So trying to teach us impulse control and all that early on, as well as entrepreneurship. And I was seven and I really wanted to buy a Nerf Gun Super Soaker, just like a child in the 90s. And my parents were like, “Okay, well, you have to figure out how to earn the money.” My mom was having a yard sale so I can see this idea that “Hey, if people will come and buy our used nk very early in the morning, I bet they’ll buy some Krispy Kreme doughnuts from two cute little kids.” So I got my sister to help me and I asked my dad to go and buy the doughnuts for me.

And that morning, we set up shop and sold out really quickly. I’m sitting there counting all my quarters really proud of myself and my dad comes over and says, “Okay, well, how much money have you earned?” I said, and this number changes like every time I tell the story, but I said something like $20 and I’m super excited thinking I can get two Nerf Guns Super Soaker, and that it was going to be a great summer. And he goes, “Okay, well it cost me $8 to buy the doughnuts for you and your little sister works for you for a little bit. So let’s give her $2. So actually, your net profit is $10.”

And he did actually take the money from me. And that was my first true introduction to how money works. And it really has stuck with me and it has been the foundation. I kind of felt like it was my origin story. And from then, never ever would I have predicted a future career writing about money for a living and yet here we are.

Robert Leonard 3:00
That’s an interesting little twist on like a lemonade stand. You know, instead of lemonade, you’re selling Krispy Kreme doughnuts.

Erin Lowry 3:06
Also, it’s much more efficient because you don’t have to pour. When you have a product, you run out of products, but also, the manual labor aspect of it is very low when you’re selling Krispy Kreme doughnuts as opposed to having to make your own lemonade.

Robert Leonard 3:18
So let’s talk about some of the mental challenges that people face when trying to get their personal finances order. What are some of the most common ones you see? And how can people overcome them?

Erin Lowry 3:28
I really think almost everything we do with money is emotional, very little of it is rational. And a big part of that is identifying your own personal relationship to money. And I hate to say it, but that’s almost guaranteed to have come from your parents or whomever raised you. And this is not trying to finger point at people’s parents. But really, we are starting to code our relationship with money at a very young age.

Different studies say different things, but it’s generally accepted between about 7 and 12 is when you’re really starting to pick up messages about money, how people around you are reacting to money, and that’s going start sending you signals and going to really start to dictate how you behave as you age. It can go multiple ways, but I like to think of it in kind of three fundamental groups that I made up in the book, and it’s riffing on a study that was done by the company Magnify Money and Professor Philip Zimbardo. He did the Stanford Prison Experiment for anybody who studied psych, but he also came up with this idea of time paradox. And that our relationship to time will dictate a lot about other things in our lives.

So for instance, if you are never really thinking about the future, you’re very much like in the present all the time, always focusing… It’s called the present hedonist. Then if you think about that in money terms, you are likely to be a spender, spender, spender. You’re not really thinking about retirement or anything and you’re probably not saving.

So I kind of riffed on this study and thinking about different ways that people interact with money and we have grouped them to YOLO-FOMO, which are the people who, as you would identify Present Hedonist, very much live in the moment, for a variety of reasons they might have negative memories of the past. They might be too anxious about the future. Whatever it is, they’re very much in the moment.

And if you think about that with money, you don’t care if you’re charging things on your credit card, or you might care, but you’re kind of repressing that feeling. You’re not at all focused on saving or investing for the future. You’re very much about creating memories today to perhaps the detriment of your bank account, etc, etc. So that’s one group.

Another one that I talked about is this sort of Delusional Optimist. And I think that that is a bit of a play on the whole millennial stereotype that we all think we’re special snowflakes, and we’re all going to be successful, which was to point out we did not give ourselves the participation trophies and the gold stars. I always like to say that. So these monsters were created by other generations. And I am a millennial, I feel the need to point it out. I’m 30. So I’m laughing with us, not at us.

