Time May Be The New Money, But Only If You Already Have Money

December 04, 2017

What would you rather have: more money or more time?

In an article, “Being Part of Generation Rent Doesn’t Have to Be a Bad Thing,“ Marisa Bate asserts that millennials are playing by new rules that reflect real economic changes. “If time is our chief commodity (perhaps our only), then we want it as much as possible – and that means outsourcing things so we can get more,” she wrote. “Once, we saved money; now, we save time.” Millennials don’t own anything and outsource everything, she contends.

Should an entire generation give up on financial security?

Bate, a British journalist who counts herself in the millennial generation, says that cash-poor twenty-somethings need a marker of success beyond the traditional home purchase and retirement savings. If millennial employees can’t find an easy path to home ownership and a pension, she observes, then they will look for experiences and flexibility. “We millennials,” she writes, “by all accounts, love experiences and not things anymore.”

Really? An entire generation should give up on financial security in favor of time flexibility? I wondered if that opinion was broadly shared, so I posted the article on social media and asked my younger connections to weigh in. Is time really the new money?

Student loans cause money and time debt

“What’s the point of time if there’s no money to enjoy it?“ was a common response. The burden of student loans caused some to feel like they had experienced a bait and switch. They followed the rules for a good education to be competitive in the job market, but someone changed the rules without telling them. People shared examples of working multiple jobs to pay the bills and stay current on astronomically high student loan balances.

For those early career employees, especially those with graduate school debts, their student loans weren’t just financial obligations. They felt like debt was a drag on their time in all areas of their lives, leaving little free time or financial resources to enjoy life now. The bigger the loan balance, the more their future time was already pledged to activities to make their loan payments. These workers used some time-saving services, such as Amazon Prime or Blue Apron, but not to create work-life balance. They used them so they had something in the refrigerator when they got home from their second job.

Urban strivers will do what it takes for work/life balance

Those with higher-paying careers or lower student loan balances were more enthusiastic about doing everything they could to create extra time in their lives to spend with family and friends. Those less financially-stressed urban professionals are prioritizing extra time over personal economy.

“I do everything in my power to save time in everything I do,” explained one 28-year-old. “I use Stitch Fix, Lyft, Amazon, Netflix and more because I’m working 60+ hours per week (and on call 24/7). I need all the time I can get if I’m going to spend quality time with my family, work out, eat healthy, take care of my mental health, socialize with friends, travel, volunteer, read, etc. I need more time so if I can save an hour here and there by avoiding a crowded mall or grocery store lines, I will do it.”

Another who favored time-saving services wrote, “I’m not a huge fan of shopping in stores and my free time is valuable to me. Working Monday – Friday, I’d rather spend my weekends doing the things I truly enjoy and that really doesn’t involve shopping of any sort.” This subset of younger employees, who have corporate jobs with good benefits and lower financial stress, are more open to incentives which give them time to focus on life outside of work.

Marriage and kids change everything – especially in the suburbs

Some of my social media friends in Generation Y (born in the early to mid-eighties), now in their early thirties, had a different perspective. They worked and played hard in their twenties, got married, bought homes in affordable suburbs and had children for which they were financially prepared (“the success sequence”).

Although many had student loans still outstanding, especially those with advanced degrees, they had not borrowed so much money that the debt impeded reaching life milestones. These friends are prioritizing homeownership and saving for goals and were more likely to own multiple cars, cook for themselves and shop locally.

Marriage and kids changed their perspective on financial issues, catapulting them into the natural focus on good financial habits that is necessary to be a homeowner. “I’m struggling to think of any friends who didn’t purchase a home within a year of having their first child,” noted one reader. “I don’t know too many people who rent now that we are in our 30s,” commented another.

Both had left more expensive urban areas to live in less expensive towns. (The opposite is true for one young, married parent I work with, who sold a home in a southeastern city to become a renter in mega-expensive Los Angeles.)

The takeaway: if you’re broke, money is still more important

My conclusion is that time is the new money only for those who already feel on track financially. Those who have a strong sense of financial possibility and faith that they will eventually reach their goals are more likely to spend money to create more time. For those millennial employees who are working multiple jobs just to pay the bills and repay student loans, money is much more important than time.

This post was originally published on Forbes.

7 Places For Young People To Put Savings

June 15, 2017

In my last two posts, I wrote about why saving is such an important part of “adulting” and shared saving hacks for new grads. But where should those savings go? Here is how I would prioritize putting my savings if I were just starting out:

