Don’t Believe the Hype About Millennials and Money

Posted on September 27, 2018September 27, 2018 by Arielle O'Shea

Millennials are killing fast food. They’re wiping out golf. Thanks to them, mayonnaise is as good as dead.

If you believe the latest survey — no need to specify which survey here, they’re all virtually the same — there’s very little millennials can’t do. Except, of course, save for retirement, control their spending and keep their grubby young hands off luxuries like coffee and avocados.

So what’s true and what’s false? Much of the above falls into the latter category. Millennial stereotypes make good headlines, but they’re often just that.

Here are some myths about the way millennials handle money, followed by the facts.

Myth 1: Millennials don’t save for retirement

Let’s be clear: As a whole, no generation is saving or has saved as much as it should. Millennials — generally considered to be between ages 22 and 37 — are no different. But it’s not for lack of trying, and they’re not doing significantly worse than their parents or grandparents did.

According to the most recent Survey of Consumer Finances, households headed by someone under age 35 have a median $12,300 in retirement savings. That’s not enough. But neither is $120,000, which is the median for ages 55 to 64 — and those people are actually on the brink of retirement age.

One thing holding millennials in particular back: lack of access to employer-sponsored retirement plans. According to research from the Pew Charitable Trusts, more than two-thirds of millennials don’t have one. The National Institute on Retirement Security says that of millennials who are eligible to participate in employer plans, more than 9 in 10 do.

And they do it at rates that meet or exceed other generations: According to a Transamerica Center for Retirement Studies analysis, millennial participants in 401(k)s or similar plans contribute a median 10% of salary, the same rate as baby boomers, and more than Generation X, which contributes 8%. The report classifies 39% of millennials as “super savers,” which means they’re contributing 10% or more. That’s more than any other generation in the study.

Myth 2: Millennials blow their money on frivolous things

This is a survey favorite, particularly when framed as a reason millennials aren’t saving. Somehow, you can be responsible for killing everything most people spend money on — dining out, department stores, vacations — and still be shamed as a careless spender.

The reality: According to a NerdWallet analysis of last year’s Consumer Expenditure Survey, millennials actually spend less than other generations in several categories that could be considered frivolous, including clothing, entertainment and alcohol.

Myth 3: Millennials are job hoppers

The truth: They’re right in line with Generation X when it comes to changing jobs. According to a Pew Research Center analysis of government data, 22% had worked for their current employer for five years or more in 2016, compared with 21.8% of Generation X workers in 2000 (when they were the same age). The analysis found that college-educated millennials actually have longer track records with their employers than Generation X workers did in 2000.

Incidentally, there’s nothing particularly wrong with moving on to a new and better opportunity — in fact, it could very well be financially savvy, assuming that opportunity comes with a pay increase. Which brings us to …

Myth 4: Millennials are unambitious

Millennials have one habit that could greatly increase their net worth, and that’s advocating for themselves at work.

According to research from Bank of America, millennials are more likely to ask for a raise. The data found that 46% of millennials have asked for one in the past two years, compared with 36% of Generation X and 39% of baby boomers. Even better, they have a good batting average: Of those who asked, 80% received.

This is key to financial security because raises are an opportunity to build retirement savings. If you increase your savings rate each time you get a raise, you’ll easily and painlessly work your way up to saving 10% to 15% of your income for retirement, which is the general goal. (To get a more personalized retirement savings goal, use a retirement calculator.)

Myth 5: Millennials don’t want to buy houses

Alternate phrasing: They’re killing homeownership. Reasons range from an unwillingness to put down roots to financial instability.

Either way, it’s not entirely true: While many millennials struggle to afford their own home, they’re working toward it. NerdWallet’s own research from this year found that 82% of millennials say buying a home is a priority. In fact, they were the generation most likely to say they’d like to buy a home to rent out for extra income. (What was that about a lack of ambition?)

This article was written by NerdWallet and was originally published by Forbes.

The article Don’t Believe the Hype About Millennials and Money originally appeared on NerdWallet.

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Spend Money Guilt-Free — Even With Student Loans

Posted on September 25, 2018September 20, 2018 by Brianna McGurran

“Ask Brianna” is a column from NerdWallet for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to askbrianna@nerdwallet.com.