And the idea of the delusional optimist or even guarded optimist, in some cases, is that you are very, very certain you’re going to be successful. So even if right now, you’re not making as much as you’d like, you’re not reaching your goals as quickly as you like. You’re very, very confident that in the next year 5 to 10 years, you’re going to be making that salary. You’re going to be doing, you’re going to be successful in whatever it is you’re trying to achieve, which could have positive or negative implications for your current bank account. It could mean that you’ll put off saving or investing because, “Hey, I’m going to be making a quarter of a million in five years. So I’ll just like worry about it when I get there.” So that’s another group.

And then lastly, there are people who are always dreaming about the future and Zimbardo would categorize those as the very future forward thinkers, which can have a detriment to yourself today. You might not indulge in anything. You might not try to create any memories. You might just be purely focused on the future. We could also call this the fire movement in some cases, and it’s people who will basically put aside every pleasure or most pleasures for today, in pursuit of their future selves.

The ideal is to be a little bit of all of these, to be a well-balanced person. And the other thing I would definitely recommend people check out is *Dr. Bradley Klontz’s work on your different kind of money scripts, as he has called them. And there’s… he has this whole quiz that you can take to help identify your emotional relationship with money, which again, I think our parents do the best with the information they have at the time. But if you grew up in a household where your parents thought about money all the time, it was a huge source of stress, you’re probably going to turn out one of two ways. Either you do not like money, you don’t like dealing with money, you don’t like thinking about money, or you never wanted to be them. And you went way over the other direction of being really micromanaging about your money.

Robert Leonard 7:23
I’ll be sure to put links to his work and his studies in the show notes so you guys can go check it out. But I want to dive into that parent aspect a little more. How can somebody overcome the biases that they might be given from their parents, if they don’t want to necessarily grow up the same way that their parents did? What can they do? What are some tips or tricks that they can implement that will help them break that?

Erin Lowry 7:43
Well, you can see a therapist. I would say that could definitely be an early step. Honestly, though, identifying that it’s happening and identifying your triggers are really key. And I also want to point out that even if you grew up in a very copacetic household financially, there still can be weird quirks that you have as an adult. It wasn’t a huge stressor in the household. But my parents are both very frugal people. And I saw that as a pattern and they splurged in the area of travel. I do that as an adult.

There are ways that I saved money as an adult that most people thought were crazy. Like, I refuse to get air conditioning for years. I live in New York City. My apartment would just straight up become a sauna. In the summer, I was like, I don’t really care that much. I’d rather save $150 a month. It took my, actually my senior dog passing out from the heat that made me go, “Oh, I need to get an air conditioning.” Very extreme example. But I just want to point out that if you had a healthy relationship, there still can be funky things that happen as an adult.

Now in terms of what you can do to stop it, again, I think you have to start reflecting on both the past and the present to start to look for connections. I have an inventory of questions that I recommend people go through in book one but it starts with things like, “What’s your first memory of money? How does it make you feel? When you were a kid growing up, how did you get money?” So you know, “Did you get an allowance? Did you have to work? Were your parents just kind of buying you whatever you wanted, whenever you wanted it?” And thinking about those things, and then trying to connect them to behaviors today can be the first step.

But what then starts to happen is you’ve identified it, now how can we solve for it? So a common example I use is there are people who grew up in very financially chaotic households growing up, whether that was sometimes the family was flush with cash, sometimes they were not. It was kind of this… I’ve heard it identified as financial whiplash experience. Not all the time but sometimes when you grow up that way, you can try to recreate that as an adult, usually, subconsciously.

But you create financial chaos for yourself. So when you get a lot of money, you’re probably going to splurge. And you’re going to just constantly have that experience of not knowing how much you’re going to have month to month. And the reason people will do that is because it’s what feels normal and what honestly feels comfortable, at the end of the day because it’s how they grew up.

So it’s time to think about, “Okay, what can I do to try to minimize this happening to me?” For instance, having a savings account at a completely separate bank from where you do your day-to-day checking. So when you log in, you don’t see a huge lump sum of cash at your disposal. It’s sort of that, hate to say it with money, out of sight, out of mind mentality. That’s just an example of one of the ways you can try to solve for it.

