4 Crucial Retirement Savings Tips

Nov-retirement-savings-imageAh, retirement. The word alone brings to mind carefree travel, spending time with loved ones and putting the stress of work aside to learn an endless assortment of new hobbies. In reality, however, retiring comfortably means starting the planning and saving process early, and making the right moves every step of the way. It’s a lifelong journey, and the sooner you can get serious about it, the more likely it is you’ll be spending your retirement days in comfort, as opposed to worrying about whether or not you’re going to run out of money.


Saving for retirement isn’t always easy, but as one-in-four 65-year-olds today will live past the age of 90, it’s extremely important to focus on. Here are four tips to get you started.

1. Maximize Your Employer’s 401(k)

If you work with a company that offers a traditional 401(k) plan, you’re in luck in terms of retirement planning. A 401(k) allows you to contribute pre-tax dollars, which can come with some serious tax advantages and make it possible to invest extra income without having it noticeably affect your budget. Though becoming more of a rarity with each passing year, many employers do still offer a match on 401(k) contributions, which is essentially free money—take advantage of it by contributing as much as possible to your plan and focusing on what it will mean for your financial future.

2. Don’t Overlook the Roth IRA

While 401(k) plans can certainly be beneficial as retirement savings vehicles, they’re not everything. Indeed, no retirement savings account offers the kind of flexibility and versatility characteristic of the Roth IRA, which is an ideal tool for building your nest egg. Unlike your employer’s 401(k), Roth IRAs are funded with post-tax dollars, which means the money can be withdrawn without having to pay any taxes once you reach the age of 59 ½ (so long as the account has been open for five years). Plus, Roth IRAs offer a number of investment options, making them less limited than most 401(k) plans.

3. Invest Gifts and Inheritances

Money that seems to appear out of nowhere, whether in the form of gifts, inheritances, or even a 20-dollar bill that shows up in your laundry, is often viewed as “fun money,” due to the fact that it materializes randomly. But that’s not to say gifted cash should be spent frivolously. If anything, gifts, inheritances and found money make excellent retirement investments and can help to pad your nest egg with each new contribution.

4. Work with a Financial Planner

As good as some may be with managing a budget, the fact is most people are not financial professionals. There are a great deal of benefits that come along with taking retirement into your own hands, but you can maximize your efforts by working with a financial planner who has expertise in this area. Though it will cost you some up-front, the health of your portfolio and peace of mind associated with knowing that you’re working with a true professional will be worth the investment.


Planning for retirement can be challenging to say the least, but it’s possible to plan effectively by starting early and focusing your approach. Don’t wait around—you’ll thank yourself down the road.

Consolidating Debt: Fight Your Way to Financial Freedom

Oct-DebtConsolidation-imageOne reality about adult life is the need to pay bills and calculate taxes. Much of our time goes into figuring out who gets how much and what our bank balance is at the end of the month. The stress of paying different people, different amounts at different times can present a challenge.

A gleam of hope in the confusion

Debt consolidation can be a great solution to our loan payment woes, by rolling several debts into one. Consolidation is beneficial if you owe payments to multiple high-interest credit card debts. One immediate benefit is a consistent interest rate, which can be a huge relief for families and business owners alike.

It only helps if you can do it right

While taking out a larger loan to pay off smaller ones, always check the following:

  • The origination fees and the processing fees.
  • Can you pay your creditors directly? Some lenders offer such support.
  • Can you get a lower interest rate if someone co-signs your loan?

Thinking outside the box: balance transfer credit cards

Some prefer going for a 0% interest credit card instead of consolidating their loans. This can be a risky move. Most credit card companies have a substantial transfer fee. The average term is 21 months, and there is also a limit to the amount you can transfer; usually $15,000. Credit card transfers are a potential solution for single men, women, working family members, and students. But if you own a small to medium sized business, the upper limit will be too low for consolidating even your smallest significant debts. Credit card transfers are not wise for larger companies.

Why is a personal loan better?

A personal loan offers a number of advantages over credit cards. Borrowing limits are much higher, and the qualifying credit scores are relaxed as well. A personal loan may even boost a credit score that is deteriorating due to multiple lapsed payments. (On the other hand, if you max out the credit on a 0% interest card, your credit score will suffer more, and you will end higher interest rates for future loans.)

