The Personal Finance Podcast - How Millennials Can Overcome Their Biggest Financial Challenges

Episode Date: December 9, 2020

Episode 31: How Millennials Can Overcome Their Biggest Financial Challenges In this episode we cover:  The 6 biggest Millennial challenges How to solve those challenges  How to tackle debt  How to get out of bad financial situations  Stuff I Recommend!  M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about how millennials can overcome their biggest financial challenges. What's popping? And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the Personal Finance Podcast, we're going to talk about how millennials can overcome their biggest financial challenges. We have a number of things to talk about today because the millennial generation, could be one of the greatest generations for personal finance.

And there's a number of reasons that we can talk about why that is. But a lot of millennials just do not have an understanding of personal finance. So what I'm going to do is I'm going to go through the six biggest challenges that I see with millennials today, the six biggest challenges that they truly need to overcome to be able to build well for them and their families in the future. And a lot of these challenges can easily be overcome. So I'm going to go through each one. and then what I'm going to do is give you a solution on how to solve that problem,

because it's a problem that almost every single millennial out there has to face. It's something that they have to overcome within their personal finances. And if you feel lost in one of these areas, if you feel lost in some areas of your personal finance and you just don't know how to solve that problem, maybe it's budgeting, maybe it's your student loans, maybe it's other issues, then you're in luck because we're going to cover every piece of personal finance that we possibly can on this podcast. This podcast is never going to stop until we cover every. every single piece that we possibly can.

And personal finance is infinite. It's infinite. So make sure you're subscribed because listening to this podcast is one of the biggest steps that you can take. So let's get into the biggest millennial challenges and how to overcome them. So challenge number one is millennials are financially illiterate. According to a bunch of recent studies, only 24% of millennials actually demonstrate basic financial literacy and just basic concepts of personal finance.

finance, most millennials, 75% of millennials could not answer questions on things like mortgages or the stock market or how they work or the difference between a mutual fund and stocks. And this is something that is happening across the millennial generation. But you're in luck, my friends, because if you're listening to this podcast, you're taking the first step towards fixing that. You're trying to build knowledge about personal finance. You're trying to increase your reach with your personal finances. You're trying to build wealth and you want to build wealth for you and your family. Why else would you listen to this podcast if that's not the case. So the biggest thing to do is you need to fight back. You need to fight a problem because how can you solve a problem if you don't understand it?

So there's a bunch of ways to do that. The first one is obviously listen to podcasts. Listen to this podcast. Subscribe to this podcast because I'm going to cover every single topic you can think of in personal finance as we go along. But one of the biggest things that I did early on was I started reading a book a week. And I talked about this before. We're going to have a full episode on how I do this, how I read a book a week. But if you learn how to read a book a week, And it doesn't only have to be in personal finance, but if you make one of those books a month about personal finance, you're going to have way more knowledge than 99% of individuals out there. And you know how powerful that knowledge is going to be?

Because increasing your knowledge of personal finance allows you to master personal finance. And if you master personal finance, you're going to automatically be a millionaire no matter what, as long as you put those concepts to work. And that's the key. That's why learning is so important. Because once you learn the information and you put those concepts to work, everything just starts to work. Everything comes together. And all of a sudden, you're building wealth for yourself. You're building wealth for your family. And this is a massive, massive impact on your entire life.

Because if you build generational wealth based on just putting in the time to produce knowledge that you can use to better your financial future, then that time building that knowledge is worth its weight in gold. And that's why I make even each of these episodes every single week 20 minutes because I want you to be able to digest it and put it into practice. That's why it's so important. to have these episodes and to listen to these episodes in addition to reading. And reading doesn't have to be just getting a book and reading it. You can use audiobooks. If you like podcasts, you're going to love an audiobook because audiobooks are the same thing

and they're getting so big now. I use a service called Audible. There's another service called Scribed. And Scribed has almost an unlimited amount of audiobooks for like $8 or $9 a month. There's so many options out there for you to increase your knowledge that are free, then why not do it? Even if you took a year to increase your personal finance knowledge, even if you took it the whole year and you said, I'm just going to read personal finance stuff this year. I want to get better in that.

That's one of your biggest goals of that year. It's going to change your life forever. And that's the key. That's the biggest key there. And there's also blogs out there. There's a bunch of great blogs out there that you can read about personal finance. There's financial samurai. There's Mr. Money Mustache.

There's all these blogs out there that you can go out there and read about personal finance. So taking the time to get out there, read some personal finance books, listen to podcasts, read a few good personal finance blogs, and filtering that information, figuring out what concepts are they all talking about that seem to be the same over and over and over again. Those concepts are truly right. And that's where you're going to find success within your personal finance is understanding the concepts first. Because if you don't understand the concepts, you can't take on the battle that is ahead of you. You have to understand

the concepts. And the only way to do that is to learn as much as you possibly can. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy. Clothes don't fit anymore and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in. PolicyGenius is an insurance company. They're an online marketplace that helps you compare life insurance quotes from some of the top insurers in America, all in one place for free. And their licensed team works for you, not the insurance companies.