Robert Leonard 10:12
Yeah, glad to hear some of those because I’ve do a couple of those. And I think that my situation with money is very different than my parents. I think everything you just gave is great advice. But I want to go back to, I think it was a second profile you mentioned a couple minutes ago, about the people who think that they’re going to be super successful.

And I think this is really interesting, because I think overall, I think that’s a really good way to think. You know, you want to be positive, you want to try and build towards success. But I think what a lot of people miss is, and I don’t have any statistics behind this, it is anecdotal, but I think 90% or more of people scale their expenses with their income. So even if they become successful, what they expect, if even if they hit that $250,000 a year, their expenses are going to scale just the way they do. And if you have hundred dollars, you know, give away 10 of it. You’re not going to give away 100,000 when you have a million. So do you think that that is going to be the case for people that thinks like that?

Erin Lowry 11:00
I think that is so common. And it’s an excellent point that whether it’s charitable giving or paying off debt or investing or putting money into a retirement account, as those aren’t behaviors that you’re doing on your current salary, it’s really hard to make the transition later on. I harp on that idea all the time when I talk about saving that just building the habit now is what really matters, because it’s so hard to make that transition.

And one of the greatest quotes I’ve got in my second book, which is about investing is a woman made the point of, “Listen, life tends to get more complicated, not less.” So even if you’re earning a lot more money, even if you’ve paid off all your student loans, you figured out how credit cards work and you’ve paid off your credit card debt, you know, everything is right on paper financially. Well, maybe you got married, maybe you bought a house, maybe you had a couple kids, maybe someone got sick, maybe a disability occurred, like things happen, and you’re right, if you inflate your lifestyle in tandem with your income, then it’s always going to be that hamster wheel. I need more, I need more, I need more.

Robert Leonard 11:57
And about the kids and getting married, that might be a a few years away for some, but that might be right in the sweet spot for some of our listeners. So the *inaudible that is you have two income, you may have two incomes right now. And if one of those people, specifically the wife or girlfriend, has a child and they’re not working, now you have one income. And if you weren’t saving or investing before, you’re definitely not going to be doing it on one income.

Erin Lowry 12:17
I am in a marriage and I have variable income. I’m the breadwinner of my household, but my income is inconsistent. So well, I shouldn’t say inconsistent, it’s variable. So sometimes it can be really high and sometimes it can be like, “eh.” So having to also account for that when you are doing your budgeting and your planning and you’re investing is incredibly difficult in some cases. And it’s really important to get on the same page early on and to build those habits early so that you know you’re not just going to blow through all of your money when you have a great month.

Robert Leonard 12:48
So other than some of these habits we’ve been talking about, what are other common mistakes that you see millennials generally make?

Erin Lowry 12:54
To go for a low hanging fruit on stereotypes, I would say one of them is not investing early enough, even as simply as retirement. And I really think of that as a problem of misnomers because we say save for retirement. So I feel like a lot of people don’t even understand that they are investors when they’re putting money into a 401k or an IRA. And it makes them… that small language shift, I think really empowers people to feel like, “Oh, I can do this. I can invest,” which then can have a positive ripple effect going out into investing in other arenas.

So into taxable accounts, for instance. There’s so many people that put off even getting an employer match on a 401k. Or if you’re self-employed, putting money into a Roth or traditional, or a SEP, or IRA. And there’s a variety of reasons this happens. Obviously, there are a ton of competing financial goals, especially when we’re still you know, establishing ourselves, probably paying off student loans, maybe living in an expensive city. You just feel like, “Eh, what’s couple percent of my paycheck? I can handle this later.”