Personal loans to pay off consolidation loans can be a smart way to manage your finances. If you have a decent credit score (600 and above), you may not have to provide collateral. Unsecured loans can be a great help when it comes to improving credit scores and securing the future of your finances.

Choosing an online lender

Online lenders have varying requirements and varying APRs. Usually, the ones with stringent credit score requirements have a lower APR, ranging close to 5%. But if you have a poor credit record, you could be required to pay a whopping 36% APR for a loan from the same company! The average rate hovers around 13% for online personal (consolidation) loans. Although, if you have a limited credit history, the company may charge you a higher APR for security reasons. There are many online loan calculators, which you can use to find out your approximate APR, and help you calculate your total debts, total payment at the end of the term, and your best consolidation possibilities.

Will the new loan help you repay your current loans?

Some loan companies will allow you to pay your creditors directly. However, this is only available for those who have excellent credit records. Some credit card debt consolidation companies will also offer credit counseling sessions. This will help you reorganize your payment structure and pay off your debts. Having proper debt counseling and management will help you move ahead in the right direction.

How much fee is your lender currently charging?

Almost all online consolidation loans have charge an origination fee, which can range between 1% and 6% of the total amount you are borrowing. While some lenders will deduct the origination fees up front, others will charge extra for the first few months to make up for it. Always check the details and calculate the net amount without the origination fees to cover all costs.

A personal consolidation loan only makes sense if you can manage an APR that is small enough to help you save money. Always get expert finance advice on loan consolidation and repayment before you apply for the loan. Moreover, always remember – there is nothing like an emergency fund in the hour of need.

Home Ownership and Disability: What You Need to Know

Sept-homeownership-imageBuying a home can be one of the most exciting experiences that life has to offer, especially when all the stars seem to align. As consumer confidence continues to build and mortgage rates continue to fall, the housing market is seeing an uptick—especially among millennials. While buying a home can surely be an exciting experience, it can also result in a great deal of stress and anxiety. Add to this the potential that you or a spouse may become disabled, and it becomes clear that the joys of home ownership often come along with a cluster of downsides that cannot go overlooked.

Not sure how disability could potentially affect home ownership? Here are a few things to bear in mind.


The Risk of Disability with Home Ownership

As people mature and responsibilities begin to grow, it eventually becomes clear that at least some amount of focus needs to be placed on the protection of assets. Whether it be bank accounts, physical belongings or otherwise, most people take steps to ensure that they’re covered in the event of an emergency. While this is generally recognized as a positive approach to life, it doesn’t take into consideration the importance of protecting the income that allows said assets to exist in the first place.

For various reasons, many people simply don’t realize just how much of an impact an illness or injury may have on their income. While being out of work with the flu may be enough to derail things for a short period of time, a lengthy absence of three months or more can be disastrous, as mortgage defaults and bankruptcies often come as a result of not being able to make a living due to disability. In fact, according to the U.S. Housing and Home Finance Agency, nearly half of all home foreclosures are due to disability and and loss of income.

Add to this the fact that one-third of all 30 year olds will experience a disability that affects their career for at least three months, and the reality of the situation becomes impossible to ignore.


What You Can Do

No one wants to spend their life worrying about potentially losing their home due to illness or injury. But playing it overly safe and never taking risks may not be realistic, and avoiding sharp turns in life is nearly impossible. Fortunately, disability insurance can help to alleviate these anxieties and protect your home should you ever experience a significant disruption in work. For most, It’s one of then most realistic ways to defend against the randomness of life.

Home ownership is a dream for millions of people throughout the world. The more you can do to protect you and your family after closing, the more likely it is you’ll experience peace of mind and enjoy turning your house into a home.

Why Millennials Need to Think about Disability Insurance

Sept-millenials-imageMillennials are shaping up to be one of the most influential and unique generations of all time. They’re already the biggest population in US history, consisting of 92 million people (compared to 77 million “baby-boomers”), and they currently make up close to half of the American workforce. One thing that sets millennials apart from past generations is the concept of living life in the moment versus preparing for the future, which may be a result of a shifting global economy and changing workforce. One thing is for sure, however — many millennials scoff at the idea of purchasing disability insurance.

