Her generation is everyone’s favourite punching bag, but Erin Lowry started Broke Millennial to prove that even the most hapless among us can become financially literate.
Her book Broke Millennial: Stop Scraping By and Get Your Financial Life Together(TarcherPerigee, $20) is a step-by-step guide for 20- and 30-somethings to establish their financial footing, written with empathetic authority: Lowry’s parents explicitly raised her to be financially responsible, but she’s deft at demystifying jargon and giving practical advice to those who weren’t so lucky.
The book covers a lot of ground, but is broken down into digestible chapters and can be flipped through at random. Lowry begins with basic financial concepts, working up to more complicated topics such as investing, home ownership, and retirement. She tackles millennial pain points such as student loans, saving when you have consumer debt, and all the thorniness that comes with money and relationships — moving back in with your parents, asking your boss for a raise, splitting the dinner bill with friends, and getting “financially naked” with your partner. Each chapter is punctuated with advice from personal finance experts and real-life examples, and closes with action checklists for readers to make the next move.
Canadians readers can skip over American-specific financial products you’ve probably heard mentioned in the media — 401(k) plans, Roth IRAs — but Lowry’s general advice about credit cards, banking, and investing is spot on. Most importantly, she shows how fellow millennials actually can afford the important stuff: investing, hiring a certified financial planner, and yes, even retirement. “Money isn’t complicated,” Lowry writes. “Financial empowerment, does, however, require taking actionable steps toward improving your situation.”
Ratehub.ca spoke with Lowry by phone from New York.
You write in the book that you’re “on a mission to stamp out financial illiteracy in our generation.” What are the financial concepts millennials struggle most to understand?
I would say pretty much everything. There are so many myths, so much misinformation, and really just an overwhelming access to information that it can make people really have a deer in headlights reaction. You type any financial question into Google, and there’s just an onslaught of answers, many of which are conflicting. I think that our general resources in life for advice, like parents, grandparents, friends, coworkers, don’t always have the best and accurate information. It can be a struggle for people to figure out who to trust, as well as finding the best resource for them, because we all learn differently. Finding a podcast, book, show, magazine, blog that speaks to you can take a lot of time.
Since publishing the book, what questions do you get asked a lot?
The biggest question I’ve started to get is about investing, which is why I have a second book — that I just handed in the manuscript for — about investing. It’s a natural progression: people have gotten their financial lives together, and now they want to know how to invest. But again, going back to this overwhelming amount of information, most of the people who reached out to me didn’t even know what a brokerage was, or how to set one up. They’d be sitting on $10,000 they could invest, but they just had no idea how to start. That’s really what this next book addresses.
It’s called Broke Millennial Takes on Investing: A Beginner’s Guide to Levelling Up Your Money. The premise of it is it’s for the true rookie investor. Someone who isn’t sure what a brokerage is, not sure they’re even ready to get started thinks maybe they are but aren’t sure how to get into the market. It also addresses very millennial-specific pain points, such as should you be investing when you have student loan debt? Should you be using apps, what these apps are, what they do, and things like that that haven’t really been covered before in an investing book. We’re expecting it to be on shelves in April 2019.
“Forgive yourself — things happen. If you drain [your bank account] because you overspent, take a moment to reflect on why it happened, figure out ways you can prevent it from happening again, but forgive yourself and move on.”
In your opinion, what are some of the most overused but minimally helpful financial tips for millennials?
My favourite one to hate on right now is the term “know your worth.” The reason I dislike it is it’s not actionable advice. It’s true on a high level, but it’s so vague that it leaves the receiver of this advice with a kind of, “huh?” It does need to be followed up with prescriptive action. Especially if people in your office or freelancers don’t want to share numbers, it’s hard to start to determine what the general gauge is for a salary. I just feel like it’s very overused to the point where it’s a little bit meaningless at the moment. I would love to see that pivot into helping people learn how to negotiate in a way that is helpful and actionable.
Another one I don’t want to throw hate on because it’s good advice, but I think a lot of millennials may buck at it because they feel they can’t, is “pay yourself first,” and automating savings. For freelancers, you can’t necessarily automate because it depends on how you’re getting paid. The other thing is, a lot of people can just save $10, $20, $50, and for a lot of people that feels pointless. I would reposition and say it’s not about the amount, it’s about the habit. In creating this habit when you’re young, even if you’re not making ton of money is important, because you’re more likely to continue it when you’re older and in a better financial situation. But if you’ve gone from 21 to 31 never saving a penny, it’s going to be a lot harder to pivot and start saving, and start saving aggressively to play catch-up. I like “pay yourself first,” but I would add the little twist that the reason you need to do it is forming the habit, even if you’re not saving much money.
You note that building a healthy savings account can take years. How can people keep going when they want to give up?
There are a few different things I like to recommend to bring in the psychological element. One is to nickname your savings account – that’s honestly my favourite piece of advice. Most banks will let you change the name of your account to something like “Japan trip June 2019” or whatever you’re saving for. Having a name means you’re codifying in your brain that you know what this money is for every single time you see it, so you’re less likely to skim money out because you’re reminding yourself why that money’s in there. Especially if you want to quit your job or whatever, every little bit does make a difference.