But especially if you get a*inaudible and especially if you start early, please just do it. That is one of the big things is just getting people to start. And another really common mistake, and this really, this transcends our generation, it trickles through all, is a hesitancy to face your numbers, especially if you are in a rough financial situation, you just ostrich that head in the sand. Don’t want to pay attention to everything, just paying minimums on all the debts owed, as opposed to doing the painful part of paying exactly how much money is owed, to whom it’s owed, interest rates, all of that. And then with that information, you can actually create an attack plan to pay it off.

Robert Leonard 14:40
So what would you say to somebody that’s about to start their first job out of college and trying to decide if they should contribute to a 401k? Or even to somebody that is in a career already and they’re not contributing to their 401k? What would you tell them to try and convince them that they should?

Erin Lowry 14:55
I think that the first question will be, “Why aren’t you?” as opposed to just trying to straight up convince by using all the fun numbers of, “Hey, if you try to double down the amount that you’re putting in, 10 years later to play catch up, it’s still not going to result in you catching up.” Sometimes those work as I feel like it’s the scare tactics of the financial world. But if we look to the health industry, showing people a smoker’s lung doesn’t necessarily stop them from smoking.

So it’s not always the most effective way. My approach really would be to ask why are you not putting money in? What are the competing financial goals? Is it lack of education? Is it just an intimidation factor for you? My very first try in setting up a 401k, I remember filling in all the information and I got to the portal where you actually picked your investments. I had no idea what to do and just clicked out. And I think that happens to a lot of people because you might not have learned anything about investing at any point. So now to all the sudden be in charge of something that’s supposed to be a retirement fund, there’s no one there to hold your hand through it. You have no idea how to pick these investments. It just feels so overwhelming. We just shut it down.

Robert Leonard 15:56
Yeah, I think the lack of education is probably the biggest thing. So what would you tell yourself, if you could go back now to, if you could see yourself sitting in front of that screen or somebody that’s in that exact same situation? What types of recommendations for investments would you give them, if they were in that situation today?

Erin Lowry 16:12
I would say I was very fortunate that I could call my parents and ask for help. And many people are not in that situation. I would say first, if you have no idea what to do, and you want to talk to a human, ask whoever’s in charge of the 401k plan, if it’s HR or accounting or payroll, whomever. Ask them who is in control of your 401k plan, what company, and see if you can call them and speak to someone there. Also pay attention. A lot of employers will bring someone in from the 401k company at some point during the year to do a meeting.

They’re very sparsely attended meetings, most of the time. Go to it. A lot of times too you would end up with just like a one-on-one with whoever helps run your 401k plan and they can sit down and help. But I would also say if you’re just trying to get started, just look at a target date fund or lifecycle fund or an all in one fund, whatever it’s called. That’s going to be tied to approximately the year that you’re going to retire, usually they’re in increments of five. So say, you know, target date fund is 2065. It’s going to start you more aggressive, and then go to more moderate and then more conservative.

Now, I can already sense that some people are like, “Oh my gosh, I can’t believe you just said that, because they can be controversial products.” So what I would like to point out is target date funds are actively managed, which means they have higher fees, every dollar you spend in fees is $1 less that’s compounding for you and future growth. It’s something that you can technically build yourself. So you *need to definitely be investigating the fees, and you could technically build it yourself.

But my point is, if you have no idea what you’re doing, at least you’re getting started, at least it’s a way to ensure your money is invested. You don’t have to stick in that target date fund for the rest of your life as an investor and the rest of your time with the 401k. You can go back in later, reallocate it to something that has possibly better fees, more aligned with your personal financial goals because the target date fund really is kind of a catch-all, one-size fits all solution to something that really should be customized and tailored to you personally.

Robert Leonard 17:57
Yeah, I think about it very similarly. And if you’re a millennial specifically, I usually think about it like just pick something that has probably the lowest expense ratio. If you really don’t know and you don’t have time, just pick something that has the lowest expense ratio, get started and then go learn about it. Now more than ever, there’s more resources out there to get educated, even reach out to some people that have, you know, written books, blogs or websites. And you can get that information, spend a few weeks learning and then like you said, you can go reallocate, and you know, a few weeks isn’t really going to hurt you.