Earlier this year, total outstanding student loan debt surpassed $1.5 trillion.

For those with loans they can’t afford, the news was a large-scale confirmation of a small-scale truth: Student loans have gotten out of control, and they leave a smoking crater in the place where a thoughtful budget should be. Seemingly endless and urgent new priorities compete for your attention and limited income after graduation: housing, an emergency fund, paying off those loans.

Here’s one more you shouldn’t ignore: yourself.

“If you’ve got a financial plan that includes no money for fun, it’s unrealistic. It’s not going to happen,” says Matthew Angel, advice director of personal finance at USAA, a financial institution for members of the military and their families.

Managing your money well is about creating balance, which you’ll have to do over and over as the shape of life changes: You may change jobs, get married, have kids or go back to school. Learn how to keep your big expenses low, get serious about setting aside “fun” money and pick activities that will bring you lasting joy, and you’ll be able to repeat the process when new priorities edge their way in.

When you lead a life that’s more than the sum of your financial stresses, you might even feel motivated to pay off your student loans faster.

Compartmentalize your cash

Budgeting meticulously isn’t for everyone. But no matter your personality, you should have a general idea of where your money goes.

Start with this method:

Add up monthly fixed expenses, like your rent, transportation, utility bills, student loan payment and average grocery bill.
Decide how much to save per month to build a solid emergency fund, which will eventually include at least three months of expenses (it’s OK if it takes time to get there).
Use a retirement calculator to see how much you should save per month now to get a head start on retirement, even if it’s just a little.
Take a look at your high-interest debt, like credit card balances, and come up with a plan to pay it down. Put even $10 more than the minimum toward your debt each month.

The money left over is where fun money will come from.

All these expenses might seem overwhelming, and I wouldn’t recommend putting off saving for retirement or letting credit card balances linger. But you can chip away at them slowly rather than throwing all your cash at one goal, giving you the freedom to set aside cash for nonessentials.

You can also save money by making smart decisions about the big stuff. Buy a used car, or sign up for a federal income-driven student loan repayment plan, which keeps your payments from exceeding 10 percent of income.

Pick the right ‘fun’

It’s worth making the effort to earn a little extra if that’s a quicker path to building discretionary cash than cutting expenses, Angel says. You can easily sell unwanted items online, he says; you can also tutor, freelance or open a shop on Etsy.

Once you set aside the cash, spend it well. You’ll likely feel more fulfilled gaining experiences, pouring money into hobbies and socializing with friends than buying new clothes or technology. Money should make you feel freer and more like yourself. If you’re spending in a way that feels empty or hasty, pause and consider whether you’re getting the most out of the money you’ve worked so hard for.

Go in with a goal

To stick to spending only the fun money you’ve decided you can spare, make a plan beforehand, Angel says. Say, “I’m going to spend $100 at most with my friends tonight,” not, “I have $500 in my bank account, and we’ll see how much is left tomorrow.” If you have access to credit cards, setting that limit internally is even more important.

Especially when you’re with friends, it’s easy to apply a “you only live once” mentality. But think of controlling your spending as an investment in going out with them again and again. You won’t accrue so much debt that eventually you’ll have to go on an even harsher spending fast to fix it.

This article was written by NerdWallet and was originally published by The Associated Press.

The article Spend Money Guilt-Free — Even With Student Loans originally appeared on NerdWallet.

What Really Matters With Your First Credit Card

Posted on September 20, 2018September 18, 2018 by Claire Tsosie

Getting your first credit card is like moving into your first apartment: It’s exciting, empowering — and, once you get used to it, pretty underwhelming.

Your first time out, “you’re not going to have a credit card that is going to have a high limit,” says Paul Golden, spokesman for the National Endowment for Financial Education. “It’s not going to have great benefits or kickbacks or reward programs probably tied to it. And that’s OK.”

A starter credit card is just that — a start. Used responsibly, it’s a way to build a positive credit history, which will help you with things like getting a better deal on a mortgage or cheaper car insurance; and it will help you qualify for a card with better terms down the road — for example, one with richer rewards. Here’s what you should look for.

