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This week Erin Lowry joins me for a bag of popcorn. Erin is the founder of BrokeMillennial.com and the author of the book Broke Millennial. We discuss some techniques to improve how you save and why you need more balance in your financial life.
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Full Transcript
Chris: [00:00:04] Hey this is Chris, hope you're doing well, and welcome to Popcorn Finance where we discuss finance in about the time it takes to make a bag of popcorn. I'm joined by a very special guest today, Erin Lowry from BrokeMillennial.com. How's it going Erin?
Erin: [00:00:17] It's gone well, how are you?
Chris: [00:00:19] Doing good. It's a Monday night here and just trying to stay awake. This time change is really throwing me off. I don't know about you?
Erin: [00:00:28] Yeah me and my dog he does not like the whole it getting darker sooner. He seems to be feeling a little depressed about it actually.
Chris: [00:00:34] It's a little depressing when you walk outside and it just feels like it's 11:00 o'clock at night and you look at the clock and it's only five. It's a little weird.
Erin: [00:00:42] One of these years we'll get rid of it.
Chris: [00:00:44] I'm waiting for it. I think Hawaii. They've already gotten rid of it. Right. I think they just stay on one all the time.
Erin: [00:00:49] Yeah. And I don't think it matters as much for them with agriculture. I mean that's what it's tied to. Right. Going way off topic.
Chris: [00:00:59] We can cover a little bit. It's fine. Erin for those listening who may not know you would you mind telling us a little bit about yourself and what it is that you do.
Erin: [00:01:08] Sure. I'm Erin Lowry. I believe that we should get rid of Daylight Savings Time. So I'm the author of the book Broke Millennial, stop scraping by and get your financial life together. And I primarily work as a personal finance author expert speaker and a general writer and I have another book that will be coming out in 2019 about investing for millennials.
Chris: [00:01:32] Very nice. Would you mind telling us a little bit about that. Can you get into that yet?
Erin: [00:01:37] Well I just signed the deal for that one. But the layout basically focuses on investing for the real rookie. And there are a lot of great investing books out there but a lot of them assume that you have some base level knowledge that you may not already have and I can't tell you how many times I've had a conversation with someone and they'll say you know I got into a spot where I've got my financial life together and I've got some discretionary income. But you know I want to put some into the market. How do I do that? And even if I said something as simple as like oh you know like an S&P 500 Index Fund. Have you looked into that? Yeah but where do I go to open that. And it's so true. Right. You don't know until you know and so I'm backing that up all the way to the beginning talking in the front of the book a little bit about you know are you ready to be investing and what does that mean for you and then getting into topics as simple as what's a brokerage? How do I go there? And then into stuff that's very millennial specific like the gamification of investing, student loan debt and investing. Also talking about things like socially responsible investing is that possible. And a little bit more higher level stuff towards the end. But for the most part it kind of digs deep into very millennial specific interests when it comes to investing.
Chris: [00:02:52] I like that idea because you're right. I mean most people don't have any type of foundation in investing especially I think for younger people out there you need that foundation before you just jump right into the market and start throwing money at things so I'm looking forward to that book when it comes out.
Erin: [00:03:06] Thank you.
Chris: [00:03:07] You know we picked up your book Broke Millennial and I've been reading it. I've been kind of jumping into it and I really like the style of your writing and the format. And one of the things that really stood out to me was the passage in Chapter 2 that said “do you think of your paycheck as a Tinder date or marriage material. In other words when it comes to money do you treat your finances as a hit and forget it situation or are you developing a long lasting relationship.” And not only that make me laugh. It really stuck with you. And I know you may not remember everything from your book but do you remember kind of what was going on when you were writing that part of what you had in mind when you wrote that.
Erin: [00:03:46] Well for me a big part of that chapter is digging into your psychological relationship to finances rather than just your you know actual financial situation. And so often when we talk about money we talk about just kind of the pure mechanics of it how it works. The mathematical side you know especially with things like paying down debt. You'll hear about debt snowball compared to debt avalanche and interest rates and how to focus on milking every penny. And that's all well and good and important but none of it matters if you don't understand how you emotionally relate to money. Because at the end of the day we are not all completely rational creatures emotions is really going to be what is the overriding factor here.
