be your only means of saving. Digit, which is free to use, typically pulls money from checking to Digit savings in increments of $5 to $50. Speaking from my own experience, Digit saves me an average of $110 per month. It’s not an insignificant sum, but the annual total is around $1,320. That’s a nice supplemental amount to fund a travel savings account or emergency fund buffer – but saving a percentage of a paycheck before it even hits checking (automating) should still take priority.
Update 4/11/17: Digit is no longer free to use. It now charges $2.99 per month — so just up your automated savings yourself and avoid getting charged to save your own money.
Acorns is an app with the tagline “automatically invest life’s spare change. Anyone can grow wealth.” The app gets connected to your credit or debit card and rounds up each of your purchases to the nearest dollar and invests the change into a diversified portfolio of ETFs ranging in risk based on your tolerance. Unlike Digit, there is a fee to use Acorns just like nearly any investing platform. It starts at $1 a month and increases to 0.25% per year once your portfolio hits $5,000 or more. While it’s a strong way for a millennial to start investing if they wouldn’t otherwise be proactive, just contributing your spare change isn’t enough. You could use Acorns to set up reoccurring investments, but moving beyond the spare change program alone needs to be your goal in 2017 in order to make a real impact.
3. Yes, those small purchases are actually adding up – but not why you think
You’ve certainly heard about the latte factor by now. As a lover of lattes myself, it’s an obnoxious attack on the frothy milk and espresso beverage – but it’s not entirely wrong. However, it’s not the latte itself that invokes the wrath of personal finance gurus. It’s the act of routine, mindless spending. The easiest way to nix mindless spending is that dirty b word: budget. You can still have some of your small (or occasionally large) indulgences when factored into your budget, but big or small spending without constraint keeps you in that dreaded paycheck-to-paycheck lifestyle.
At the bare minimum you should know your cash flow – how much is coming in and how much is going out.
4. Physical buildings aren’t necessary for keeping your money safe
It’s nearly 2017 and we’re supposed to be digital natives and yet scores of millennials still feel anxious about using an Internet-only bank. Using a traditional brick-and-mortar bank is not going to keep your money any safer than an Internet-only bank like Ally, Charles Schwab, USAA or Capital One 360. Not to mention Internet-only banks tend to offer more competitive interest rates on savings accounts and provide lower fees on checking accounts. Wondering “how do I get my money out”? Some online banks belong to a network of ATMs like AllPoint or Star while others reimburse ATM fees you’re charged at any bank. Just be sure your bank is FDIC insured and you’ll be getting the same level of protection as a brick-and-mortar establishment. Plus, doesn’t it make logical sense that a progressive online bank would be more on top of its security game than some of the old school brick-and-mortar types that still have crappy websites? Just a thought.
5. Saving is important, but negotiating is critical
Personal finance articles often extoll the virtues of saving (this one already did) but this isn’t the only important money skill on the road to wealth. Your ability to negotiate has a significant impact on your lifetime earning potential. Some even claim you could be losing out on a million dollars or more over the course of your career by not learning how to negotiate early.
You don’t have to start with the biggie of walking into your annual review and asking for more money. Instead, try calling up your Internet or cable provider and negotiating to get a lower price point on your package or a perk if you stay at the same rate. Small experiences help get you prepped for not only potential rejection with little on the line, but how to counter in a negotiation.
When you prep to go into your boss’s office or get on the phone with a client, it’s important to have proof of why you deserve a raise and a specific request in mind. Don’t just accept a 3% raise to adjust for inflation. Show your boss how you’ve improved, what you’ve brought to the company, compliments you’ve received from co-workers and clients, metrics that back up your tangible contributions to the company. Also come in armed with the knowledge of how much someone in your position, living in your city, makes at your job. Then make the specific ask of how much of a raise you’d like. The worst your boss can say is no. It might ding your pride a bit, but it’s better than staying mute.
Image from Unsplash
15 responses to “5 Things Millennials Need To Understand About Money In 2017”
Love the post. I admire what you are doing and truly believe we all need to have a better grasp on our finances.
“…just contributing your spare change isn’t enough.”
YES!! Thank you for spreading the message.
Great article, small spending does add up! been there, done that! had to consult a planner
Could not agree more with all of these points especially the point on routine.
When I was in uni I would buy my coffee every single day (even though I was on a casual job paycheck), I felt I needed the caffeine hit to get my head into the zone for study. But then I ran out of student loan help and had to fund the rest of my degree myself. I was still buying my coffee every morning and at first neglected to really ‘count’ that expense as weekly expense. I suppose I saw it as more of a necessity. I soon realized that it was purely routine and I started making coffee at home (it definitely wasn’t as good, but it did the job).
Being a millennial myself, I think mindset is such a strong factor when it comes to finances and the challenge is getting through to millennials and inspiring them to change their mindset about money.
“However, it’s not the latte itself that invokes the wrath of personal finance gurus. It’s the act of routine, mindless spending.” Well said! If you’re not budgeting and your expenses exceed your income, those little expenses are a big problem.
I don’t use any financial apps but I have a budget excel sheet to monitor my expenses and savings. It seems like using an app is beneficial and I am planning to explore Acorn how I can use it in my advantage.
I’m a millennial and have such a hard time with negotiating. There have been so many occurences where I knew I could get the purchase for cheaper than it was, but didn’t say anything.
Good points. I especially like your comments on negotiating. It really can’t hurt to ask, but you have to be organized. You are right, you have to have all your “ducks in a row.”
Negotiating is a big one. Many people don’t even ask, which will hurt in the long run. Employers aren’t just going to give you the max value that you’re worth. Often times, they don’t fully realize how much value you bring to the table. It’s up to you to document that value and present it to your employer. The worst they can say is no, but when you present a good case with actual numbers behind it, it’s that much harder to turn you down.
Great piece to add to my list of things to watch for in my day to day. I would trade my other strengths to bring my negotiation skill to par. I think that’s where I’m leaving a lot of money on the table. Thanks for sharing!
Loved this piece. We would all love a quick fix, but it’s true that an app (or even a couple of them) alone can’t save us. Negotiating is one of the skills that I’ve built in recent years, and it really does pay off… but only when I am aware enough to use it! 🙂 Most of all, this really resonated with me: “it’s not the latte itself that invokes the wrath of personal finance gurus. It’s the act of routine, mindless spending” I don’t think I’ve ever heard that summed up so succinctly and with such impact before. THank you.
I made the switch to online only bank, Simple. Love it! Totally agree it’s time to put the old banks behind us and embrace modern banks that partner with us instead of trying to find ways to fee us.
Really great tips. Whenever I have an accomplishment at work I would write down the date, accomplishment and any other relevant information. That way, when annual reviews are around the corner I am able to come up with quite a few reasons why I deserve a raise! Thanks for the great post!