Dec. 9, 2020

How Millennials Can Overcome Their Biggest Financial Challenges

How Millennials Can Overcome Their Biggest Financial Challenges

Episode 31: How Millennials Can Overcome Their Biggest Financial Challenges

In this episode we cover: 

  1. The 6 biggest Millennial challenges
  2. How to solve those challenges 
  3. How to tackle debt 
  4. How to get out of bad financial situations 

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On this episode of the personal finance podcast, we're going to talk about how millennials can overcome their biggest financial challenges. Welcome to the personal finance podcast. I'm your host, Andrew, founder of dollar after And today on the personal finance podcast, we're gonna 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 wealth 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 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, 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 stock. 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, the biggest thing to do is you need to fight back, you need to find 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 gonna 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, 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 gonna 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 than 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 gonna love an audiobook because audiobooks are the same thing. They're getting so big. Now I use a service called Audible, there's another service called scribe, and scribe has almost an unlimited amount of audio books for like eight 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 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 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 mister 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, figure out what concepts are they all talking about that seemed 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 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 them move the money for moving expenses, they 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're prepared for them by just saving a couple $100 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 countermove 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 1000. But saving that first 1000 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 lived 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 for the rest of their life. But 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 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 got to have emergency fund challenged. 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 said over a trillion dollars in student loan debt, we're gonna 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 will tie you down, it will weigh you down forever if you don't get rid of it, especially especially if your student loan debt is above five to 6% interest rate. Because that 5% to 6% interest rate is really, really weighing you down. And I've heard of people having eight 910 12% interest rates, it's gonna be lingering around forever if you 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 aggressively 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 you're paying more money and student loan debt and say you're probably 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 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 credit 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 subscribe 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 gonna 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 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 him and saying, hey, I'd like arrays, 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 them 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 when no question they expect you to ask for because you're checking all the boxes that they stated that you needed to check off to be able to get that race. 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, that execution plans, it's the episode is called I believe how to get a raise. And if you look, listen to that episode, I go into a very detailed, systematic process on how to do that. And then I also wrote an ebook, a free ebook 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 is 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 that you die, you actually 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 a 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 an entire episode on how to on buying versus renting a house. But these are things you have to take into 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 an 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 you're reducing your you're doing big things for your personal finances, you're doing massive things for personal finances, cutting out lattes is not going to do anything. But reducing your housing expense is going to do a lot, I'm talking in the 10s of 1000s 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 card 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 off your student loans in one year, and we 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 pride 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 of the some of these burns, 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 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 then 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, if 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 gonna have to fail a couple of times, you have to fail 234 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 may be centered around something that you're interested in, is going to change the way that you can make money. Because once you start making your first dollar sale 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 $1 Why can't I make $50? Why can I make $1,000? Why can I make $100,000, I'm 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 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 gonna make you money while you sleep, you want to find sign 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 if you're trying to pay off your student loans, you want to make some extra money, 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 did 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 for 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, 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.