Erin Lowry is the author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together and Broke Millennial Takes On Investing: A Beginner's Guide to Leveling Up Your Money now available for preorder! Her first book was named by MarketWatch as one of the best money books of 2017 and her style is often described as refreshing and conversational. Erin's appeared on CBS Sunday Morning, CNBC and Fox & Friends. She has written for Fast Company, Cosmopolitan Magazine and Refinery29 and regularly speaks at universities and conferences around the country. Erin spent most of her childhood living in Asia, but now settled in New York City with her husband.
Getting Financially Naked w/ Erin Lowry!
K: What inspired you to write Broke Millennial?
E: Writing the book Broke Millennial was an extension of all the work I'd done prior, starting with just a simple blog of the same name. The inspiration really came one night while talking with a friend. She was electing to forgo pursuing her dreams in the name of a steady job she hated because, in her words, money stressed her out and she simply hoped she had enough of it at the end of each month. It's naive to say, but that was an eye opening moment for me because I grew up in a household where we talked about money a lot, but in positive ways. My parents were dedicated to ensuring my sister and I understood how money worked and how to budget, save, set goals and they even tried to teach me about investing, but I wasn't quite ready to listen yet. I quickly realized how many people avoided talking or dealing with their own finances and I wanted to create a space where people could come and learn but it wouldn't feel intimidating or judgmental. It would be fun and lean largely on storytelling. Thus Broke Millennial was born.
K: In your book you discuss the importance of having an emergency fund! Should your emergency fund and your savings account be two different accounts? Why?
E: I'm a big fan of multiple savings accounts. It enables you to have accounts for specific goals and you can see the amount inch closer and closer to your goal, which is really encouraging. I'm also a visual person and like the separation of my money into different accounts (checking, saving and even investments) for different purposes. Your emergency savings fund really does need to be its own entity because it's not money you should be using for a purchase or a life event. It's money that works as your safety net when things go wrong. That can feel overwhelming to hear at first, which is why it's important to set small, achievable goals as well. It takes time to build up an emergency fund reserve + have savings accounts for other financial goals.
K: When it comes to budgeting for me, it is super tough to start and also stick to! What tricks of the trade do you have for creating a budget and actually sticking to it?
E: You have to keep pivoting and modifying until you find what works for you. A lot of times people try a really strict budgeting style and it doesn't work for them because it was just too rigid. Give another style a go instead! I also really encourage people to recognize that your budgeting style will, and should, evolve as your life changes. I'm not using the same budgeting methods at 29 as I did at 22 because my life has changed significantly, including getting married and merging my finances with another person.
The absolute first step to any budget, though, is knowing your cash flow. (How much is coming in) - (How much is going out) = cash flow. You need to know those numbers in order to formulate a plan.
K: In your opinion, what are the best ways to improve your credit rating?
E: On-time payments = 35% of your credit score! Utilization (amount of available credit you use) = 30% of your credit score. So 65% of your credit score is from just two factors, so that's where you need to focus. Step 1 is never, ever missing a payment. If you worry that you won't be able to pay a bill, then get proactive and call your creditor to see if you can work something out. Step 2 is to spend no more than 30% of your available credit limit on a credit card. That means if you have $1000 line of credit, you don't spend more than $300. Then each month, you pay off that credit card bill on time and in full. Never carry a balance over month-to-month and start paying interest. There is no need and just creates debt. Just making one or two small purchases on a credit card (e.g. tank of gas or paying for Netflix) and then always pay the bill on time and in full.
K: Student loans 101! What do you feel are the best strategies to tackle student loans?
E: That's a big question that's one of the largest chapters in my book, Broke Millennial, so I'll say the first step is to really face your numbers. You need to know exactly how much student loan debt you have, which companies own your debts, whether they're private or federal and if they're federal, are they subsidized or unsubsidized, the interest rates, the principal balance owed and the minimum monthly payment. You cannot make an attack plan until you have this information.
K: Knowing what you know now, should millennials be concerned with investing? If so, how should we choose which investments best fit our finances?
E: Absolutely millennials 100% have to be concerned with investing! That's why the next book in my series is Broke Millennial Takes On Investing: A Beginner's Guide to Leveling Up Your Money. The first place most people start is with a 401(k) through their employer or with an IRA they open themselves in order to start saving for retirement, except I don't like that we use the word "save" I want you to think of it as investing for retirement. The first focus when choosing investments is to determine your goals, risk tolerance, and time horizon (fancy way of saying, when do you need the money?). Once you've answered those questions, it will guide your choices in building an investment portfolio to ensure it's well diversified.
K: In your book you dive into a Traditional IRA and a Roth IRA. Can you explain the difference?
E: It's all about taxes. A traditional IRA means you're getting a tax break today while a Roth IRA means you aren't getting a tax advantage today, but won't have to pay taxes on the money you take out of your IRA In retirement. There isn't a right or wrong answer and saving in an IRA regardless is a win. Generally, the advice is for younger people to use a Roth IRA because the logic is you're in a lower tax bracket now than you will be in the future, so it's a better deal for you today. Is that true for everyone? No, but people often like the cut-and-dry approach that a Roth IRA means not having to pay taxes in the future when you're unsure of what your tax bracket will be.
K: As millennials, this is a huge time for entrepreneurs! Tell us more about your current job/jobs, and how did you get to where you are in your career?
E: This question alone could be it's own interview, but I have worked as a barista, babysitter, page for The Late Show with David Letterman, account coordinator at a boutique public relationships agency, the first employee at a FinTech start up and finally, I started working for myself earning a living both writing and speaking. The big lessons I learned were to take risks and negotiate. Negotiating is critical! Here is an article that overviews some of my journey.
K: What financial advice would you give readers? Also, what is next for Erin Lowry? We want to know!
E: The advice I always give is my personal mantra: you control money or money controls you!
My whole goal is to help people feel in control of their money. The first step is to face your numbers, even if it's scary. Currently working on promoting my second book Broke Millennial Takes On Investing, which comes out April 9th, 2019 and I'm also writing my third book, which will be focused on the intersection of relationships and money.
I would like to send a special thank you to Erin for taking time out of her schedule to interview with me! It was super fun doing this interview, and I had a blast discussing finances, inspiration, and goal-setting with such an amazing individual! Her wise words of wisdom and immense knowledge in the area of finance is truly amazing, and super inspiring to follow. I can't wait to see more amazing tips and tricks for tackling personal finance from her new book, Broke Millennial Takes on Investing available now for preorder! Thank you for sharing your light with us! If you loved this interview, check out her book Broke Millennial available for purchase right here! Just click the link below, and grab your copy today! Thank you for reading, and thank you for allowing me to share my soul with yours! Happy #SoulfulSunday!