Erin Lowry 18:27
Definitely. And I would honestly say, it could even be a year that’s not going to really hurt you in the long scheme of things, especially if you’re younger. Just get that money invested in something. Do not have it be sitting there in cash. I have heard so many horror stories about people who are getting ready to retire and never actually invested into the market. Just had it sitting in a cash settlement fund for decades. And so yeah, maybe they had $200-$300,000, which is a really nice chunk of change, but that’s not… I’m going to retire comfortably for the rest of my life kind of money.

Robert Leonard 18:57
Yeah, definitely get started and you can always reallocate and ultimately in a 401k, you’re not picking individual stocks. So even if you pick the wrong thing, it’s very unlikely that it’s going to go to zero like it could with an individual stock. So you’re pretty safe from that perspective. So…

Erin Lowry 19:14
I do want to make one point though, because you brought up individual stocks, if you have the option to invest in your company’s stock, great. But do not put all or even a big chunk of your portfolio into that company stock because then your money, both your income and your investment portfolio is tied to one company, which is not a good idea and it means you are not diversified.

Robert Leonard 19:34
And for any history, go back and look at Enron and Worldcom, anything like that. And you can see examples as to why not to do that. Now, despite all of the challenges and mistakes millennials make, and there’s a ton of articles out there that say millennials are not well positioned for the future. Despite all of that, what do you see as the biggest opportunity for millennials?

Erin Lowry 19:55
You know, it’s interesting, I feel like those articles come out with always conflicting headlines. Half the time we’re doing great and we’re saving more than previous generations, half the time we’re destitute and we’re going to be eating cat food at the age of 45. Like they just can’t make up their minds. Personally, I am very bullish on the millennial generation, not just because I am one, I really think that we are going to be innovative in interesting ways. I think the fact that most of us have had to work multiple jobs means that we’re already building a recession-proof plan for our livelihood in the future. And I don’t love the amount of debt that so much of our generation has had to contend with.

But it is one way that it’s made a lot of people get serious about their financial lives fairly early. So I think overall, we are going to be just fine. But a lot of that’s going to be because we had to change the game a little bit. Every generation iterates. We are not special snowflakes, in that regard. But the world really has changed a lot in terms of access, looking at the fact that you can be a DIY investor very early, it doesn’t take a lot of money to get into the market anymore. It really does set us up to live very comfortable lives.

Robert Leonard 21:03
The conflicting headlines are so interesting right now because some headlines say millennials are in a bad position because we’re not saving enough money. Others say we’re saving so much that we could be the cause of the next recession because we’re leading to slower economic growth.

Erin Lowry 21:20
And to be honest, that’s just kind of how news works. And I feel pretty much any study or survey can sort of be manipulated to get the outcome that the company wants to get, in terms of the flashy headlines. That’s partly how you see all of that, too. I think the other great thing about our generation is that we seem to slowly be waking up to systematic issues that exist as well. And I’m hopeful that we can then help change those for not only our generation, but future generations, so more people will have more access always and at a much earlier age as well.

Robert Leonard 21:53
Yeah, I completely agree. I’m bullish on our generation as well. I think we as a generation can do some very good things and I’m hoping with the show and from help with amazing guests like you that we can help educate millennials to make great changes in the world. Now, how can someone tell us they’re on track with their money at their current age?

Erin Lowry 22:11
Now there are plenty of benchmarks that exist. So if you want to get yourself real riled up, Google the thing you’re interested in, benchmark, and see what happens. I think it was about a year ago, it could have even been to an article about how much you’re supposed to save for retirement, which I should say invested for retirement at different ages went semi-viral and got people all kinds of worked up, because one of them is that you should have one extra salary by the age of 30, which a lot of people did not have, do not have will not have.

