Welcome to the transcript and show notes of the very first episode of the Millennial Personal Finance Podcast! You can find the podcast below or listen and subscribe on iTunes.
This episode will give a detailed accounting of the lackluster financial circumstances that Millennials are facing and give you 5 suggestions for how you can make your financial future better.
Please note, some of the content from this podcast comes from previously published articles I’ve written.
Transcript and Show Notes:
Hello and welcome to the Millennial personal finance podcast. I’m your host Amanda. The Millennial Personal Finance Podcast is the podcast to help Millennials like you make, spend, save, and invest money better. This podcast will give you hacks, tips and tricks for how to create and achieve financial goals.
In upcoming episodes, I’ll be interviewing experts in the fields of freelancing, finding your passion, investing your money, and saving on big and small purchases, among many other topics. My goal is to help a whole generation get smart about their money and get on the path to financial freedom, whatever that might look like for you.
Since this is the very first episode, I’ll start by telling you a bit about myself.
I’m probably like a lot of you out there listening. I don’t have a business or economics degree and a five years ago if you told me that I would be an expert on personal finance I wouldn’t have believed you. In fact, five years ago, I actually started a small scholarships and admissions consulting service called Getting in Consulting which I still run today. I have two English degrees (an undergraduate degree and an MA) and I managed to graduate university with no debt, and $40,000 in savings.
There are a lot of factors that contributed to being able to do that including getting around $60,000 in scholarships, and going to a cheap school in Canada which charged the equivalent of in state tuition at an inexpensive state school in the US. My parents also helped me out giving me about $8,000 a year during my undergrad.
But what really allowed me to save so much was leveraging my skills to get jobs that paid me much more than minimum wage, and living extremely frugally which are two things, that I plan on touching on in future episodes.
For the last five years, I’ve been helping clients get into their dream schools and apply for and win scholarships to help them pay for it. During that time, I’ve also been helping friends find ways to live more frugally, maximize their earning potential and invest.
Last summer, I decided to use that experience to write a book that could help more people. That book is called The Complete Guide to a Debt-Free Education and is currently available on Amazon and Kobo for a discounted price of $4.99 to celebrate the launch of my podcast.
When I launched that book in September 2014, I also decided to launch the blog Millennial Personal Finance which you can find at www.millennialpersonalfinance.com. I had been helping friends get their finances in order for so long that I knew I could help more Millennials.
Since launching my blog, I have become a Credit.com expert and my writing has appeared in USA Today.com, Time.com, Fox News, ABC, Yahoo! Finance, The Huffington Post, and many other sites. Which lead me to writing my second book Money is Everything which is a personal finance book for Millennials which came out this past April and was published by Tycho Press.
So, that’s a little about me. Feel free to contact me if you have any questions, any suggestions for future guests or requests for me to cover topics in future podcasts. You can do so at firstname.lastname@example.org or by commenting in the shownotes for this podcast by going to www.millennialpersonalfinance.com/1. The shownotes will also feature a transcript of this podcast and any links or resources mentioned in it.
So, let’s get into the topic of today’s podcast – why millennials are screwed and what to do about it.
Why Millennials are Screwed
What’s it like to be young these days? Well, it certainly isn’t carefree. A perfect storm of rising tuition costs, and youth unemployment and underemployment, has meant many of us are saddled with unwieldy student loans that we’re struggling to pay back.
That’s left countless in Generation Y with no option but to live at home. For those of us who are lucky enough to live on their own, many are living paycheck to paycheck and struggling to make payments on our debt. As a result, some of us are putting off things like getting married, saving for retirement and having children. The situation is so bad that it’s tantamount to our entire generation being sentenced to debt.
Student Loan Debt Has Skyrocketed
In the last few years, debt levels have skyrocketed to an average of $33,000 per student. And nearly 70% of students are now taking on student loans, which is up from less than half of students in 1994, according to Edvisors.
With education inflation increasing and companies demanding more education for the same positions, we often feel forced to get at least a Bachelor’s degree and possibly even a graduate degree in order to have a chance at a good job. But graduate school often just means graduate student loans, and 15% of students who get more than one degree leave school with six-figure debts.
Growing debts have meant that student loans now represent the second highest form of consumer debt after mortgages, exceeding even credit card debt.
We’re Underemployed and Unemployed
At the same time, as we’ve graduated and moved into the working world, the youth unemployment rate has soared. In 2010, the unemployment rate for 16-24-year-olds reached an all-time high of 19.6% and as of July 2014, it sat at 13.6%. That’s more than double the 6.2% unemployment rate for the entire U.S. population for the same month.
But that’s only part of the problem. According to the U.S. Department of Labor, about 750,000 of Bachelor’s degree-holders, or 26.8% of graduates under the age of 25, are underemployed. Some economists believe that we will never be able to make up for the years of unemployment and underemployment that they’re experiencing.
Entering the workforce during bad economic times has long-term effects, according to researchers at the Georgetown University Center of Education and the Workforce. These effects lead to workers settling for jobs they otherwise wouldn’t have taken, which leads to reduced earning potential and less job security even 10 to 15 years later. One of the problems that those of us who are lucky enough to have jobs face is that while average student loan debt has increased between 2005 and 2012 by 35%, the inflation-adjusted median salary has dropped by 2.2%.
All of this potentially explains why more Millennials are living at home. Pew Research found that 53% of 18-24-year-olds, 41% of 25-29-year-olds, and 17% of 30-34-year-olds live at home with their parents.
