Personal Finance Can Save Millennials

What is your first memory of money? 

What excites you most about money? 

What scares you most about money? 

These are the initial questions I ask to kick off financial presentations, inviting the audience into the financial conversation. And the answers always evoke an emotional response. As a financial coach, my purpose is to educate and empower clients to better understand themselves and their finances. I do this through highlighting the emotions involved in each and every financial decision we make – consciously or not – and how that can positively or negatively affect our financial future. Until we face our emotions and their manifestation in our behaviors, we cannot break down bad habits and build up a sound financial foundation. 

What do emotions have to do with our financial decisions? Let me show you.

75% of Millennials and Gen Z make their financial decisions so they can “keep up with the Joneses.”

This cycle is self-perpetuating. It’s easy to get caught up in the mindset of measuring our worth based on what things we have and how much we spend. But rooting our identity in how much we can “keep up” only leads to a disastrous spiral of debt and compounding mistakes. As a millennial myself, I know we can do better. 

What if we took it upon ourselves to become financially prudent and stop the cycle of spending? Perhaps our friends and neighbors would notice and also choose to begin living a more financially prudent lifestyle. As you consider changing your financial habits, don’t just help yourself, but be an example for those around you!

50% of Millennials and Gen Z receive financial assistance from their parents. 

This means anything from parents “lending” you money right after graduation to help purchase a used car to subsidizing rent for a single apartment. In the vast majority of cases, both parties involved, have the best intentions. But what ends up happening is that young people become dependent on receiving assistance and never develop financial discipline. And why should they when mom and dad are footing the bill? Parents have taught their kids that when tough circumstances arise, they will be there to bail them out. But what happens when there is no safety net anymore?

The majority of young people do not take the same pride in being self-sufficient or debt-free that older generations do. In the age of instant gratification and digital media, they are increasingly worried about the status that comes with “keeping up with the Joneses” even if that means taking on insurmountable debt.

Many people are afraid of a six-letter word (that they view as a four-letter word): BUDGET. 

A budget is where the personal part of personal finance comes in. While there are general rules of thumb to follow, everyone’s budget will vary based on unique circumstances and goals. One of my favorite questions I received while giving a presentation was from a young man who asked, “How much is too much to spend on my hobbies? Mine tend to be a couple hundred dollars per month.” This is a perfect example of a situation unique to an individual that cannot be solved by a cookie cutter solution, and where the assistance of a financial coach can help someone think through these situations.  

Here is what I explained to the young man: hobbies grant us an outlet that is both productive and rejuvenating. I do not want to take away anyone’s creative or stress relief space. Mental health is vital to a productive, meaningful life, and if spending a couple hundred dollars per month on a hobby allows you to accomplish that, I won’t stand in your way.But, that may mean you need to cut back on discretionary spending elsewhere. Budgeting is all about tradeoffs, so knowing what you are trading is essential. 

Finally, it’s important to understand the differences between a financial advisor and a financial coach. Financial coaches are generally more appropriate for early to mid-career professionals because the coach’s goal is to educate and empower their clients to foster positive habits that achieve financial freedom. They also act as accountability support along the way. Financial education is necessary in each stage of life ; it is simply not enough to direct an advisor where to invest your money. If you are not preventing bad financial habits, you will never be financially free. Whether someone is seeking help with a budget or desires accountability to get out of debt, EMPOWERMENT is the name of the game.

Patrick Nalepa was the speaker at a recent event with AF’s D.C. Hub, if you want to attend events like this, become a member today. If you are interested in learning more about financial coaching or want a free consultation, please reach out to [email protected] or check out my website at nalepafinancial.com.