So that makes people feel some type of way. And that’s very understandable, especially if you either had to delay investing for retirement, you didn’t have access to do it. You didn’t have the bandwidth and your budget to do it. That’s why people tend to get upset. I would say take all benchmarks with a grain of salt. You are playing your own game. If you find it motivating, because if you’re a really competitive person and you like being like, “Oh, that person just saved $100,000 by x age, I’m going to go do that too.” And if it’s motivating for you, great. And if it’s not, cut out the noise and just focus on what are your actual goals, what do you personally want to achieve? And then start to backwards plan from there.

Robert Leonard 23:21
I mean, I completely agree. And I think what’s interesting about the benchmarks, or what’s difficult about the benchmarks is there’s sometimes outliers and so if they’re not using a median, you can sometimes be comparing yourself to something that’s not realistic, and you know, discourage yourself for no reason. And if you if you know that you’re so far away from that benchmark, I feel like a lot of people are just going to get discouraged and not not continue to work for their goals.

And not too many episodes ago, just a few episodes ago, we had Doug Boneparth on the show and he talked about how he works with millennials that make upwards of $600,000 to over a million dollars a year and you know, those millennials are in your benchmarks. And so take like you said, take it with a grain of salt and just realize that everybody’s going at their own speed. And just because you’re not necessarily at the benchmarks, or even if you’re above the benchmarks, it doesn’t mean anything in particular.

Erin Lowry 24:09
Yeah and I would just say too, you do your own goal-setting and set a quote-unquote, realistic goal and then set a goal for yourself. So that even if you don’t hit the higher end, you can still hit something. And I personally am a big fan of micro goals, which sounds kind of strange. But if you have a big overarching goal, and I feel like so many people right now, it’s like, I want to reach a million dollars by x age.

So if that’s your goal, great. But then niche it down to say, you know, how much each month of this year do I want to be putting away to service that overall larger goal or if you have a personal development goal, how many books per year in the genre do I want to read or whatever it is. I feel like having those smaller, very achievable goals, since sort of like the debt snowball of life is figuring out then how to do something small so everyone loves check things off a list.

Robert Leonard 25:02
I absolutely love that advice. That’s exactly how I do my my goal setting. Now, technology these days, there’s so many software and apps and things like that. What are some of the best tools or apps that you know of that can help people on their personal finance journey?

Erin Lowry 25:18
I mean, I love myself a Google spreadsheet. I know it is not at all a sexy answer but that is where I do my budgeting because I create my own. But there are so many options out there. My biggest thing is finding what works right for you, not what worked right for your best friend, your sister, your husband, whomever it is in your life, because to use the cliche that maybe everyone in every episode says, “Personal finance is personal.” So just because it’s working for someone else, doesn’t mean it’s necessarily the right fit for you.

There are great resources out there to get started. You know why NAB I’m sure that people have mentioned that before you need a great budgeting software using the zero-sum budgeting method for people who are either on a variable income or trying to get really serious about debt payment, that can be a widely helpful budgeting tool. But also acknowledge the fact that as we age, we grow, life changes. So what budgeting style might have worked when you were 22 to 26, might not be the same as what’s working for you now.

The other thing, I would say, as an uncommon answer, but my favorite tools are text alert on all of your credit card, every single credit card, you should have an alert set up, not only just to update you on the overall balance, but every single time a transaction gets made, you should get a text message about it. And that’s not a like, you should just have a reminder constantly of the money you’re spending, that’s just a good fraud alert.

So on your bank accounts, anytime a transfer is happening on your credit cards, if you have moved through life at this point, without having any sort of credit card fraud or debit card fraud, I applaud you, but I also promise you it’s coming. So it’s great to be proactive about it. And I would say having your bank app on your phone and being in touch with how much money you have is a good idea, but make sure that it is password protected and that it is different. If you’re doing a pin to get in, it’s a different pin than the one that it takes to get into your phone. Diversify your protection.

Robert Leonard 27:07
Now almost every time I talk with a financial expert about personal finance, I really like to get their opinion on a hotly debated question, because I think it allows people listening to the show to get varying different opinions and hear different arguments for this question, and just ultimately make the best decision for them. So do you think someone should start investing first or pay off their student loans?