As nice as it would be to have invincibility on our sides, no one does, and no one — not even millennials — can predict the future. Here are just a few reasons why millennials need to think about getting disability insurance sooner than later.

1. The Chances Just Aren’t That Slim

One of the main reasons why people ignore the importance of disability insurance is because they believe disability will not happen to them. In many cases, these same individuals believe that disability only results from injury or “slip and fall” accidents — not true. In fact, chronic diseases such as cancer and heart disease have been identified as a leading cause of disability, not to mention risks associated with obesity and arthritis. One-in-four of today’s 20-year-olds will experience disability prior to retirement, and when the numbers are that high, securing disability insurance begins to make all the sense in the world.

2. Your Income Depends Upon It

Millennials are poised to make up approximately 75 percent of the global workforce by 2025. It’s an impressive percentage by any measure, and one which lends credence to the importance of having income protection. Statistically, 50 percent of 35-year-olds can expect to be out of work for a period of 90 days or more before reaching the age of 65. This equates to three months or more of lost income for those who do not have disability insurance deployed as a safety blanket, which, for many, can lead to foreclosure or eviction.

3. You May Not Be Eligible for Social Security Disability Benefits

When most people think about Social Security, retirement is what comes to mind. But Social Security disability benefits may also apply to those who cannot work due to a medical condition. Unlike private disability insurance, however, relying on Social Security disability benefits in the event of an incident can be risky, as 65 percent of initial claim applications are denied. Even if you do get awarded benefits, you need to be out of work for 12 months or more to collect — not ideal by any means.

With income protection on your side, you can enjoy the peace of mind associated with knowing that you have a financial safety net, should something come out of left field.

Take Control of Your Paycheck!

8-21-paycheck-imageEveryone looks forward to payday, but for some, the excitement is tied more to being able to make rent than the gratification of a job well done. Living paycheck-to-paycheck is something that most people go through at one point or another (half of Americans find themselves in such a situation), and it can be a difficult cycle to get out of. With a little bit of effort, though, you can take control of your paycheck and stop stressing out about your financial responsibilities—even on a relatively limited salary.

Tired of worrying about your paycheck? Here are a few things you can do to protect your money and secure your financial future.


1. Set Spending Money Aside

One of the biggest misconceptions about being financial responsible is that it’s important to stop spending money on things you enjoy. Cutting spending “cold turkey” can feel great at first, but it’s not sustainable to deprive yourself of fun and entertainment. Spending money isn’t inherently bad—it’s losing track of how much you’re spending on things like hobbies and dining out that can be a problem. By putting a set amount of spending money aside each pay period, you can practice discipline without the risk of eating into your paycheck.


2. Pay Your Bills First

If you’ve ever had to wait until the last minute for a check to arrive before you could pay your rent, you know how stressful a scenario like this can be. We often create this type of situation for ourselves, and in many cases, it’s easily avoided. Every time you receive a paycheck, take a close look at the bills you have due within the next 20-30 days, and pay as many as you can without coming up short—the peace of mind alone is worth it.


3. Consider Disability Insurance

No one ever expects to encounter a disability; many even believe injury is the only cause. But the fact is, 90% of disabilities are actually a result of illness, such as cancer or musculoskeletal disease. Accidents only account for a small percentage of cases, and while playing it safe may seem like a good way to avoid the threat of a disability, there are absolutely no guarantees in life. Since only 50% of Americans would be unable to make ends meet after going just one month without a paycheck, there’s good reason for considering disability insurance.


4. Take Advantage of 401(k) Matching

When you’re struggling to keep the lights on, retirement is likely to be the last thing on your mind. But ignoring the future just because you’re living in the present is a risky tactic, and retirement planning is something that people in all financial situations need to consider. If your employer offers a 401(k) plan with matching, you should do everything possible to contribute the maximum that a match will be allowed for—often 4% of your paycheck. Why? It’s free money, and it helps secure your financial future.


5. Build an Emergency Fund

Just about everyone knows emergencies can arise, but how many people actually focus on creating an emergency fund? 60% of Americans lack enough savings to cover a $500 emergency, which doesn’t even take into consideration major, costly scenarios. Building an emergency fund to cover one-to-two-month’s expenses can take time, willpower, and a whole lot of budgeting, but it’s a crucial part of safeguarding your financial health.