Ease of approval

When you have a thin credit file and limited income, you’re not likely to qualify for a card packed with benefits. Instead, aim for something more basic.

If you already have a credit history that shows consistent on-time payments and responsible borrowing — say, from repaying student loans — it’s possible to qualify for a regular “unsecured” credit card that doesn’t require a deposit. To increase your odds of approval, apply through the bank you already use or with a preapproved offer received in the mail. If you’re in college, look into a student credit card.

Don’t have a credit history yet? Consider applying for a secured card, one that requires a cash deposit. Or ask a parent to add you as an authorized user on a card with a history of on-time payments and a balance that’s far below the limit.

No annual fees

Avoiding an annual fee on your first credit card is a budget-friendly move that allows you to keep the card open for a long time at no cost. That can bolster your credit scores if you continue to make on-time payments on the account.

Useful rewards

When Zina Kumok applied for her first credit card at 22, she wanted a sign-up bonus — one that she could earn easily.

“I wasn’t making a lot, and I was trying not to spend a lot” at the time, says Kumok, now 29, a freelance writer in Indianapolis who covers personal finance.

“I didn’t want to feel like I was being pressured to spend more to reach a bonus, which obviously never works out in your favor,” she says. Kumok opted for a card with versatile cash-back rewards and a sign-up bonus with a modest spending requirement.

Follow Kumok’s lead: Look for a card that will reward you for the spending you’re already doing to avoid overspending to land a sign-up bonus.

Keep in mind that cards with rewards tend to charge higher interest rates. But if you expect to pay your bill in full every month, that shouldn’t be a deal-breaker.

“The APR only matters if you don’t pay off your balance,” Kumok says.

Reporting to all three bureaus

Your first credit card has a simple purpose: to demonstrate to lenders that you can handle credit responsibly so you can borrow money when you need it later on.

Make sure the card reports to all three of the major credit bureaus: Experian, Equifax and TransUnion. Most credit cards do, but if you’re unsure, contact the issuer.

How to manage your first card

Applying for your first credit card is simple, but building a credit history takes more effort.

Stay well below your limit. Using too much of your first card’s tiny limit could sink your score. But you don’t have to spend a lot to kickstart your credit history. It’s possible to build credit by making just one small transaction per billing cycle and paying it off on time. “You could set up your recurring monthly cell phone bill to be paid [with] your credit card,” Golden says.
Pay your balance in full and on time every month. Do this and you won’t pay a penny in interest or penalties, and you’ll build a positive credit history, too.
Make a plan. To avoid overspending on your new credit card, set a weekly budget and keep tabs on your accounts. If your spending starts to creep up, trim costs to get back on track.

This article was written by NerdWallet and was originally published by The Associated Press.

The article What Really Matters With Your First Credit Card originally appeared on NerdWallet.

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How to Choose a College Major With Loan Debt in Mind

Posted on September 18, 2018September 14, 2018 by Anna Helhoski

Dan Brandt still has $32,000 in student loan debt, after earning his bachelor’s degree in marketing, but he’s not worried about paying it back.

That’s because Brandt chose a major and a career with that debt in mind.

“Money is a big deal for a 17-year-old kid that has nothing,” says Brandt, who graduated from Augsburg University in Minneapolis in 2011 with $55,000 in student debt. “I knew the salary ranges in marketing could make a nice living, but I was more concerned with finding a place I enjoyed working at,” adds Brandt, who is now a marketing manager at Best Buy’s headquarters.

If you, unlike Brandt, don’t know what you want to study, you can choose a major that won’t leave you with student loans you can’t repay. Here’s how.

Explore job titles and prospects by major

Start by listing your interests and skills. There may be a clear fit — if you’re adept with numbers, for example, you might consider accounting.

Next, research careers by matching a major to one of the “Occupation Groups” listed in the U.S. Department of Labor’s Occupational Outlook Handbook. Each group lists positions along with descriptions, educational requirements and projected job growth. Consider contacting your college’s career office to link up with alumni who studied what you’re interested in, to see their career path.