Erin: [00:04:30] So if you don't figure out why you have the emotional relationship that you do to money it's going to be really hard to make the necessary changes. The other thing that you can figure out is if you understand why you emotionally react to money the way you do. You might not be able to necessarily switch that mentality quickly and easily, but you could set up barriers in order to prevent yourself from possible self sabotage. And one really easy example I think of when it comes to something like that is let's say that you're a person who tends to you know you save money like you're supposed to maybe you automate it out of your paycheck and it goes into a savings account right at the top of the month rate when that paycheck hits.
Erin: [00:05:09] But you know throughout the month things come up and there's the happy hour your friends are going to and that brunch your friends want to do and that trip your boyfriend wants to take. And you start to siphon little bits off the top of that savings because it's right there when you log into your bank account. So it really small easy thing to do is set up a savings account at a completely separate bank then where your checking account is. So let's say that your checking account is at Citi and you open up a savings account at Ally. So every time you log into your checking you're not seeing that money that's over at Ally and it's just one really simple way for you to be setting a barrier between yourself and your money. So even mentally when you log in you're not seeing that. And then if you do have to move money over it it takes a minute. You can't do it automatically. So that makes it a little bit harder and you're more likely to think it through.
Erin: [00:06:04] And the other thing to do I always recommend on savings account is nickname them.
Chris: [00:06:08] I like that.
Erin: [00:06:08] So that there's a very prescriptive thing such as you know let's say you're saving up to go to Japan in June of 2018. So you change the name of your savings account from savings account 07815 to Japan trip 2018. A lot of banks allow you to go in and change the name like that so then every time you see that fund it's like do I really want to go to happy hour tonight or do I want to leave that 20 dollars in there for this trip.
Chris: [00:06:35] You know I really like that. Are you looking at my bank accounts right now because it feels like you're kind of reading off my technique right now because what you explained, what you described there is exactly what I had to do to prevent myself from doing that little skimming like using off a savings account because it is so easy just to say well you know it's this one little thing I'll just pull twenty dollars, I'll pull thirty dollars, it won't be that big of a deal. And then next thing you know you've ruined whatever your plans were for that money. So I definitely love that concept there.
Erin: [00:07:04] Yeah that's one of my favorite ones. I definitely do both of those things as well. The nicknaming the savings accounts is one of my favorites. And it really helped you double down and focus. You know it throws up a little psychological block for you which is really important. And the other thing with all of this is kind of understanding and in that chapter of the book I actually have sections where I encourage people to sit and write down some of their earliest money memories and their relationships to money and how money makes them feel. And a lot of that is because it was coded in us at a very young age by our parents or whoever raised us. And listen your parents do the best they can with the information that they had at the time. So I'm by no means trying to pass the buck and say this is all my parents fault. None of this is on me. But you're learning a lot about money from the way your parents are reacting in front of you and the way they talk to you about money. The way to talk to each other about money. And it could be you know was money a source of tension in your family. Was money something that wasn't you know overly glorified, where your parents hyper frugal. I mean all of these different ways to relate to finances does impact you in the long run. You know I think of my parents as they did a great job when it came to talking about money.
Erin: [00:08:14] My sister and I were learning how many worked at a very young age. My parents were very hands on about teaching us with very practical ways. Like my sister and I had to pay for a lot of things ourselves if we wanted it even as a really little kid. I had to figure out how to earn money. So it was like you know lemonade stands, babysitting the evil cat that lived next door when the neighbors went out of town, all that kind of stuff. But then you know it taught me how to control my impulses because if I was in a store and I wanted a toy and my Dad said OK I'll pay 50 percent. And I had to think it's 14 dollars is seven dollars really worth this stuffed animal right now. Do I want to save that up for something else. And that was already being restructured in my brain as a young child. But on the flip side my parents were hyper frugal and a lot of ways. And so when I grew up it was that you know level of frugality had been coded into me in a way that even today sometimes it's hard for me to get over. And being frugal generally is a pretty positive thing. But sometimes it also prevent you from living your life. So it's been something that I've kind of tried to figure out how to come to a happy medium where I feel good about how much I'm saving but I'm also investing in my friendships and my relationship and you know not living in a constant state of deprivation just for the sake of saving money.