That paycheck? You earned it, so don’t take what you do with it lightly! Focus on building new habits, and watch as your financial stress begins to melt away.

Financial Freedom Through Frugality

financial freedom

Achieving Financial Freedom

Financial freedom is something everyone aspires towards. How they go about achieving it is another matter altogether. It’s true, frugal is the new cool in many circles, but spending less isn’t how most people are saving for retirement, early or otherwise.

“Financial freedom” doesn’t necessarily mean the same thing to everyone. For some, it refers to ditching debt. For others, it means not having to worry so much about money and their financial situation.

In this case, financial freedom means becoming unfettered from the shackles of finance. It’s about creating “a life that is better than your current one, which just happens to cost 50-75% less,” (Mr. Money Mustache).

According to an article in the New Yorker, Mr. Money Mustache’s goals are:

  1. “To make you rich so you can retire early”;
  2. “To make you happy so you can properly enjoy your early retirement”; and
  3. “To save the whole Human Race from destroying itself through overconsumption of its habitat.”

The Scold: Mr. Money Mustache’s retirement (sort of) plan


Life is Expensive. Or is It?

“Life is hard and expensive, so you should keep your nose to the grindstone, clip coupons, save hard for your kids’ college educations, then tuck any tiny slice of your salary that remains into a 401(k) plan. And pray that nothing goes wrong in the 40 years of career work that it will take to get yourself enough savings to enjoy a brief retirement,” (“Getting Rich: from Zero to Hero in One Blog Post”).

But that’s just a line, Mr. Money Mustache insists. “What happens when you can save more of your income? As it turns out, spending much less money than you bring in is the way to get rich. The ONLY way.”

How much could you possibly save? “Simply cutting cable TV, and a few lattes, would instantly boost their savings to 15 percent, allowing them to retire eight years earlier!! Are cable TV and Starbucks worth having two income earners each work an extra eight years for???,” (“The Shockingly Simple Math Behind Early Retirement”).

Here are two important takeaways from Mr. Mustache:

Cutting your spending rate is much more powerful than increasing your income.

“Earning more is great, and I highly recommend it. But by definition it is impossible to out-earn the habit of spending all your money,” (“Reader Case Study: Young Man Saved from Jeep Suicide”).


How Much Money Do We Need?

“According to a new survey from Charles Schwab, Americans say it takes an average of $2.4 million to be considered wealthy,” (“Here’s how much money Americans think is enough to live comfortably”). “As for how much it takes to be ‘financially comfortable,’ survey respondents say it’s an average of $1.1 million.”

Like the definition of financial freedom, the real secret behind Mr. Money Mustache’s (his real name is Peter Adeney) financial success is his own perception of wealth. He has what he needs. He doesn’t need to worry about money. By his own reckoning, he is a wealthy man.

And that sensibility is catching on in the form of “an anti-consumer, penny-pinching movement that’s finding favour with millennials,” (“Meet the Frugal Millennials Planning for Decades of Retirement”), and it inspired Stephanie Williams and Celestian Rince to adopt extreme frugality and thrift into their lives, all while meticulously recording their expenses, and lack thereof, on their personal finance blog, Incoming Assets.

“It costs the two of them less than $1,500 a month to live—and that number includes the $787 rent on their 400-square-foot apartment. Their combined income, meanwhile, is just under $90,000 a year. They save roughly 60 percent of it. When their investment income hits a point that it can pay the bills, they’ll bid their jobs as receptionist and administrative assistant adieu. Their savings amount to about $260,000.”

“Meet the Frugal Millennials Planning for Decades of Retirement”

Financial Freedom is Possible

Ultimately, Mustachianism, financial badassity, or whatever you want to call financial freedom, seems to be more attainable, more viable, when we look at concepts of spending, saving and wealth in a certain light.

“It seems as if thinking about the world through the lens of maximizing your independence by minimizing your overhead could, at best, transform your life, and at worst, result in your amassing thousands of dollars in savings,” (“Meet the Frugal Millennials Planning for Decades of Retirement”).