Erin Lowry 27:29
The answer is do it both for me. Now, that is also keeping in mind that putting money into a 401k or an IRA is indeed investing. So whether or not you have access to an employer match retirement plan, I want you to be putting money into a retirement account. So that might be a Roth or traditional IRA or SEP IRA or simple IRA, depends on your background, depends on what you have access to and your tax preferences. But you should, at the bare minimum, be investing for retirement while paying down student loans. The one exception is no penny that can be pulled from your budget to get rerouted to investing because even the bare essentials, everything is spoken for including debt payments, like okay, fine. But most of the time, people can free up something to put towards at the very least retirement.

Now when it comes to taxable investing, which is usually where this question is headed. I really like the rule of thumb that I got from the experts I interviewed for my book that the cutoff should be 5% interest rate and if you have student loans that are under 5%, mathematically, it could shake out for you to be investing in a taxable account while paying down your student loans. If it’s tipping over 5%, honestly, the math might not cut in your favor, it probably makes more sense to just aggressively pay down the student loans.

Now that’s just the pure math play of it all. I always like to draw upon the mental emotional angle of having debt for a lot of people, this is a keeps them up at night situation. If you legitimately cannot get to sleep at night for it really is source of stress for you, pay it off. I still would like you to at least get the employer match on your 401k. But don’t focus on anything else. So focus on other taxable investing, don’t even hit play around really with the micro investing apps or anything like that, yet. Just slay that debt.

And then as soon as you’re done, you can of course, reallocate some of the money that you’re putting towards that to your investments, and at least invest for retirement because if you don’t, it could be easily 10 years before you get paid off. It could be 20 to 25, depending on your payment plan. So you do not want to be waiting till you’re potentially a decade or two out from retirement to start investing for and planning for retirement.

Robert Leonard 29:37
Yeah, you almost always want to take that employer match on your 401k. I mean, that’s free money essentially, that they’re giving you. You don’t really get many opportunities for 100% ROI. Now, going back to what you were talking about mathematics, what Erin meant there, I believe is the interest rate on your student loans, if it’s above 5%, it’s not guaranteed you’re going to make that rate of return if you invest in the markets, especially after taxes.

Whereas if you’re below 5%, you probably have a decent chance of getting that return or better in the market. So on a net-net basis, you’re going to be better off investing in stocks. And so that’s where it comes into play. So definitely, it’s something you want to take into consideration. But there’s obviously the psychological aspect of it. And just the monthly payment, if you have a high student loan payment, sometimes you need to just get rid of that first. And if that’s going to make you sleep better at night, then take that into consideration as well.

Erin Lowry 30:25
And I would like to point out with all of the recession talk that we’re hearing about in the news and even around the water cooler lately is, you know, one of the best ways to beef up your financial life before recession… I am not currently predicting one I’m just acknowledging it the common conversation, is to be as debt free. I like to get as much debt paid off as possible. And that is not to say if you’re investing in tandem, I’m telling you to stop, but it is to say that being debt free makes life easier to weather the ups and downs of a recession.

Robert Leonard 30:57
Absolutely. I mean getting rid of that monthly payment, it’s just going to put you in such a stronger financial position, if and when that time does come for the recession. To round off the show, I want to get one final piece of advice that’s tactical from you. And I want it to come from a place of what advice would you give to somebody that’s really close to you, say a close friend or family member came to you and asked for advice? What is the number one and first piece of advice that you would give somebody that’s really just trying to get ahead with their finances, whether it be investing personal finances, they just want to be better with their money?