Another thing you can do is play an “out of sight, out of mind” game with it and keep the bulk of your savings at a different bank than your chequing account, so when you log into your chequing account you’re not necessarily seeing your savings. I do caution to have at least a little bit of savings at your primary bank, because if something does happen where you need money quickly, it does take a couple of business days to clear the transfer from one bank to another. If you’re really trying to save up for something, putting it at a different bank, especially one with a high interest rate – high being relative – it’s less likely you’ll be pulling money out and transferring it into chequing. Maybe you keep automatically saving, or paying yourself first, but maybe you only check on it every two months, instead of every week. You’ll see that it’s amassed more than you thought.
Accountability buddies are great when it comes to your money, especially in times that you’re feeling a little bit dejected because things may not be happening as quickly as you want them to, or because something unexpected happened that caused you to deplete and almost start from scratch. Those moments are going to happen, and unfortunately for all of us there will be points where we’re trucking along great and then, Murphy’s Law — stuff goes wrong, and that costs money. Having someone you can talk to about it, whether that’s a trusted friend, a sibling, a parent, or even a financial therapist, can also be a great way to have a debt chat and have a reminder that you can do this, you’ve done it before, you’re doing well. Forgive yourself — things happen. If you drain it because you overspent, take a moment to reflect on why it happened, figure out ways you can prevent it from happening again, but forgive yourself and move on. It doesn’t help anyone for you to be wallowing in a past mistake.
Do you think forgiveness or letting things go is a hard thing for people? Is that what holds a lot of people back and keeps them trapped in that overspending cycle?
What it can do is become a self-fulfilling prophecy where you’ve screwed up once or twice, and now you just feel like “What’s the point? I’m just always going to keep screwing up.” That’s the part that concerns me for some folks — people who have a tendency to be spenders and have a hard time saving. Honestly, it’s a cliché, but you just have to keep trying. Why don’t you try changing some version of how you’re doing your saving, or how you’re doing your budgeting? Maybe the style that you’re using isn’t working for you. There are so many other methods out there, and maybe just doing it a different way will be actually what’s helpful and a game changer.
“I don’t think there’s a reason why we have to be working until we die.
The only issue is if you don’t take control when you’re younger.”
Millennials have inherited a totally different financial reality than our parents’ generation, including an increasingly number of people working freelance. Right now, millennials are roughly in their mid-20s to mid-30s. We’re young now, but what will our retirements look like?
I would say there’s not necessarily a reason that it has to be extremely different. There are all those surveys and stuff that come out about how [the retirement age] used to be 65, now for millennials it’s going to be 70. No, wait — it’s 72! No, wait — it’s 75! First, we’re living longer, so that’s one thing to consider. At the old retirement age of 65, you might have only lived until 75, maybe 80. Now, we have people that are living well into their 80s, and even into their 90s.
First of all, you might want to work longer — it just doesn’t necessarily have to be your office job. Maybe you’ve put yourself in a position where you don’t have to work the same day job and you can pivot to doing something that still generates income and is more enjoyable for you and that’s really your career renaissance, something that you do a little later in life. My dad did that. My dad is in his early 60s now, and in his mid-50s he ended up leaving his company, where he’d been a company man for 20+ years and ended up creating a consulting business that actually turned out to be more lucrative than the quite lucrative job he was working prior. You never know, but I don’t think there’s a reason why we have to be working until we die. The only issue is if you don’t take control when you’re younger. If you wait until you’re 45-50 to start saving for retirement, yeah, you’re going to be working a lot longer. But if you take actual steps in your 20s and 30s and start contributing to retirement savings, we still definitely can put ourselves in a position to retire in our 60s if we want, or even earlier for some.
I would also say reflect on what you want retirement to look like, and that’s always going to be an evolving thought and an evolving conversation as your life changes. Do you want it to be that you just completely let any version of a workforce and you’re playing golf and sitting on a beach? That might sound great to you, but after a year that could get old. You might need some sort of purpose and function, so consider that when you think about your retirement plan. And maybe volunteer – it’s not something you get an income from, but I don’t think we’re at our best mental health-wise when we’re without some sort of direction and purpose.
What are some personal finance/investing authors, blogs, books, websites, podcasts, etc. that you’re reading right now?
Podcast-wise, I love StartUp. I always listen to Planet Money. Freakonomics is great, I just don’t listen it every single week — I tend to binge it at random points. Truth be told, I actually try to listen to non-financial podcasts a lot of the time because I’m so inundate with money always that I need something else in my brain.
A lot of times I read non-money related content because it’s a way to be expanding slash relaxing my brain. I like articles from Money, Wall Street Journal, the New York Times — Rob Lieber is amazing. I honestly get a lot of my money content from Twitter, because I follow a lot of financial journalists, so I just read the articles that they’re sharing. Same with other bloggers or personal finance experts.
My favourite books that are not your standard answers that I would recommend for people is The Thin Green Line by Paul Sullivan. He’s a New York Times reporter who wrote a book that’s very much about examining the wealthy. I have kind of transitioned into finding that side of finances very fascinating and what makes the wealthy tick how they amass and preserve wealth. Farnoosh Torabi’s When She Makes More is for women who are breadwinners, and it’s an interesting look into what that means, and the potential issues it can cause in your relationship and how to handle them. Another one is The Ascent of Money, and it’s all about the history of the financial world going all the way back to the Mesopotamia era. It’s fascinating how a lot of what was going on 500-600 years ago is really still impacting how we behave and interact with our money today.
This interview has been edited and condensed.
Read more interviews with personal finance authors in the Ratehub Reads series: