Millennials, of course, want to take charge of your financial life. Financial freedom is what most people want. Can you imagine not having to worry about money? You would have enough savings and investments. You wouldn’t worry about a creeping emergency that you couldn’t cover. You would know that you had a savings plan for your retirement. I can almost hear your sigh of relief.
Millennials, you are a resilient, savvy generation that has experienced debt, unemployment, pandemic worries, and other frightening economic situations. You are now coming back strong, experiencing almost full employment, on your terms. You can also have a financial plan that lets you sleep at night… but you need to spend as much time focusing on that as choosing a trendy restaurant.
Another challenge awaits you as well. Inflation is in your face, and it’s real. Every time you get in your car or stop to shop or grab a bite to eat, you’re reminded that everything costs more. You can easily see the big things affecting you financially: credit card and mortgage rates are going up; the stock market is down; and now you can not get this big login bonus. But what about the little things? Do you spend your money where you want? Are there areas of that drip, drip, drip of your leaking money that you’re not really focusing on?
Small expenses can even creep in that you are not aware of. For example, C+R Research just conducted a study that found nearly half (48%) of all Millennials forgot subscriptions they no longer used but paid for them anyway, compared to 24% for Baby. Boomers. Overall, consumers are sending $133 more than they realize on subscriptions each month. They thought they were spending $86 a month, but they were actually spending $219 a month.
These small expenses can add up.
How money savvy are Millennials?
A survey by Investopedia showed that “Millennials said they understood investing best, as 44% said they had advanced knowledge of the subject. Z (31%) and Baby Boomers (26%).” It is worth noting that the survey found that almost half of respondents said they had only a basic understanding of digital currency, such as cryptocurrency, blockchain and NFTs.
Millennials are very self-directed and many choose self-managed investment platforms (45%) over financial advisors. You invest and use the internet to buy and also invest in crypto. You are a digital generation, looking for advice online, from choosing a car to financial products. But I argue that you also need human contact and advice when it comes to your money. Money is personal, emotional, and it carries a lot of family baggage. Financial planning decisions aren’t as simple as buying the latest digital device or selecting a vacation spot with the tap of your phone.
I looked for a company that could offer financial coaching both in the little tactile digital experience and high touch experience of personal interaction with a real person. Technology alone is not enough. We’ve seen it with exercise, weight loss, and overall health. Why wouldn’t it be the same for money?
I found OneEleven, a financial education and wellness app. I am now a consultant to the company. OneEleven partners with leading companies who want to increase employee engagement and reduce turnover. They guide and help their members set goals and encourage them as they work with real human coaches who help participants achieve their goals. I also like OneEleven’s approach of helping people set goals and then taking small pieces to achieve them.
I told Dani Pascarella, Founder and CEO of OneEleven, that I look at achieving my financial goals the same way I look at housekeeping. Of course, my goal is to have a clean house. If you tell me to clean my whole house, it will never happen. But if you tell me to start with my sock drawer, that’s an achievable goal, and I’m all for it.
There is so much financial information out there. I asked Pascarella why she thought OneEleven was different. She told me that she “started the company to help millennials transform their relationship with money — for good. Seventy percent of millennials live paycheck to paycheck, and money is the number one cause of stress for our generation. But it doesn’t have to be. It’s possible to combine technology with real coaches to inspire people to be responsible for their behavior and achieve their goals. I want our members to have confidence in their money and reduce their stress, they can do it in minutes a day, right from a mobile app.”
Your bad habits can also cost you dearly
Your FICO score gives creditors insight into how you manage your financial life. Your payment history makes up about 35% of your FICO score. Creditors want to know things like: Are you paying your bills on time? Are you carrying too much debt? Will you be a good responsible customer? These questions will determine whether they want to do business with you and how much it will cost you.
- Monitor your credit score: If you’re thinking of buying a house, a car, or even some new furniture, a bad FICO credit score can cost you real money, or even prevent you from buying those things. FICO scores range from 300 to 850, or 250 to 900, depending on the scoring model. To demonstrate the effect your FICO score can have, for example, you’ll need at least a credit score of 580 if you want to buy a home with an FHA-approved mortgage. A score between 660 and 700 is considered good. If your score is above 700, you can be sure lenders will view you positively. According to MyFICO, the annual percentage rate (APR) on a mortgage can vary widely depending on your credit score. The rate can increase by more than 1.5 percentage points. This may not seem like a big deal, but it is when you look at it over the life of the loan.
- Car insurance: A bad driving record can really increase your car insurance costs – if you can even get car insurance. Depending on the details, according to a study conducted by QuoteWizard, if you have had speeding tickets, accidents or DUIs on your record, your insurance premiums could increase by 26% to 75%. That could mean $300 more per month, compared to an average of $176 per month for those with a clean driving record.
- Utilities: If you don’t have good credit, utility companies may ask you to pay a deposit when you first set up service. You may need to prove that you paid on time before they release it to you.
- Life insurance: In addition to your medical history, insurers may also review your credit history. A bad credit score may not prevent you from buying insurance, but it can make your premiums more expensive. For example, if you have a FICO score of 750 to 850, you may be offered a preferential rate, and on the other hand, if you have a score of around 620, because you have declared bankruptcy, for example, you will not may only be eligible for a standard rate. That could mean hundreds of dollars a year, which will add up.
Good financial habits can help you achieve the life you design. But conversely, bad financial habits can create an uncontrollable and stressful life. Be mindful of your spending and really consider whether your spending will bring you the long-term joy you want. You don’t want your life to be like the famous Will Rogers quote: “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t want. ‘they do not love.”
President and CEO, Children’s Financial Network Inc.
Neale Godfrey is the author of 27 New York Times #1 bestselling books that empower families (and their children and grandchildren) to take charge of their financial lives. Godfrey began her journey with The Chase Manhattan Bank, becoming one of the first female executives, and later became President of The First Women’s Bank and Founder of The First Children’s Bank. Neale pioneered the topic “kids and money,” which took off after her 13 appearances on “The Oprah Winfrey Show.” www.nealegodfrey.com