What Happens When Your Financial Advisor Retires?

financial advisor

Everyone eventually retires. And as there are many questions you should be asking your financial advisor about your own retirement planning, considering many of us will need financial advice long after we retire ourselves, there’s an important question to keep near the top of the list: What will happen to your account, to your retirement planning, when your financial advisor retires?

Financial Advisors: Do They Have a Succession Plan?

Planning for retirement is difficult. We spend years discussing our financial details with our advisor. We form a relationship. In many cases, it’s a bond built over decades. You have trusted and relied upon this person to guide your steps on the path to financial security, and you want to be sure your financial advisor has implemented a succession plan which considers your long-term needs as a client.

Your financial advisor is helping you plan for your future. It’s easy to assume they have their own exit strategy in place. They know the importance of planning ahead, right? Unfortunately, it seems some financial advisors and their businesses suffer the same fate as the cobbler’s children. Succession is a major issue in the investment industry today, for both its professionals and their investors.

Financial Advisors Want to Work Forever

A 2014 study entitled Key Trends in Wealth Management Business Practices interviewed almost 1,000 investment advisors in Canada and the United States. Sixty-one percent of the respondents were over 50 years of age. Reportedly 12 percent of the Canadian respondents indicated they would likely be retiring within five years. None of the respondents based in the US felt they would retire within five years. Not even those over 60.

“When asked about their plans for retiring, the sale of a practice ranked lowest on an investment advisor’s list of priorities (10 percent). Operating a business at a slower pace (31 percent), and living off accumulated assets (23 percent) ranked much higher. A shocking 38 percent of all respondents have no plans for retiring at all. Another 28 percent don’t plan to retire in the next 15 years,” (“Do Investment Advisors Need To Do a Better Job Planning Their Own Retirement?”).

Practice What You Preach

Increasingly, a good succession plan is a necessity for keeping existing clients and attracting new ones. “Advisors can’t change the inevitable,” says Tom Nally, president of TD Ameritrade Institutional (“The big benefit of having a succession plan”).

“They need to live by the practices they preach,” he added. “Clients want to work with someone doing the right things for their own legacy.”

Clients Need to Ask the Question

Despite these findings, many advisors do have the long game high in mind. Some feel the pressure needs to come from the clients themselves.

“Clients need to say, ‘My retirement is going to last 30 years. Where are you going to be?’,” states Paul Saganey, founder and president of Integrated Financial Partners (“What to Do When Your Financial Advisor Retires”, New York Times). Every one of Mr. Saganey’s advisor teams are required to have succession plans for both retirement and less predictable events, like dying or becoming disabled.

To help prepare for a new financial relationship, Rick Robertson, associate professor at Western University’s Ivey School of Business, recommends proactive measures. “It wouldn’t hurt to ask, even if the person doesn’t have much grey hair, do you have a succession plan? What would happen if something happened to you?” Mr. Robertson says (“Planning ahead: Someday, your financial advisor will retire, too”, The Globe and Mail).

What Can You Do?

  • Ask the question: Does your financial advisor have a plan for their retirement?
  • Ask if you can you meet their successor or the rest of the team.
  • Examine your finances and treat this is as an evaluation opportunity. Maybe it’s time to move on to a new advisor.

Financial Planning for Millennials, By Millennials

Financial planning for millennials

“Millennial” is the greatest insult someone who crashed the modern economy via subprime mortgages can call another person. Remember when replacing “Millennial” with “snake people” was big a few years ago?

But I’m here to tell you that Millennials are people too, so there’s no need to be mean. We’re just like you, but maybe a little more into Harry Potter and Pokémon, and a little less into Applebee’s (you’re welcome). Oh, and we might budget a little differently.

Not that differently. But Millennials are in a different place than, say, Xennials, and that affects our money habits. Yes, there have been approximately one trillion articles written about financial planning for Millennials. Here’s another one.

Millennial Money Lessons

Millennials have a reputation for being spoiled and receiving participation trophies (Note: I have yet to find evidence that participation trophies actually exist, but they make a good boogeyman). And I was pretty spoiled growing up. But here’s the thing: It actually made me better with money.