Research potential earnings

Your major could make a big difference in lifetime earnings: The disparity between the lowest- and highest-paying majors is $3.4 million, according to a 2015 report by the Georgetown University Center on Education and the Workforce.

“There are people who really want to go to into social work or drama, but money is going to be an issue,” says Brad Hershbein, economist and director of information and communications services at the W.E. Upjohn Institute for Employment Research. “You have to know that, and make an informed decision about what it’s going to be like after you graduate.”

Research median salaries rather than average salaries, Hershbein says.

“The example I always use is if you put Mark Zuckerberg [Facebook’s billionaire co-founder and CEO] in a room with 10 other people who have no money, the average of the group is still inordinately wealthy,” Hershbein says. “You don’t care about the average so much as the median.”

The average starting salary for the class of 2017 was $50,516, according to the National Association of Colleges and Employers Summer 2018 Salary Survey, but median earnings — where half earn more and half earn less — start at $27,000, according to 2014 research by The Hamilton Project, an economic research group at the Brookings Institution.

To find data on salaries, use sites like Salary.com or Glassdoor. Include “entry-level” in your search, along with specific cities or regions for more accurate results.

Factor earnings into borrowing

Before you take out student loans, submit a Free Application for Federal Student Aid, or FAFSA, to qualify for gift and earned aid, including grants, scholarships and work-study. Find private scholarships with scholarship search engines, such as the U.S. Department of Labor’s CareerOneStop scholarship finder or Scholarships.com.

If you need loans and you’re not sure how much to borrow for college, you can keep repayments manageable by aiming for a monthly payment that won’t be over 10% of your expected after-tax take-home pay each month in your first year after school.

For example, If you expect to make a starting salary of $46,000, then borrowing about $24,000 for college means you can afford a monthly payment of $257. Use an undergraduate student loan calculator, like one from The Hamilton Project, to see what it would take to repay debt based on your major.

When in doubt, switch

If you start school without your major picked, it’s OK. College is the place to explore potential career paths.

“Don’t be deterred by risk to pursue a more difficult major; if you try computer science and it doesn’t work out, you can always switch majors,” says Artem Gulish, a senior policy strategist at Georgetown University Center on Education and the Workforce. “No one can really know what they can be good at if they haven’t tried it.”

Realize that if you do change your path, it could take longer to complete your degree, which may mean taking on more debt. But it could also lead to a career that motivates you, potentially boosting your earnings and the ability to repay your loans.

This article was written by NerdWallet and was originally published by The Associated Press.

The article How to Choose a College Major With Loan Debt in Mind originally appeared on NerdWallet.

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Skip Student Loan Forbearance — Do This Instead

Posted on September 11, 2018September 11, 2018 by Brianna McGurran

Forbearance is a way to stop making student loan payments temporarily. It is not a long-term affordability strategy, or a way to put off repayment indefinitely.

And that means very few people should use it — probably far fewer than are doing so right now.

In the second quarter of this year, 2.8 million federal student loan borrowers had loans in forbearance, according to the U.S. Department of Education. Almost 70% of borrowers who started repaying loans in 2013 used forbearance at some point in the next three years, according to the U.S. Government Accountability Office; a fifth had loans in forbearance for 18 months or longer.

Many students didn’t truly grasp what they signed up for when they scrambled to afford an education they were told they needed to succeed. Forbearance is the quick fix they turn to when the bill overwhelms them.

But if forbearance isn’t a good idea, what are borrowers in trouble supposed to do? Follow these guidelines:

Use income-driven repayment to make your loan payments more affordable over the long term.
Choose forbearance only for short, one-off financial crises, like when you have a big auto repair or medical bill to pay.

Here’s why.

What forbearance is

Forbearance allows you to pause payments, generally for up to 12 months at a time for federal loans.

There are different types, but discretionary forbearance is the one that can creep up on you. It’s available to anyone with financial difficulties, and there’s no limit to how long you can get it for. Interest will keep adding up, meaning at the end of the forbearance period, you’ll owe more than you did before.

For instance, after putting $30,000 in loans on hold for 12 months at 6% interest, you’d owe about $31,800.

Think of forbearance as a last resort. It’s too easy to renew it and let your balance grow, while also spending each month without factoring in a student loan payment.

