Must be Funny in a Rich Man's World
Updated: Oct 1, 2019
Money, money, money. I try to live with less, but then I always end up spending more. I don’t have a bad relationship money in the slightest, but I do seem to consistently spend up to the wire. I save well for a few months and then spend it on a trip or eating out or clothes instead of letting it continually rise. Zach and I are fortunate that the only debts we owe exist on our cars and the house; no tuition loans or secret credit card interest piling up live in our closet. But, his saving habits far exceed my own. When my father died almost 5 years ago now, I was only 22 years old and had to learn about money quick. My parents raised me with proper work ethic and to never spend more than my means, but my college courses definitely did not prepare me for the ins and outs of investments and retirement savings, let alone handling my father’s estate. I went the conservative route in my investments and set aside a chunk of change for a wedding and a future down payment on a house. I chose to be less aggressive because I did plan on experiencing significant life changes, like marriage and moving states, within the next 5-10 years.
Recently, I met with my new financial adviser and finally received a few answers to the financial questions I hadn’t known to ask previously and confirmation on others. You should question everything when it comes to your finances! For my fellow millennials or those of you entering the workforce with a substantial benefits plan, know your options and consider these suggestions:
Saving in general
I rarely shop at brick and mortars anymore, but I order items (clothes) online too frequently. It may feel like a holiday when I receive a package, but the $15 here and $30 there add up. If I see the money in my account, I want to spend it.
I started using an app called “Qapital” that securely connects to your bank savings accounts and allows you to set rules to save money. These rules include taking out x amount of dollars each time you get a paycheck, rounding your spending up to the next dollar and saving that amount, and rewarding yourself when you don’t spend somewhere. It helps you automatically save money without thinking or even realizing the money has been put safely away for later.
I always heard that you should elect to contribute a percentage of your paycheck each payroll to your 401(K) that is at least equal to the percentage that your company will match, which is usually between 3%-6%. Also, I follow the plan of with the idea that you will get a raise each year, automatically adding an additional 1% to your contributions each year to slowly increase savings without your noticing.
I currently contribute 8% and my company matches 4%. During my visit with my new financial adviser, he suggested that I up it to 10% with a goal to eventually get to and stay at 15% contributions. Based on my previous knowledge, I found myself surprised at this high of a percentage. But, he noted that if I could reach 15%, then I would be comfortably set for the future.
Starting a new job
No one stays at a company for 30-40 years anymore. Millennials, myself included, have often found that advancing to the next step in your career often means joining a new company. Promotions and hiring within don’t occur as frequently anymore. We haven’t experienced roles with a built-in succession like our elders, so we have to seek opportunities elsewhere when we are ready for the next challenge.
If you elected to contribute to a 401(K) at your past company, which I hope you did, you need to do something with that money. I just learned how to do this almost two years after leaving my previous company, so you aren’t any more out of the loop than I am. You need to reach out to your past HR benefits department to obtain a proper 401(K) transfer form and an account statement or a portal log-in to pull one of those yourself. You can choose to receive that as a liquid check, but 20% will be taken out of the total. At the suggestion of my financial adviser, I am transferring that money to an IRA with no cost penalty. This is wise as well because when you move from company to company during your career, you can then transfer all of your 401(K) earnings into this same IRA to ensure you don’t have earned money floating around in various accounts or funds. Consolidate and monitor!
Pay off that credit card
You should be paying off your credit card balance at the end of each month. Period. If you don’t, that interest adds up and then you are paying unnecessary money. We all have our vices, which makes planning where and how we spend a valuable balancing act. Zach and I love eating out for dinner, so we try to eat at home for breakfast and lunch, and we buy simple, healthy meals at the grocery for a smaller bill. This planning proves even more important if your bill payments are set-up for autopay through your credit card. More money, more problems. As a rule, I pay off part of my credit card each time I receive a paycheck (every other Friday) so that I’m usually paying off more than I owe up to that date, so I don’t feel overwhelmed by having an entire paycheck go to my credit card bill once a month, and so that no charges are carried over to the next month and penalized. Debt is your enemy.
Balanced spending habits don’t happen overnight. If you continue to educate yourself on your finances and reevaluate your earnings, expenses, and investments at least once a year, you can set yourself up for success. Money isn’t everything, but it does matter, and budgeting so you don’t have to think about each time you swipe your credit card to buy groceries or worry if you can afford the restaurant bill on your night out will improve your quality of life.