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Call 16-531-2600 or visitconX Ontario.com. This episode is brought to you by FedEx. These days, the power move isn't having a big metallic credit card to drop on the check at a corporate launch. The real power move is leveling up your business with FedEx intelligence and accessing one of the biggest data networks powered by one of the biggest delivery networks. Level up your business with FedEx, the new power move. Challenge number two, millennials are financially. fragile. Now, this is one of the biggest things that I see come up in people's lives. And people who don't truly build wealth don't have a way to deal with situations when expenses come up that they

do not expect. The Washington Post just did a survey that said that 63% of millennials would have difficulty covering an unexpected $500 expense. Now, if you've listened to the personal finance podcast for any amount of time, you know, your boy has talked about emergency funds a bunch. And guess what? There's reason for that, because emergency funds will save your behind in any situation that comes up. If you don't have an emergency fund or if you don't have cash on hand, liquid cash on hand to be able to take care of emergencies, it's going to leave you cash poor.

It's going to leave you broke for the rest of your life. You have to understand this because not having cash available will not allow you to take that dream job and have the money for moving expenses. It will not allow you to go ahead and take care of an expense when your car breaks down. Because unexpected expenses put you behind. But guess what? They're inevitable. It's not if they're going to happen.

It's when they're going to happen. Unexpected expenses will happen. Your car will break down. The roof of your house is going to cave in at some point. All these situations are going to happen at some point because everything breaks down. Everything breaks down. You're going to need to replace things. you're going to need emergency health insurance.

I mean, all these things are going to happen. So making sure you prepare for them by just saving a couple hundred dollars a month so that you can take on those things when they happen is the biggest thing you need to do. So this is the biggest counter move is first, just start out with saving a simple $1,000. If you don't have an emergency fund at all, save $1,000 because $1,000 can cover a lot of things. It can't cover everything. You're going to want to expand it after you get to $1,000. But saving that first $1,000, at least having $1,000 in emergency fund,

is going to cover a lot of things. This is the reason why Dave Ramsey says save $1,000. That's his first step, because you have to be able to take care of the things that are unexpected when they come up. It's the people that don't have cash on hand, that don't have emergency cash on hand, that live paycheck to paycheck for the rest of their life

because every situation that comes up puts them backwards. And they go into debt and live paycheck to paycheck to paycheck for the rest of their life. Emergency funds are non-negotiable. You have to have one to be able to build wealth for you and your family. So make sure you have some cash. on hand. And if this pandemic has taught us anything, it's that you definitely need an emergency fund. You definitely need cash on hand in case you lose a job. So all these people that are preaching, you know, two, three months of emergency fund, that's not the best situation right now.

We just learned that this year. You need at least six months of expenses, if not more, in the long run. But just start off with $1,000, try to get to that point and then build up your emergency fund from there. It's a requirement. You've got to have emergency fund. Challenge number three, millennials are burdened with student loan debt. Now, this is one of the truest things I've ever heard. Millennials are burdened with student loan debt. We understand that our generation has more student loan debt than any other generation before them. In fact, we just hit over a trillion dollars in student loan debt.

We're going to have an entire episode detailing student loan debt and how to tackle student loan debt. But let me just tell you something. This has to become a priority for you because student loans are completely holding you back. Debt will tie you down. It will weigh you down forever if you don't get rid of it. Especially if your student loan debt is above 5 to 6% interest rate. Because that 5% to 6% interest rate is really, really weighing you down.

And I've heard of people having 8, 9, 10, 12% interest rates. That's going to be lingering around forever if you do not take care of that now. So student loan debt, to me, especially when those high interest rates, is a pants on fire emergency. So you have to aggressive. prioritize that student loan debt to be able to pay that down. Because like I've said before, the market average for investing in the market is around 8% historically. So what's happening here is if you're paying more money in student loan debt and say you're prioritizing investing in the market only and just paying the minimum on your student loan debt, then what's happening is you're

getting a negative return, especially if it's over 8%. So that's where you have to really look at your student loan debt and realize I need to prioritize this. So the first thing, thing to do is to get serious about it. Now, if you have one of those high interest rate, I recommend looking at a site like credible and saying, hey, maybe I can refinance this student loan debt and find the best rate out there so I can at least reduce the interest rate. Then what you want to do is just prioritize and attack those student loans. If you have multiple student loans, I would attack the highest interest rate first and go down the list. Doing it the reverse way is psychologically important. And I know a lot of people have had a lot of success doing it

with the lowest balance first, but attacking the highest interest rate first is mathematically the fastest way to pay down your student loan debt. So make sure you stay subscribed to listen when that student loan episode comes up because I'm going to go into great detail on how to attack it.