“Because forbearance can be applied for virtually any reason, you want to keep that for a potential emergency down the road, where you may not qualify for anything else,” says Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that offers free student loan advice.

What forbearance isn’t

Forbearance is not the same as deferment, another way to stop making student loan payments.

Deferment is a better option, since you won’t pay interest on subsidized student loans when they’re in deferment. You’ll qualify for deferment in certain circumstances — when you’re unemployed, for instance — so ask your student loan servicer if that’s an option before going with forbearance.

Forbearance isn’t as easy to avoid when you have private loans. Private lenders generally offer few ways to lower payments unless you’ve already fallen behind, Mayotte says. But it’s worth asking for interest-only or interest-free payments as an alternative.

Smarter ways to get relief

Most people with student loans have federal loans, which means they’re eligible for income-driven repayment. These plans lower payments to a percentage of income; you can pay $0 if you have no earnings.

To qualify, some plans require you to show you can’t afford the standard 10-year schedule, but one plan — called Revised Pay As You Earn — is available to all federal borrowers. Sign up for free at studentloans.gov.

Depending on the plan and the type of loans you have, the government may pay part of the interest that accrues if your payments don’t cover it. Your loans will also be forgiven if there’s any balance after 20 or 25 years of payments.

Income-driven repayment will help get you through a crisis, but staying on it for decades will mean owing more in interest. Under current rules you’ll also be taxed on the balance forgiven.

Use income-driven repayment strategically by staying on it once you’ve found steadier financial footing. You can pay extra each month without penalty to get rid of your loans faster, and a lower payment is there as a safety net if you need it.

This is your chance to take back control of your loans, and to keep them from dictating the life you can afford.

This article was written by NerdWallet and was originally published by The Associated Press.

The article Skip Student Loan Forbearance — Do This Instead originally appeared on NerdWallet.

5 Reasons for Flyers to Love the Middle Seat

Posted on September 6, 2018August 30, 2018 by Kimberly Palmer

For some people, the middle seat isn’t a curse to avoid, but a perk to covet.

Ralphiee Esperas, a 30-year-old Phoenix resident who works in marketing, says his love affair with middle seats started a couple of years ago on a flight from Phoenix to Iowa, when he found himself in the middle seat on an evening flight. After striking up a conversation with the woman on his right, whom he recalls as being in her 60s, he offered to buy her a drink.

“I felt good about the situation, so I said, ‘I’m gonna get a drink; the first round’s on me,’” he says. Then, the woman on his left, whom Esperas says was in her early 20s, joined in after sharing that it was her birthday.

“We talked, the drinks were flowing, and we kept buying each other rounds,” he says. The conversation covered “just life,” Esperas says, including what they did for a living and the reason for their trip.

If, unlike Esperas, you’re someone who usually dreads the middle seat, here are five reasons you might want to consider giving it a chance:

1. More networking opportunities

Carolyn Clancy, an executive vice president at Fidelity, found a new job because she sat in a middle seat back in 1999.

After striking up a conversation with the person seated next to her, she ended up exchanging business cards and interviewing for a job at Fidelity, where she remains to this day.

2. New friends

As Esperas’ experience shows, a middle seat offers a prime opportunity for unexpected connections.

“I want to hear other people’s stories. It’s the best education about life, instead of just reading it on the internet. I get a lot of energy from that,” he says. He acknowledges, though, that he is the definition of an extrovert, and that introverts might have a different perspective on long conversations with seatmates.

Race car driver Kenny Wallace, who has a large social media following, says he often opts for the middle seat as a way of paying it forward. “I choose the middle seat sometimes to help people under stress,” he says.

For example, he will volunteer to trade his aisle or window seat with someone separated from their family so they can sit together.

Occasionally, his generosity has led to more tangible benefits, such as one time last summer when he received free beer in exchange for moving to a middle seat in a different aisle so two sisters could sit together.

3. A faster exit

If you don’t have assigned seating and can take your pick, often middle seats are the last to fill up — which means if you want to sit near the front of the plane, your best chance of finding an available seat is often choosing a middle one.

