- 21 insights from personal finance professionals to help you make a plan for your money in 2021
- Leave some room for the unexpected
- Automate your money to make progress a no-brainer
- Find out where your money is going already
- Add savings into that list
- Consider giving your credit cards a break
- Find your support system
- List every loan and its terms
- Lean on your partner
- Check up on your credit
- Don't be afraid to start small
- Follow your plan and readjust when you need to
- Ignore the day-to-day market movements
- Identify what you can control
- Don't wait until tomorrow or next month to get back on track
- Aim to be good with money, not perfect
- The grim reality of millennials who rely on their parents for money: ‘I pay for lunch at work, and I pay for my Netflix account’
- Student loans and rising rents don’t help
- ‘Parents could end up as an enabler’
21 insights from personal finance professionals to help you make a plan for your money in 2021
Investing can be right for anyone, not just the wealthy or finance-minded.
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“Let your life lead your money — that's the first thing.
What is it that you aspire to do? What do you value? What are your goals? Let's start there. Then the money is not necessarily a second. It's a complement; it's a partner.”
— Preston Cherry, certified financial planner and founder of Concurrent Financial Planning
Leave some room for the unexpected
“When I see people with a financial plan, one of the things I tell them is to expect the unexpected.
“As long as you're walking on this earth, you're going to have an unexpected expense. I call them 'the known unknown,' and those are expenses that you know are going to happen, but you don't know when.”
— Tania Brown, certified financial planner with SaverLife:
Automate your money to make progress a no-brainer
“What I to have clients do is automate their transfers to whatever the goals are, things that they're trying to achieve, and have those in separate accounts so that they can clearly see their progress. And it's all just sort of set up, and it's happening for them. So they make the decision once, and then it triggers on its own.”
— Anna N'Jie-Konte, certified financial planner and founder of Dare to Dream Financial Planning
Read more » How to make a plan for your goals, no matter how big or small
A couple sits down to sort out their budget before planning anything. Hero Images
“The main point of financial planning is to use your money as a tool for life. As far as the budget goes, understanding what you actually want to do in your life is very important to build that plan.”
— Eric Roberge, certified financial planner and founder of Beyond Your Hammock
Find out where your money is going already
“I would say that the first step — I'm always surprised at how many people either discount this or put this off or just don't know — is really being honest about how you're spending your money. You have to know how much is coming in versus how much is going out on a monthly basis.
“It might sound simple, but to me that's the very essence of what it means to start thinking about a budget. That term doesn't have to be so scary, but if you don't take that step back and evaluate this, you're never going to be able to move forward.”
— Kelly Lannan, the vice president of Fidelity Investment's Young Investors for Personal Investing
Add savings into that list
“Start tracking how much you save each year and aim to save 10% to 15% of your income as an 'investment' in yourself. You'll be amazed how quickly it will add up.”
— Kristi Rodriguez, vice president of thought leadership for Nationwide Financial
Consider giving your credit cards a break
“I always suggest trying a cash diet, where maybe you take a week or a couple of weeks where you don't use a credit card and start using cash only.
“That way we're just a little bit more mindful about how we spend. I know we use credit cards for everything today, but this way it makes us really be more thoughtful.”
— Carrie Schwab-Pomerantz, certified financial planner and board chair and president of the Charles Schwab Foundation
Find your support system
“A budget is essential, but it can be even more powerful when you have that support system of people who share the same goals. That's what we've seen to be extremely effective and powerful.”
— Sunny Israni, chartered financial analyst and founder and CEO of Clasp
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“To quote my grandmother, 'Facts are stubborn things.' And so I think that the mistake that many people make is embarrassment, shame, bury their head in the sand.
“The best thing that anyone with any kind of debt can do is build a personal balance sheet. It doesn't have to be fancy. It can just be pencil to paper on a legal pad with your debts on one side, and your assets on another.