My parents bought a car that my older sister and I shared all the way through high school and college. When I graduated from college, I lived at home for a few years while I saved up enough money to buy my own car (a Ford Contour can only last for so long, especially when it no longer holds power steering fluid and becomes as maneuverable as a fridge). Speaking of college, my parents paid for almost all of it — and I was done paying off student loans within a year after graduating.

It would be easy to see how this would make me wildly irresponsible with money. But the thing is, none of this existed in a vacuum. My parents paid for things, but I knew what was going on. Money lessons were instilled from an early age. Clark Howard was a staple on the radio during road trips. When I was seven years old, my allowance had to be divided between spending, charity, and stocks. I’m still not entirely sure I own those stocks, but message received.

My parents never put me in debt, and now I never want to be in debt. I use a credit card, but pay it off in full every month. I don’t buy things unless I know I can pay for them. I have an emergency fund. It was really nice not having to worry about money growing up, and I don’t want to worry about it now.

Financial Planning for Millennials: The App

The iPhone didn’t come out until I was in college, but that still means I’ve spent basically all of my adult life with a smartphone. There are a lot of benefits to smartphones – I never have to know where I’m going ever again – but one of the biggest benefits is all the financial and budgeting apps out there.

Admittedly, I might be predisposed to seeing this as a huge boon considering I like technology, and write for a personal finance blog, but I can’t be the only one. Budgeting apps are only outnumbered by however many Angry Birds games have been released. There’s a reason why we can write about so many of them, and I’ve tried just about all of them, from Clarity Money to YNAB.

And it didn’t start with apps. I was a Mint user before it was bought by Intuit. This probably plays into another Millennial stereotype, but I’d rather do literally every banking thing online than in person, and I don’t remember the last time I had to go into a bank (it helps that I bank with USAA and Schwab, who don’t have many physical branches).

Venmo is hands down the easiest way to transfer money to pay for shared utilities, or anything else (although I was excited this past weekend when I saw the option for Zelle in my USAA app. Yes, that got me excited, shut up. My girlfriend didn’t seem to care as much.). I have a Vanguard account, but have to admit that Betterment and Wealthfront are much more aesthetically pleasing and user-friendly.

Then there are the non-financial apps that have big financial implications. I’ve subscribed to Netflix and Hulu for a while, but YouTube TV means I finally have a good cable alternative. With FreshDirect, I don’t even have to go to the grocery store. Technology has had a huge impact on how I manage money, but also on the way I spend money.

Can You Be Too Hands on With Your Money?

The good thing about all of this app stuff? I can access my finances from anywhere (or at least anywhere I have my smartphone which, let’s be honest, is everywhere).

The bad thing about all of this app stuff? I can access my finances from anywhere, and I sometimes I’m compelled to.

Is it possible to be too hands on with your money? It feels that way. Like I’m missing the forest for the trees, that I’m so worried about having an app set up just so, and I spend more time tweaking and setting up automation than I would checking in every now and then – and I still have the same level of financial awareness.

If you’re like me, you go through bouts of obsessively checking apps to see what you’re spending money on. If you are, there’s good reason: Developers want us to keep using their product, so they introduce elements of gamification to keep us coming back for more. I’m still looking for the perfect app that walks the fine line of being helpful without making me feel like I need to regularly unplug.

Maybe #kidsthesedays won’t have this problem because they’ll have been plopped in front of an iPad since they were a toddler, and they’ll have better impulse control when it comes to opening apps. Stay tuned for a follow-up article 18 years from now.

Millennial Money Mistakes: It Was the [Smart]Phone’s Fault

Budgeting apps can (ostensibly) help you save money. Just about every other app, though, can make it harder.

I’m not just talking about when Amazon has to refund $3 billion because babies keep making in-app purchases. Why wait for the subway when I can just hail an Uber? Why spend time cooking dinner when Seamless is so much easier? How many subscriptions do I have because signing up from my phone was so easy and I just never took the time to cancel them. Really, is it worth figuring out how to unsubscribe from Medium when it’s only five bucks a month?

I like to think I’m good with money, but I’ve spent a lot of money just because my phone was right there. If The Financial Diet is any indication, I’m not the only one. Every now and then I have to take stock of the money I’m spending that I don’t even see because it goes from bank account to app – and remember, never be afraid to uninstall an app. It could save your budget.