If you know you’ll be rushing to make a connection or just eager to get off the plane, sitting closer to the front could be considered a major plus.

4. Both armrests (in theory)

According to widely acknowledged traveler etiquette, the person occupying the middle seat deserves access to both armrests. However, not everyone respects this custom.

“It seems I usually end up sharing with the person sitting next to me that I don’t know. I actually just educated a teenager sitting next to me on my last flight about the armrest rules,” says Christina Saull, a travel blogger based in Washington, D.C., who writes at the aptly named website My View from the Middle Seat.

5. A possible row to yourself

If you are traveling solo and you suspect that your flight won’t be a full one — for example, if it’s scheduled at an unpopular time such as early in the morning — then the economists who blog at the website Cheap Talk calculate that you increase your chances of getting a row to yourself by selecting the middle seat.

Here’s how they reach that conclusion: If you select the middle seat on a relatively empty flight, then the next person to select a seat will choose a different row, because they prefer not to sit directly next to someone. If the flight fills up, you might get seatmates, of course. But otherwise, you could wind up enjoying the row to yourself.

And as travel blogger Catherine Smith notes, “I love the middle seat … when the aisle and the window are also empty.”

The article 5 Reasons for Flyers to Love the Middle Seat originally appeared on NerdWallet.

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To Make College Cost Even More, Pay by Credit Card

Posted on September 4, 2018August 28, 2018 by Brianna McGurran

Sure, your college may allow students to pay for tuition and fees with a credit card. But, like partying the night before a midterm, it’s probably not a good idea.

Paying for anything with plastic requires a plan to get rid of your balance fast. That keeps interest charges from piling up. Plus, many schools charge “convenience fees” that could cost more than the value of any rewards points or cash-back bonuses you’re hoping to get on your card.

Here’s what to weigh before using one type of credit to pursue another.

Convenience fees

Before brandishing your card, check if the school tacks on an extra charge, called a convenience fee, to accept payments made with plastic.

Colleges with convenience fees charge 2.75% of the total payment, on average, according to a survey of 410 institutions by the National Association of College and University Business Officers. That means if you pay $2,000 for tuition, your card will be charged $2,055. The bigger the payment, the more expensive that fee will be.

Eroding rewards

If your credit card offers cash back or travel rewards based on the amount you spend, the idea of charging your tuition bill might make “Free plane ticket” flash in front of your eyes. But do the math first.

On a 1.5% cash-back credit card, you’ll earn $30 in rewards on a $2,000 charge. A 2.75% convenience fee of $55 will more than cancel that out.

It’s more likely you’ll see savings if you recently got a credit card with a sign-up bonus — say, if your card offers $200 back after spending $1,000 in the first three months. But even then, if a convenience fee were applied, it would eat away at those rewards.

Interest charges

Community colleges are the type of school most likely to accept payment by credit card — and the least likely to charge a convenience fee — according to the National Association of College and University Business Officers survey. They’re also the least expensive, according to the College Board.

But even then, it’s not a good idea to pay with a credit card if you plan to carry that balance from month to month. Unless you have a card that doesn’t charge interest for an introductory period, carrying a balance could mean paying loads in interest charges. For instance, leaving a $2,055 balance on a card with an annual percentage rate of 17% will accrue about $29 in interest in the first month alone.

Other financial aid options

Know that you don’t have to pay for school out of pocket.

Fill out the Free Application for Federal Student Aid, known as the FAFSA, to qualify for federal grants you don’t have to pay back. Students with financial need can get a Pell Grant, for instance, of up to $6,095 for the year. The amount you’ll receive depends on your income, school costs and whether you’ll attend full- or part-time.

The FAFSA also makes you eligible for federal student loans, whose interest rates — 5.05% for undergrads in 2018-19 — are generally lower than the rates on credit cards. Check into scholarships, too, and ask about getting tuition reimbursement from your company if you’ll work while studying.

Unless you have a plan to get rid of your balance fast — and you’ve already exhausted every other financial aid option — paying for college on credit doesn’t make the grade.

This article was written by NerdWallet and was originally published by The Associated Press.

The article To Make College Cost Even More, Pay by Credit Card originally appeared on NerdWallet.