Build up an emergency fund. You may still feel invincible, but you’re actually more likely to need emergency savings than anyone since you’re more likely to change jobs frequently and less likely to have retirement assets or home equity to fall back on in an emergency. Shoot for at least $2,000 in savings, which is what the Federal Reserve Bank estimates the average American needs to resolve a financial crisis. Ideally, you want to be able to cover 3-6 months’ worth of necessary expenses in case you’re in between jobs. After all, you can’t always rely on the Bank of Mom and Dad.
Max a Roth IRA. Since Roth IRA contributions can be withdrawn tax and penalty-free at any time, a Roth IRA can be used to help build your emergency fund while also saving for the future. Just make sure you keep it invested relatively risk-free like in a savings account or money market fund until you’ve accumulated enough emergency savings outside your Roth. At that point, you can invest the Roth IRA more aggressively to grow tax-free for retirement. The younger you are and the longer the money will be invested, the more you can benefit from that tax-free compounding. You can also use the earnings penalty-free for qualified education expenses or up to $10k for a first-time home purchase.
Max the match on your employer’s retirement plan. Once you’ve accumulated some emergency savings, make sure you’re contributing at least enough to your employer’s retirement plan to get the full match. Otherwise, you’re leaving free money on the table. If you can’t afford to do that right away, you can slowly increase your contributions over time. Some plans even have a contribution rate escalator feature that lets you automate that.
Pay off high-interest debt. Once you’ve done the above, pay down any debt with interest rates higher than 4-6% since the debt may be costing you more than what you could earn by investing your savings. Start with the highest interest rate balance and then put the payments towards the debt with the next highest rate as each balance is paid off. You can see how quickly you can pay off the debt and how much interest you can save with this Debt Blaster calculator. Paying down the debt will also improve your credit score and improve your debt/income ratio, which can help you…
Buy a home. Once you’ve settled down enough that you think you’ll keep it for 3-5 years, owning a home can provide tax benefits and allow you to build equity. However, you’ll need savings for a down payment, closing costs, and any furniture/appliances you want to purchase. Ideally, you want to put down 20% to qualify for the best mortgage rates and avoid having to pay private mortgage insurance.
Max out a health savings account. If you’re in a high-deductible health insurance plan, you can contribute to an HSA pre-tax and use the money tax-free for qualified health care expenses. Unlike flex spending accounts, you can keep any unused money in the account and even possibly invest it. When you turn 65, you can then use it for any purpose without penalty so it can do double-duty as a retirement account too.
Save enough to hit your retirement goals. If you’ve done all of the above, run a retirement calculation to see if you’re on track. If not, you may want to save more, starting with your employer’s retirement plan.

If you need help, consider consulting with an unbiased financial planner. Your employer may even offer access to some at no cost to you. Aren’t you starting to feel more like an adult already?

The Top 7 Reasons Saving is the Most Important Part of Adulting

June 01, 2017

I recently celebrated my 38th birthday, which I guess officially puts me in my late 30’s. As I reflect on the past couple decades, I find myself thinking about how the effect of saving money early on really made an impact on my life and helped me to “adult” better. For all those lucky kids just getting started with adulting, here are my top 7 ways that saving money from day one will help make it easier:

Saving money = more life choices

“Finding yourself.” You may still not know what you want to do when you “grow up” and that’s okay. In fact, I didn’t either — my first job interview after college was to sell newspaper advertising. Your early career years are a time to explore different career options. That means you’ll make a lot of mistakes. Having savings gives you the freedom to say “no” to a job or boss you hate in order to pursue something you’ll love.
Security. You may land a great job but find that sometimes things don’t work out on the employer’s end. As the last one hired, young people are often among the first to be let go. Think of your savings as the lifeline keeping you from mom and dad’s basement. Having what our CEO calls “FU money” also means the freedom to walk from a job when you need to.
Travel. One of my closest friends from college took a year off to travel the world shortly after graduation. If you’d like to do something similar, now is the time to do it before you’re tied down with obligations. Having money in the bank will make that a whole lot easier.
Marriage. Unless you plan to elope, weddings are expensive. And even if you do plan to elope or not marry at all, the cost of attending other people’s weddings can really add up too. Having money set aside allows you to make the most of these happy occasions.
Buying a home. An Australian billionaire recently stirred up controversy by blaming millennials’ inability to buy a home on their fondness for expensive avocados and coffee. He has a point. An increasing number of young people are putting off buying a home because they don’t have enough money for the down payment and closing costs. That means continuing to pay rent and helping someone else build equity instead of yourself.
Starting a business. Even the most brilliant business ideas aren’t typically profitable right away. In the meantime, you’ll still have bills to pay. That pressure for a quick buck could lead you to short-term thinking at the expense of the long term growth of your business.
Financial independence. Don’t think of it as “retirement” but as getting to the point where you work (or don’t work) as you want to. The sooner and the more you start saving, the sooner that day will come. Some people have even taken this to the extreme and retired before 40!

Don’t think of saving as deprivation. Think of the money in your bank as representing freedom. The more you have in there, the more options and freedom you have to live your life the way YOU want to.

Living Paycheck to Paycheck? Here Are 4 Places to Find Money

March 02, 2016

One of the things I love the most about living in a big city is that we are the first ones to have access to innovative products and services like Uber, Instacart and Flywheel. Whenever I start to daydream about moving back to the quiet of a small town like the one I grew up in, I have to remind myself that I’d be giving up things like the option of having my groceries delivered from Trader Joe’s or the variety of workout options I can choose from each week. (I currently teach BODYPUMP^TM and have credits at Zen Yoga Garage and Flywheel.) If I want to live where you can hear the grass grow and the need to carry Mace is laughable, I won’t be able to be so picky about where and how I get my sweat on. Continue reading “Living Paycheck to Paycheck? Here Are 4 Places to Find Money”