As part of Financial Literacy Month here on the Unison Blog, we’re interviewing experts on personal finance from all over the country. Today, we’re publishing our interview with Erin Lowry, a personal finance blogger living in New York City who created the site BrokeMillennial.com. You can also find her on Twitter @BrokeMillennial.
Can you tell our readers a little about yourself?
I founded and run the site Broke Millennial and, I also have a book coming out May 2nd called Broke Millennial: Stop Scraping By and Get Your Financial Life Together. My mission is, really to help millennials do just that. To go from feeling broke to becoming a financial badass, and just getting their lives together. A big part of the way I do that is, I take out the preaching and the finger wagging from a lot of what you see in traditional finance writing. Instead, I focus on story telling.
I'd like to be able to -- I call it ‘trick people’ -- into learning about personal finance. I do that just by telling and sharing stories from my own life. And then if it's something that I haven't necessarily experienced, I use stories from either friends, loved ones, or my readers who have shared with me. Just trying to weave a tale so, at the end you say "Oh, that's how you setup a 401k". That is always my goal.
That's great! Is that style particularly appealing to Millennials?
Yes, and I think a big part of it is that we're a generation who doesn't like the preaching and the finger-wagging. I definitely do take a casual approach in a lot of how I write. There is a lot of sarcasm, quite a bit of humor, and I don't really mince words but I also don't preach at people, and I think it's a fine line there. It's not all puppies, rainbows, and unicorns when I write, but at the same time, it's not like, “well you are damned for doing everything you've done, you need to atone for your sins.” I don't really like that rhetoric either.
Taking a step back, how did you first get interested in personal finance, and what has that journey been like?
Well, I guess I've always been interested in it because my parents were always talking about money in my childhood in a very encouraging and healthy way. They never fought about money. Money was never a stressful factor in our house but my parents had started kind of seeding in little money lessons throughout my life -- from the time when I was about seven years old. It was a simple as: I did a donut stand to sell Krispy Kreme donuts at my mom’s yard sale, in order to make a little bit of money. At the end, my dad who had been my backer, and had gone and driven to get the donuts and paid for them, because again I was seven, came up to me and said "All right well you have $20, and it cost me eight dollars to purchase the donuts and your little sister worked for you a little bit, so you should pay her too. In the end you have $10 as your net profit." He actually took the money. It wasn't like a theoretical lesson. It was like "No, no here's the $10."
They just used so many lessons like that along the way. My sister and I were always required to pay for 50% of anything that we wanted. That was something that really taught us how to curb impulse spending. It taught us how to only buy what we value. There were these little lessons and I actually recently asked my father "Was that deliberate or did you kind of just like fall into doing that, and if so were we kind of lucky we turned out this way?" And he goes "No, we were being very deliberate about how we talked to you and raised you to understand money because our goal was to have you be enabled not entitled." I've always really loved that line.
That's really my goal, is to kind of share this bigger picture. I grew up with this comfort level with money, even when I didn't have a lot of it. I moved to New York City and, I was earning about $23,000 a year, which is not a lot of money to live on. Even though I didn't have a lot, I wasn't really stressed about it because I understood how to budget, how to live within my means. I was able to live within my means. I didn't create any credit card debt or anything like that. It was incredibly naïve of me but I sort of assumed everyone felt this way to a degree because what's normal to you growing up, you kind of assume it's what's normal for the world.
It wasn't until I started having some conversations with friends, that I realized like "Oh, even my friends who grew up from comfortable means and don't even have student loan debt, credit card debt, or anything, are still stressed about money."
That's why I started Broke Millennial. I wanted to be addressing everyone who felt stressed and be able to kind of convey the sense that even if you don't have a lot, it doesn't have to be a stress factor, if you understand how it works and how to control it. I want you to be controlling your money as opposed to your money controlling you.
What tips do you have for people who are trying to save up money, perhaps for a down payment?
The first big thing that I always tell everyone -- and people hate this -- is to know your cash flow and when I say that it's basically just a fancy way of saying “budget” but, people hate the "b" word so, I stopped using it. When I say cash flow too, it's not that you have to have a specific budgeting style necessarily but it's that you know exactly how much is coming in and exactly how much is going out, whether that number is positive or negative. If you're already at a deficit, if your monthly bills are exceeding your monthly income, you have to make some tough calls. Are you flashing things? Are you minimizing your spending in order to start saving or perhaps figuring out how to earn more, or a little bit of both.