Millennials and Their Things

If you Google “Millennials experiences over things” you get more than a million results. It’s cliche, but I think it might actually be true. I hate when that happens.

I don’t really buy a lot of “things” anymore. Sure, there are a few big ticket items I want every now and then – I’ll save for a new smartphone or Nintendo Switch – but it’s not very often. Most of what I want I can get through one streaming service or another. (Or the public library! Because Millennials are the generation most likely to use the public library! Seriously!)

But a recent trip I took to Iceland was the best purchase I’ve made in recent memory. Most of my money is spent on food, and I feel a lot less guilty when I’m eating out with someone than when I lazily order a Seamless meal.

So, I budget accordingly. If I know there’s something coming up that would potentially break the bank, I start saving early. I have a separate bank account for big purchases that doesn’t get touched unless it’s for something specific.

Financial Planning for Millennials: Finding the Right Path

There’s been a lot of ink spilled about Millennials in the workforce: We switch jobs constantly, we want to do something that matters, we’re less likely to retire than other generations.

Financial planning for Millennials feels the same way. I’m on the right path, but am I going to care about owning a home one day? Should I use a 401(k) because I always have, even though I might get a better ROI somewhere else? There are so many investment options out there, how can I be sure that I’m using the best one?

When I’ll figure all of this out is one big ol’ emoji shrug. But, I’m not that concerned about it. I think these concerns are universal, not Millennial. No how matter how much prep work you do, there’s always a “what if…” when it comes to our money. We can control a lot, but we can’t control a recession, or a housing shortage, or getting laid off.

Everybody has a plan until they get punched in the face. Sometimes all we can do is damage control.

Maybe I’ll never own a house, and if that’s the case, everything will still be fine. Especially if they crash the housing market again.

Check out Millennial Matters: Grabbing Life, Ditching Debt for a free Financial Guide to Life eBook!


Note: This post originally appeared on PolicyGenius.


Q&A Broke Millennial: Get Your Financial Life Together


Q&A Broke Millennial: Get Your Financial Life Together

Erin Lowry is a personal finance expert and the founder of Broke Millennial. She’s also the author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together.

Erin spends her days dispensing practical advice so millennials (like her) can navigate pesky (but important) money questions. She joins us now to answer some questions about how she got started, and what it was like getting her own financial life together at an early age.

Can you share what your transition from college to being on your own was like?

The transition ran the pendulum of exciting to stressful. I moved to New York City pretty quickly after graduating college, so I got thrust into handling my own affairs pretty quickly.

However, I was prepared for that because I went to college in America while my family lived in China, so I was used to having to navigate things for myself.

It’s important to remember that back in 2007, when I went to college, it wasn’t as easy to connect with people overseas. I couldn’t FaceTime my family. Skype was in its infancy and it would cost the GDP of a small country for me to be calling my parents on a regular basis.

I moved to New York City with one part-time job working in entertainment and just kept hustling and applying for absolutely anything else in order to pick up other work to make ends meet.

I ended up working as a barista and babysitter in addition to my main job. There were exhausting days and moments I cried, but overall, I loved making it on my own.

What could have made the transition a smoother and quicker one for you?

What could your parents, community, or educational organizations have provided, which could have helped establish your financial literacy early on, and helped to get your financial life together?

I wouldn’t change a single thing, partially because I’d been given a great financial education from my parents.

Had I not been given that advantage, it would’ve been a real struggle for me to handle money in those early years.

What are your tips for new graduates struggling to set a budget and live within their means after years of being supported by their parents?

Know your cash flow. How much money is coming in each month, and how much is going out.

Write out a list of all your expenses and evaluate where your money is going. Do you have places you can slash in order to reallocate those funds elsewhere?

You also need to be vigilant about ensuring other people don’t spend your money. Some peers will out earn you, so it’s important that you not try to constantly keep up if you don’t have the financial means. Be honest with your friends and loved ones.

When your peers ask you for advice, what is the one change you tell them is most important to make to get their financial life on track?

The first step is running your cash flow. You need to know how much money is coming in and how much is going out each month. Then you need to also face your debt numbers and create an actionable plan. Without knowing this information, it’s pretty impossible for you to have control over your financial life.