Erin Lowry 31:31
I have a two-pronged answer for this because it depends on: are they in more survival mode debt payoff mode? IN which case harkening back to what I said earlier, my advice is always the very first step you have to take is to face your numbers. So go home, create a spreadsheet and write down how much debt you have, who owns each of those debts, what the minimum monthly payment is. what the principal balance is, and what the interest rates are. And when you have all of that information, then we can talk about how to formulate an actual attack plan. But that is truthfully the hardest part of the process because it’s so easy to ignore it for so long. And it can be really painful to confront potential mistakes that you’ve made in your past or just things that have happened to you that have resulted in this debt.

The other thing that I would say if it’s somebody who’s just more in trying to level up their money situation, find what connects with you about how to learn. And what I mean by that is we are in a wealth of information situation. Now you can get information anywhere and everywhere. Anyone with an opinion can have a platform. So go and find the person that speaks to you, whether it’s podcasts, videos, YouTube shows, you know, traditional money talk shows, magazines, blogs, Instagram, Twitter, what have you.

Find the person that’s speaking with you and just consume as much information as you can, but please vet it against other verified sources. For example, it’s a great way to source people opinions on things. But to borrow a quote, “The information that you find on Reddit is worth exactly what you paid for it.” So just be sure that you are checking it against other verified and experienced credential people.

Robert Leonard 33:13
Yeah, I actually fell somewhat victim to that when I was first getting started. It was probably a decade ago or so. I didn’t vet the person that I was getting advice from. Thankfully, I learned very quickly, and it didn’t cost me too much money. But definitely, if you’re seeing, if you’re going after some of this course, or using resources from somebody that’s just doing a ton of paid advertising on Facebook, and it doesn’t seem super, not scammy for lack of a better word, I would just definitely vet that person and be very sure of who you’re learning from.

Erin Lowry 33:42
You know, and that’s a great point. I would say the other thing when we think about financial advice is so many people can use the term financial advisor, financial planner. It can get used in a bunch of different ways. If you’re going to hire someone to help you with your money, date around, meet with a bunch of different people. See who you connect with.

You want to check their credentials, you want to make sure that they’re in good standing. Personally, I would say look for a CFP, the only preferably, but make sure you’re understanding how they’re getting paid. And if they do take commission, make sure you understand exactly when and how, and if that’s impacting your overall portfolio or financial plan at all. These are all, again, you can just google, “How do I hire a financial planner? or “Checklist to ask financial planners?” And information is going to start coming up, but you really want to make sure that you’re going to do a deep dive and do your due diligence on anyone who’s going to help you handle your money.

Robert Leonard 34:30
Absolutely. With so many people out there, just do your research, make sure you know who and what you’re getting yourself involved in. I think that’s really the big takeaway there. Erin, thank you so much for your time. I really appreciate it. Where can the audience go to connect with you and learn more about all that you have going on?

Erin Lowry 34:45
It’s been great to chat and you can find me at brokemillennial.com. It is the website. Broke millennial on Twitter, Broke Millennial blog on Instagram, and “Broke Millennial: Stop Scraping by and Get Your Financial Life Together,” “Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling Up Your Money,” and they’re on shelves really wherever books are sold, as well as Amazon, and hopefully your local library. Do you can certainly check them out there.

Robert Leonard 35:08
Awesome. Awesome. Thank you so much, Erin. I’ll be sure to put links to all of those different resources in the show notes so you guys can go check it out. I really appreciate it. And thank you.

Erin Lowry 35:17
Sure thing.

Robert Leonard 35:18
Before we wrap up the show today, I wanted to share a few exciting things that are happening with Millennial INvesting right now. First, over the next few weeks, I’ll be adding a new section to the show where I answer questions from the audience. If you have a question you’d like to have answered on the show, you can ask the question by going to asktheinvestors.com and recording your question there. Again, that’s asktheinvestors.com. I also wanted to invite you all to join our Millennial Investing Facebook group. There’s a great community of people having great conversations. You can find the group by searching Millennial Investing on Facebook and just looking for the show’s graphic. I’ll also put a link to the Facebook group and the site where you can record your questions in the show notes. That’s all I had for this week’s episode. I look forward to seeing you all again next week.

Outro 36:05
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