Millennials face grown-up financial realities

[April 26, 2017]  By Chris Taylor

NEW YORK (Reuters) - Everyone has chuckled about millennial generation stereotypes: slackers hanging out in their parents' basements, playing video games and binge-watching Netflix.

That creaky stereotype requires some revision. After all, the generation's vanguard is now around 35 years old, buying homes, raising kids and facing all the economic anxieties of every other age group.

For those transitioning into their prime earning years, Erin Lowry has a new money guidebook. A millennial herself at age 27, the popular financial blogger is releasing "Broke Millennial: Stop Scraping By and Get Your Financial Life Together."

She spoke with Reuters to talk about a few next-gen ideas for money management.

Q: Do millennials face particular financial challenges that are holding them back?

A: I think one big difference is that money is so digital these days. People are rarely handing over cash. It almost makes it feel less real, like it is Monopoly money or something.

Another difference is that student debt is so huge these days that it actually makes people less careful about their early financial decisions. You are already in a big hole, so what is a little bit more? If you already have $80,000 in debt, what does it matter if it becomes $100,000? That is very dangerous thinking.

Q: What concrete advice do you have for young people getting their financial lives in order?

A: One tip is what I call a "no-budget budget." After you get your cash flow under control, pay your bills, and put aside at least 5-10 percent for savings every month, then allow yourself some leeway. Whatever is left over at the end of the month - I don't make myself stick to the exact same percentages or categories every month - I spend it on whatever I want.

Q: What is the big financial challenge for the many millennials who are freelancers or contractors?

A: That is a real differentiator for this generation because quite a few of us are self-employed. As a result, they should try to have more in emergency savings than is typical, aim for 6-9 months' worth of expenses.

Also, freelancers tend to undervalue themselves when it comes to negotiations because they are afraid of not getting the gig or because they don't know what to charge. My advice is to not get desperate and charge rock-bottom rates.

A man plays a video game with the Oculus Rift VR headset at the E3 Electronic Expo in Los Angeles, California, U.S. June 14, 2016. REUTERS/Lucy Nicholson

I know one freelancer, and every time she comes up with a potential fee in her head, she tacks on an additional 15 percent. You almost have to push yourself to ask for more.

Q: With previous generations, homeownership was often assumed. Is that changing?

A: Maybe it is because I live in New York, but the idea of homeownership feels difficult to me. You have to think about how long you are going to be in an area, whether your job is going to be moving around, what the additional costs of things like repairs and property taxes will be.

Historically there has been a huge emphasis on homeownership, but I don't think it is the only way to increase net worth, and I don't think it is the right choice for everyone.

Q: As a popular blogger, is it difficult to share so much of your personal story and put all your finances out there?

A: For me, it is pretty natural by this point. Where I tend to get tripped up is in dealing with money and other people.

For instance, with my boyfriend, there has been a big learning curve in talking about money and our future goals together. The merging of finances can be a very emotional thing, and I have to be careful not to overstep any boundaries. I can't just say: "My way or the highway."

Q: Are millennials ready for what is perhaps the greatest wealth transfer in history?

A: One thing that makes me nervous is how few financial planners are courting their clients' children. For instance, my parents have a wealth adviser whom I have never heard from.

I think it behooves them to reach out to the next generation. That relationship shouldn't start when the parents die; it should start much earlier.

(Editing by Beth Pinsker and Lisa Von Ahn)

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