But just understand this. If you prioritize your student loan debt and you get rid of it, it's going to make a massive difference in the long run because a lot of people have a lot of student loan debt and getting rid of that, getting rid of that weight

that's holding them down financially is going to change your life forever. Challenge number four, millennials wages are stagnant. Now this is massively been the case for a lot of millennials because a lot of millennials are earning 20% less than baby boomers did at the same time when they were the same age. So if you pair that with having more student loan debt,

you can see how the outlook is not looking great for millennials. They have a lot of challenges in front of them. But understanding some of these concepts is going to allow you to overcome this. So what you want to do is you want to look at a situation like this where you're looking at recessions or pandemics or whatever else comes up when you graduate from college, and your wages are going to be lower, especially if you enter during those times. But what you've got to do is understand that you may have to start at an entry-level salary because everyone does. And if you're entitled and think that you need to start

with a higher salary than an entry-level salary, I'm sorry. You're just dreaming. And if you get that job, fantastic. But what you have to do is start from the bottom and move your way up. Now, moving your way up is a combination of hard work. It's corporate politics. There's a lot of things that are going to happen there. We've had two episodes talking about how to ask for a raise. But negotiating that raise is going to allow you to increase your income, to increase your savings rate so you can increase and build wealth. You just have to understand how to negotiate for a raise. You don't just walk into your boss's office and say, hey, I'd like a raise. Instead, what you have to do is start talking to them and communicating with them and saying, hey, I'd like a raise. What do I need

to do in the next year to be able to get that? They're going to give you a bunch of goals, a bunch of ideas, and you're going to take those ideas and execute them. And as you're executing them, you're continuously communicating with him and saying, hey, I'm executing these ideas. Thanks so much for the advice, that type of thing. And then as you get to that point, you're getting closer and closer to your year-end review, then you're going to be able to ask for that raise

with no question. They expect you to ask for it because you're checking all the boxes that they stated that you needed to check off to be able to get that raise. And that's the beautiful thing about this, is that a lot of people won't do this work to be able to do that.

But if you do it, the competition's not that hard in the corporate environment. A lot of people are lazy. Most people are looking at their phones all day long. So if you put in the extra effort and execute this plan, and you can listen to that execution plans, the episode is called, I believe, How to Get a Raise. And if you listen to that episode, I go into a very detailed systematic process on how to do that. And then I also wrote an e-book, a free e-book that you can use and use it as a reference.

It's got scripts and everything that you can use to be able to ask for that raise. And I promise you it's going to work. Now, the second move, along with asking for a raise, to be able to combat these lower salaries, is to get a little thrifty, my friend. Because if you get a little thrifty, just reduce your overall expenses. It's going to help you actually combat that. So reducing your expenses and increasing your income

and growing that gap in between those two is going to allow you to be able to do anything with your personal finances. So growing that gap and investing that gap is going to be massive for you. But if you're not making as much money as you want to, look at the areas that don't bring you value and reduce your spending in those areas.

Maybe you're spending a bunch of money on eating out. You could care less to eat out. You actually would rather cook at home. reduce the spending on the eating out and cook more at home. If it doesn't make a difference to you, if it doesn't bring you value, then don't allocate your hard-earned dollars towards that stuff. That's the huge thing that you need to understand. That's the huge thing that you need to execute when you're thinking about your personal finances. Challenge number five, rents are rising and they're eating up millennials income. Now, this is another thing that is happening because rents are rising

every single year. I own rental properties and I think it's at times pretty high. When you look at the rental rates that are coming out now, they're pretty high because a lot of times they're much higher than my mortgage for a smaller house. And so what I'm seeing here is rental rates are rising above the rates of mortgages. So buying a house in certain areas, at least in my area, but in certain areas, it's almost cheaper to buy a house than it is to rent a house. But you have to factor in all the different costs that come into owning the house. So a lot of times when you rent, your landlord will pay for your repairs. But when you own a house, you have a lot of additional costs. So we talked about how to buy a house and things like that as well. And we'll do a entire episode on

how to, on buying versus renting a house. But these are things you have to take in consideration because rents are rising very fast right now. And they're gobbling up substantial pieces of people's paychecks. So there's a couple of counter moves that you can make here. One is to house hack. We've talked about house hacking a bunch of times is when you live in one unit and rent out the other unit. And you basically can live for free. Another thing you can do is you can move to a cheaper part of the country. If you live in the middle of New York City and you're paying $3,000 in rent, and you have $10,000 of student loan debt,