If you're already in the positive then it's figuring out how to be very judicious with your spending and be actionable and only be spending currently on what you value. That can open up a little bit of money to put in savings. The other thing that I really like to tell people is that, I know a lot of folks, especially younger millennials who, maybe have lower salaries and high debt burdens, they feel really discouraged at even the thought of saving. They scoff at the idea of saving anything. My advice is, even if it's only five dollars - it's like less than of the cost of a craft beer in a lot of bars - save it.
What you're doing with even just that five dollars, it's not like that's what's going to make you a millionaire, and it's not like that's going to add up to a lot of money but, you're building the habit now. It's a lot easier when you start earning more money and, you start to minimize your debt burden, to just add to that saving habit as opposed to being 32, having never saved and trying to make a complete lifestyle shift.
It's really in the beginning more about building the habit. Not unlike healthy habits. I mean, if you think that you can eat however you want and drink however you want through your 20's and gain a bunch of weight, and all of a sudden, at 35 you're gonna wake up and be able to get into shape. That's really not how it works.
We know this but, so many of us are resistant to these changes. That's why, even if it's just a little bit, start the habit now.
I love that. Speaking of advice, what's the best piece of financial advice you have ever gotten?
I think there are two. One, I don't know that it was necessarily advice, so much as a little bit of a parable that turned into advice. Back in around 2009-2010, shortly after the great recession kind of kicked off, I remember having a conversation with my dad about investing. I was still in college at the time but I was starting to work and I had a little bit of money, sort of asking his advice and he told me exactly how much he and my mom lost in 2008. It was a very significant sum of money. He said, very calmly, "You know? The stock market is cyclical. What you have to do is not panic, and pull everything out and it'll come back around" - and it did. I think that having someone say a number like that, which to me was just like this shocking amount of money to lose – although ultimately he didn't lose it because the market came back – but to have this very calm conversation about it, and to just say like "Hey it's cyclical, don't panic. It'll come back" was really powerful.
I am in my general life a rather risk adverse person. When it comes to investing, I'm quite aggressive because of just that one conversation. I’d say that's one of piece of advice, and that's something that I really preach on a lot, when I talk to Millennials about investing is that, know yourself, know your risk tolerance, if you're somebody who gets really cagey when the market starts to dip. Don't check your stocks that day. When Brexit happened for instance, I remember tweeting "Don't check your portfolio. It's just going to make you panic." The markets aren't reacting to just this one off thing that's happening in the world. That doesn't mean it's all crashing.
There's that, and then the other kind of funny piece of advice that my mom gave me, that I sort of still live by - when I moved to New York, I was 22 just out of college, and she goes "You know everything you own should be able to fit into the back of a car until you're ready to settle down." I still take that to heart. I probably have a little bit more than could fit in the back of a car but, most of the stuff I'm very willing to sell right now. I have yet to invest in really nice furniture, because I'm not in an apartment that is my long-term home. I just don't feel the need to spend money on furnishing it and decorating it, and it just feels very temporary to me right now. Not everyone can live that. Some people like to nest. But my mom's saying, I really took that to heart. I call my apartment today “recently-robbed-chic,” because I do not have a lot of stuff. It's one way to actually save quite a bit of money.
Okay, last question. What common mistakes do you see people making that you think they can fix?
First one definitely is a resistance to save, or invest because it feels pointless, or it feels intimidating. That really frustrates me, because there's so many, especially with investing. There are a lot of easy ways to get into it. You don't have to be some sort of savant in order to. Now don't be stock picking but, if you just do like plain vanilla index funds and at the very least be investing in a company 401k, or into an IRA. If you're completely confused about how to get started on either of those, target these funds. That's just a way to start. You can rebalance your portfolio later.
That's definitely one thing that frustrates me a little bit. The other is just, well I think two more. One is, kind of having this like refusal to understand what your full financial picture is, because you're scared of it. I completely empathize with that. It can be really scary when you have debt too. You know you have debt but, you're not quite sure how bad it is. Having to face those numbers can be really scary.
If you don't do it, it's just going to get worse. You can't get a handle on the situation until you really face the numbers.
The other one is, people are very resistant about changing and picking their financial products. A lot of people default into things, just because it's what their parents used or, it's what they see ads for on TV. There's not necessarily research going into saying "Is this right for me?" Especially Millennials being so technologically savvy and advanced. There's no reason to be banking with an institution that's charging $35 for an overdraft fee, and $12 for overdraft protection, if that's legitimately an issue that you have, you are more than once a month, or even once a month getting an overdraft fee, that adds up so fast.
If you just switch to a bank that has overdraft protection that cost you nothing or, has an overdraft fee that's nine dollars instead of $35. That's a significant amount of money you just put back into your pocket.
Thank you for speaking with us, Erin!
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