Chris: [00:09:33] You know I'm really happy you said that because I think that is like a struggle because I think it's easy to go on either extreme either you're the person who just doesn't really care about how much money they spend not even looking at their account they just let the money flow out or you on the other side where you're so concerned about saving and prepping for retirement and being responsible that you hold on to every penny and you don't really enjoy it. That can be a hard balance to strike because I know I had a ton of credit card debt several years ago and once I got out of it it was hard to let myself spend money freely because I had developed that mindset of I have to hold on to every dollar, it has a purpose. I have to save you know prepare for the worst case scenarios. I mean how did you deal or how are you dealing with the struggle of allowing yourself to enjoy your money.
Erin: [00:10:21] Well one thing is I actually do set up a fun fund of sorts so it's a chunk of money that I give myself permission to spend in any way that I want. So that certainly helps. And setting some sort of threshold on that money. You know if it's going to be you have 50 dollars this week to spend on you know although lattes and happy hour cocktails that you can with that amount of money you can do that or it could be you know OK I'm going to put this money aside because I want to take a trip in three weeks and that's where that money is going to go. So I do have different savings accounts for different purposes like travel is something I truly value and I save for that specific purpose I have a travel savings account and then having the flexibility to be able to go out with my friends now is important because I learned the hard way in my first year I lived in New York City. I was only making about twenty three thousand dollars. So not very much money. And it felt like a struggle just to stay afloat because I was trying to actively avoid incurring any debt in my life. So what I did was triple down on work. I had my main job which was working as a page for the late show with David Letterman and that was super fun but did not pay very well.
Erin: [00:11:32] And then I was a barista at Starbucks and I would babysit and the problem was I was making some great friends at work but I wasn't investing in those relationships at all really outside of work because people would invite me to things and I would do a cost benefit analysis of going out and spending some money even if it was a kind of cheap activity or something I could control like going to a bar where I could just have one drink. I didn't have to buy five drinks but I could stay there. And I would run that against you know baby sitting and making maybe 80 bucks in a night. And I would pick babysitting every time because money was always trumping. And I lost some good friendships that way that could have gotten developed because if you say no enough times people stop asking.
Chris: [00:12:16] That's really true.
Erin: [00:12:17] Yeah that's definitely something I learned the hard way early on and I'm very aware now to make sure that I invest in my relationships. Now that doesn't always mean saying yes to what your friend wants to do. It could mean saying Hey I appreciate that you want to do that. Not really in my budget for said activity but how about instead we have a coffee and go for a walk or you come over and I can make some food and we can hang out and chat or whatever it is. So it doesn't always have to require spending a lot of money but it's making sure that you take the time as well to put into your relationships.
Chris: [00:12:54] That's a great idea. People end up with a lot of social anxiety about the thought of you know turning down an offer or being asked to do something that they feel they can't afford. I think a good alternative like you mentioned is maybe make the recommendation to do something that's cheaper and more cost effective and that you can jump out ahead of them and provide an option that's not going to cost you down the money.
Erin: [00:13:14] And the way I like to explain that is solving the problem that you're creating before you create it. So a friend invites you to do something you create a problem by saying that you want to hang out but you don't want to do said thing. So instead of just letting that hang in the air you automatically come with the solution to the problem as well.
Chris: [00:13:33] That's a great idea. That's a good way to put that. Well Erin thank you so much for spending time with me and talking about about your book and your thoughts on the emotions that go along with money. And I think you've put some great recommendations out there that people can implement right away. Before we go is there anything going on with you that you like to mention or any place that we can get a hold of you and follow along with what's going on in life?
Erin: [00:13:55] Absolutely. So I am most active on Twitter. You can find me at @brokemillennial just make sure you're spelling millennial with two L's and two N's. You'd be surprised how often people get that one wrong. You can find me at my site brokemillennial.com. I'm on Instagram at @brokemillennialblog and if you just want to chat back and forth if anything that I said today kind of resonated with you one way or another and you know disagree with me or you agree and want to talk about it please definitely find me on Twitter. I love chatting with people there.
Chris: [00:14:23] Thanks Erin. I can definitely recommend for those who haven't checked out Erin's book Broke Millennial, please do. It's definitely a fun read. I'm really enjoying it so far.
Erin: [00:14:32] Thanks. And that can be found wherever books are sold and also Amazon, BarnesandNoble.com and possibly your local indie bookstores or your library. And if it's not at the library you should request it.
Chris: [00:14:42] Oh nice. I'll definitely have my local library.
Erin: [00:14:44] Yeah I love getting it into libraries.
Chris: [00:14:47] Thanks Erin I appreciate you spending some time here.
Erin: [00:14:49] Thanks for having me.