Recognizing Risk in Investing

recognizing risk

Risk. As a word it’s inherently negative, especially when it comes to health or disability insurance. When it comes to investing, risk is neither good nor bad. It can yield both positive and negative returns.

Recognizing risk and assessing it, is part of a plan and process rather than something to be avoided.

Market Risk vs. Business Risk

There are many different kinds of risk, but when it comes to recognizing risk in finance, investors look at business risks and market risks.

According to the Financial Industry Regulatory Authority (FINRA), business risks are “associated with investing in a particular product, company, or industry sector.” These include management risk, which refers to management team decision making. If management puts their own interests above those of the company, or does something fraudulent, or gets involved in some kind of scandal, their actions count as risk for the company in question.

Market risk, on the other hand, “involves factors that affect the overall economy or securities markets. It is the risk that an overall market will decline, bringing down the value of an individual investment in a company regardless of that company’s growth, revenues, earnings, management, and capital structure,” (FINRA).

Some common market risks include: interest rate risk, inflation risk, currency risk, liquidity risk, sociopolitical risk, country risk, and legal remedies risk.

Whoa. That’s a lot of risk. None of which are inherently bad. Learning to recognize risk, and to be aware of how various risks can affect a portfolio, is important.

Understanding Risk

Okay, we recognize the risk. We can identify that it is, or could be, affecting our investment portfolio. But, truth be told, knowing risk is there doesn’t solve any problems. Recognizing it is the first step. Measuring it and understanding how it can affect your investment(s) is the next.

There are many different ways to measure and quantify risk so that we understand how it will affect an investment. Standard deviation, chance of loss, beta ratios…however, this is where recognizing risk is good in theory, but difficult in practice. For example:

Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market.

A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0.

High-beta stocks are supposed to be riskier, but provide a potential for higher returns; low-beta stocks pose less risk, but also lower returns.

Simple, right? Maybe for some, but overall, risk assessment is a question to ask your financial advisor. That said, it is our ability to recognize risk, and understand how it can affect our portfolio, that is pivotal to asking a professional the right questions.  

Recognizing Risk Aversion

Asking the right questions is important, but so is knowing some answers. When we first sit down with an advisor, planner or broker, the question of risk comes up.

What are you comfortable with? What factors should we be considering? Age? Liquidity? Are you risk-averse? Many of us don’t know the answers to these questions. If we do, they may have changed over time.

Recognizing risk isn’t just about knowing that some risk is essential in an investment mix. It is important to realize when and where we shouldn’t carry risk.

“Bonds are supposed to be boring. The primary role they serve in our portfolios is not necessarily to make money, but to dampen the volatility that is an inevitable byproduct of the real moneymakers—stocks,” (“Don’t Let Wall Street Fool You Into Taking Too Much Risk”, Forbes).

Recognizing Risk Tolerance

Just like the word risk, the words “safe” and “conservative” can have different meanings for different people. In an effort to identify “safe” investments, some people can’t avoid risk.

What’s riskier? Investing in something safe, with returns that could get eaten away by inflation? Or tolerating risks for bigger returns?

“Facing a potentially longer lifespan than their parents, many investors in their 50s and early 60s need to be more open minded and take on more risk to avoid outliving their nest eggs, financial advisors say,” (“Pre-retirees seeking safe investments can’t avoid risk”, The Globe and Mail).

“Millennials and, to some extent, GenXers, are risk averse and conservative in their investing approach. Given their long-term investment horizon, this perspective could be harmful to their retirement planning,” (Report: Loss Aversion and Your Investment Portfolio, Sun Life Global Investments).

Risk: The Financial Equivalent of Eating Your Broccoli

Recognizing risk and assessing our tolerance for it will help us ask the right questions when we talk to our financial advisors, but it also helps define and achieve the big picture of saving for retirement.

The Sun Life Global Investments report explains it well:

“If you understand how taking prudent risks can help you meet your long-term objectives, you may be willing to accept risks you would otherwise reject—not because your natural loss aversion is gone, but because you know that dealing with the discomfort caused by volatility is in your best interest. It’s the financial equivalent of eating your broccoli—you do it because it’s good for you, not because you like it.”