It’s Stressing Us Out
All this has led one-third of Millennials to state, according to a Wells Fargo study, that they would have been better off working rather than going to college. More than half of Millennials in the study described their debt as their biggest financial concern, and 42% called it ‘overwhelming.’ In fact, according to a BMO study, half of Millennials are losing sleep over their debt, with 56% so worried about debt that they think about it several times a day.
It’s not just causing them stress, however, it’s also affecting their relationships, with half arguing with family, friends or partners about debt, and 51% having to borrow money from friends or family to service their household debt.
Given our dismal debt situation, it’s not surprising that many of us feel like we’ve been sentenced to debt. We followed the path that their parents and teachers assured us would lead to success. We went to school. We studied hard. No one knew that we would end up graduating during an economic recession or its tepid, drawn-out recovery.
The unprecedented financial hardships that Millennials have experienced have many predicting that Generation Y will be the first generation in recent memory to be worse off financially than their parents. This is already starting to have an impact on Millennials with a 30-year-old in 2013 worth 21% less than a 30-year-old in 1983.
Despite all these factors, some still blame us for our hardships. Either we’re lazy, or we’re entitled. Either we took the wrong degrees, or we’re unemployable. The truth is that we’re the most well-educated generation and that different career or life choices wouldn’t have helped since they graduated at a time when there just weren’t enough entry-level jobs to go around.
But We’re Still Hopeful
What is particularly admirable is that all these struggles haven’t caused us to give up. While we might currently feel like they’re sentenced to debt, according to a 2010 study by Pew Research, 88% of us believe that we will do better in the future.
And we will do better in the future! Just because we’ve been royally screwed by the economy, doesn’t mean we can’t still have great lives. It just means we have to be a generation who is especially careful with money. So how do you do that? Well, in future episodes I’ll give you lots of ideas but in this episode I’m going to suggest five things to do to start.
5 Things To Do to Ensure a Bright Financial Future
1. Do a Student Loan Check Up
Many Millennials are burdened by student loans so it makes sense to check to ensure that you’re getting the best deal and best terms possible in paying back your student loans. Look into consolidating your federal loans and refinancing your private student loans.
By refinancing your loans you can potentially get a lower interest rate and better repayment terms saving you thousands of dollars in interest over the life of the loan and hundreds of dollars a month on your payments. I never pay more interest than I have to because doing so is basically like kissing your money and throwing it into the wind.
You might also consider changing your payment plan in order to accelerate your payments so that you’ll pay less interest overall.
2. Get a Financial Plan
Trying to accomplish your financial goals without a detailed financial plan is like getting into a plane without knowing your final destination. You’ll probably get somewhere but it might not be where you want to go and it might take longer than you expect.
A financial plan involves you sitting down and figuring out what you want in life and how much money it will take to make that possible. You can make a financial plan yourself which is great if you’re drowning in student loans and working a job that pays you peanuts. I’ll have some links in the shownotes to some resources that will help you do that. [ Check this link out]
If, however, you’re in the part of our generation that is actually making decent money it might be easier down with a certified financial planner. I recommend finding a fee-only planner that doesn’t earn a commission on any of the products that they recommend. While financial advisors and financial professionals who earned commission can also give you great advice, I like to be certain that advice that I am provided is completely in my interest.
3. Build an Emergency Fund
If you haven’t already saved up enough to cover your expenses for at least 3 to 6 months, then this is the year to do it. Having cash reserves to cover you in case of an emergency will give you peace of mind and ensure you won’t have to rely on credit cards if something goes wrong.
If saving an emergency fund is impossible for you to do you should consider at least opening a low interest line of credit from your bank to cover you in the event of an emergency. While cash reserves are best, having a low interest credit available is much better than resorting to credit cards if you need them because of an emergency.
4. Start a side hustle
Many personal finance experts will tell you to be frugal, to clip coupons, and to do very elaborate and time-consuming things to save a small amount of money. This isn’t always the best advice since you’re often better off working at a side hustle where you make $20-$30 an hour than spending that time saving $10.
Stop focusing so intently on saving your money and look for opportunities to increase your income. You might consider cleaning houses on the weekends, driving seniors around, or becoming a personal trainer. If there aren’t any opportunities where you live to make some money on the side consider doing things like starting a blog or selling crafts on Etsy that allow you to make money online.
Here are some great side hustle ideas: Blogging, Online stores, and Easy Online Ideas.
5. Get a Handle on your Credit Score
One of the biggest mistakes people make is not paying enough attention to building a good credit score. The problem with not focusing on your credit score is that down the road having a low score can potentially cost you tens of thousand dollars more on your mortgage or other loans over the course of your life. The first thing you should do is check your score.
Once you know what it is, you know how much work you have to do to improve it. A good score is generally anywhere between 700-749 whereas a score above 750 is considered excellent. Next, you should learn more about how your credit score is calculated and do things like keep your credit card balances below 20%-30% of your total limit and make sure to always pay your minimum balance.
If you don’t have a long credit history you should consider getting an immediate family member with good credit to add you as an authorized user on a credit card that they’ve had for a long time. The credit history of their card will then be added to your credit history and boost your score. Also, make sure to get a free copy of your credit history once a year and check it for any inaccuracies.
With these simple hacks, you’ll be well on your way to ensuring that your financial future in will be bright. They’re not going to fix all your problems or even help you escape the Millennial debt sentence tomorrow, but they help lay the foundation for a positive financial future. Stick with this podcast and we’ll help you break free from the chains of student loan debt.