they have to pay every single year and you have additional issues with your earning potential, then you got yourself a problem here. And if you move to a cheaper part of the country, this is going to help you significantly because housing expenses is the biggest expense in your budget. And so if you can reduce your housing expense significantly,

you're reducing, you're doing big things for your personal finances. You're doing massive things for your personal finances. Cutting out lattes is not going to do anything. But reducing your housing expense is going to do a lot. And I'm talking in the tunes of thousands of, thousands of dollars a year. So looking to either purchase a house in an area where maybe it's cheaper to own the house than it is to rent a house, move to a cheaper area, or house hack is going to allow

you to reduce that housing expense. And then the wild car thing, and it's not something I recommend, because I think a lot of people need to have a little bit of self-pride, but a lot of millennials do this anyway is to move in with your parents. Maybe you want to pay up your student loans in one year and you want to get real aggressive with it. I think that's a great situation where you could move in with your parents for a year, have free rent, put all your money towards those student loans, get rid of it, and then all of a sudden you're building true wealth, because now that money that you were putting towards your student loans is going to investments. And it's going to make a massive difference. So if you do something like that, if you're trying to pay down debt,

a significant amount of debt and you need to do something drastic, that's the only time I see that situation happening. But a lot of people are moving back in and not having self-fried just because it's the easy route. So think about these options because you do have options when your housing costs are too high. Number six, fewer and fewer millennials are becoming full-time entrepreneurs. So a study came out that said that we have 34.8% less entrepreneurs between the ages of 20 to 34 than we did in 1996. And young adults who used to be the largest demographic in 1996 of people who were starting companies are now the smallest demographic of people who are starting companies. And entrepreneurship has declined amongst millennials. And it's partly because some of these burdens

we just talked about, the rising rent rates, the student loans, those types of things. So they don't have the extra capital be able to do that. But there's a way you can combat. at this. And we have an episode coming up where I'm going to talk about over 20 side hustles that you can do, but you can become an entrepreneur on the side. And Warren Buffett, one of the best investors of all time, even says the same thing. Never leave your day job for something that is not proven. And what I mean by that is you need to start your business on the side. You need to keep your day job and start your business on the side because the last thing you want to do is cut off your lifeline, which is your job to start a business. Now, a lot of people have been successful doing that.

and you're going to hear these grand stories from people who say, I just quit my job and I started my business and it all just worked out. But the majority of the time, that doesn't work out. So what you have to understand is sometimes you're going to have to fail a couple of times. You're going to have to fail two, three, four times before you find the business that's going to work for you. And so doing it on the side, having your day job, growing your day job, growing your income at your day job, and then doing it on the side and allowing you to have additional income, maybe centered around something that you're interested in,

is going to change the way that you can make money. money because once you start making your first dollar, say, online, you're going to see the world differently. Because if you make money online or a different way, then you're going to be able to say, hey, I can grow this. If I can make a dollar, why can't I make $50? Why can I make $1,000? Why can I make $100,000? It's just going to grow from there. But you got to start somewhere. So doing it on the side, nights and weekends, working your tail off. I know it's hard to do that. You want to come home from work and just relax. But coming home and working on something and producing towards something that's going to bring you tremendous value, there's nothing like it

in the world. And one thing to note about side hustles, and we're going to talk about this in the side hustle episode as well, but one big thing to note about side hustles is you don't want to really rely on things that are just short-term fixes. Things like just running around and doing like a delivery service or driving for Uber or things like that, that's not going to make you money while you sleep. You want to find signed hustles that are going to make you money while you sleep. So starting in some of those places, yes, that'd be great.

If you're trying to pay off your student loans, you want to make some extra money and you just want to make some hustle money, some sweat equity, that'd be great to do those things, to make some extra money on the side so that you can use that money to pay down student loans. But if you're just looking to create another income stream, which I think everyone should have multiple income streams, if you want to stack up those income streams, then you want to make sure you're finding things that make money while you sleep. And I'm going to show you a bunch of those coming up here in that episode. So before we wrap this episode up, I'm going to leave you with this. Whatever financial obstacle you're facing, just understand that there's a way around it. There's a way to fix that financial obstacle. And it starts with education, understanding how you can overtake that financial obstacle and turn it around for the best for you.

Turn it around so that you can build wealth for your future, for your family's future, and build tremendous wealth for generations to come. That's the key to beating these obstacles because everyone faces these obstacles, but it's how you deal with them is what's going to dictate, if you can build wealth or not. Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode.

And share this episode with a friend. And don't forget to leave a rating and review on iTunes as well because our goal is to bring as much value to you as possible. And we're trying to spread this message that money can buy freedom. That's what money is there to do, is to buy more freedom. So thank you again so much for listening, and I hope you have a great day.