“And human capital is an asset, too. So, if you have a salary, if you have money coming in, certainly list that. But those facts are stubborn things, and you need to know exactly what you're facing, what your payments are, and have an idea of how you're going to approach it.”
— Alison Hutchinson, senior vice president at Brown Brothers Harriman
List every loan and its terms
“The biggest advice is to get organized around your student loans. Write them all down, and see what you have to tackle.
“It always seems a bigger task at first than it really is. And once you get organized, you can kind of see the big picture a lot clearer, so you know who your loans are with, are they subsidized, are they unsubsidized, are they private loans, are they federal loans, and getting an understanding around that. And then just going and looking at your options.”
— Carmen Perez, personal-finance blogger at Make Real Cents
Lean on your partner
“Irrespective of whether you decide to take on your partner's debt or not, that debt is going to affect your relationship. Because it will either limit your partner's ability to do certain things or it'll limit your ability as a team to be able to go out and do future things together.
“So what I recommend to couples is to tackle debt as a team, even if you're not taking over that person's debt, or paying, or contributing to the payment of that debt. The best part about being in a relationship is you have a partner to help you navigate all that.”
— Aditi Shekar, founder and CEO of Zeta
Check up on your credit
“Review your credit reports regularly. They provide a complete record of your debt-related financial relationships, can be used as a resource for working with your creditors on payment planning, and are a critical tool in managing your debt through difficult financial situations.
“Keeping your debts as low as possible will put you in a better financial position when the economy emerges from this crisis.”
— Rod Griffin, senior director of consumer education and advocacy at Experian
Read more » How to pay back your student-loan debt, no matter where you start or what type of loans you have
“Active investing is a skill that can be learned and developed over time. For those that do it successfully, it is not an emotional exercise. In fact, successful active investors put measures in place to protect themselves from emotional decision making. If one lacks either the will, skill, or time, passive investing is ly a better strategy.”
— Wilson Muscadin, a financial coach and founder of The Money Speakeasy
Don't be afraid to start small
“You don't want to be silly about how you invest and incur costs that are perhaps not necessary, but I don't think there's any amount that's too small.
“I'd rather you do something than nothing, especially with a 401(k) when your employer will match whatever you put in. That's basically a 100% guaranteed return. You don't get a lot of free lunches, as we say in finance. That might be one of the few, and you're giving up on an incredible opportunity if you don't put any money away at all.”
— Scott Pedvis, financial advisor at Wells Fargo
Follow your plan and readjust when you need to
“It's very important to stick to your game plan, to understand what you're going to be using the money for, and really know that there are going to be points where the market is not doing so great.
“But if you have a long-term game plan that you want to stay in with a risk associated with your investment portfolio, it's best to stay the course. And if you can't stomach the risk the portfolio you're in might be subject to, then reevaluate and determine whether it makes sense to scale that risk down.”
— Joseph Edmondson, certified financial planner at Equitable Advisors
Ignore the day-to-day market movements
“One of the big things you want to know is to take comfort in the context.
“You don't want to focus on the 30 to 45 worst days we have seen in 10 years and let it make you forget about the good times that we had for 10 straight years. You want to have that context and know that long-term investors almost always win.”
— Kevin Matthews, a financial advisor and founder of Building Bread
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“We're living through extraordinary times. While each of us is learning to persevere through this moment, don't anchor your vision of the future to the current environment.”
— Sandi Bragar, certified financial planner and partner and managing director in planning, strategy, and research at Aspiriant
Identify what you can control
“What I find people do is they focus on a thing that they cannot control and ignore the things they can.
“For instance, if someone loses their job, they had no control over the job loss, but you have 100% control over calling your creditors and letting them know you may not be able to pay the bills. You have 100% control of going in your budget and cutting out unnecessary items, cable.”
— Tania Brown
“My biggest piece of advice, and this is hard, OK, I'm not saying it's easy: People have to stop comparing yourselves to others, especially over social media.
“You have to define your own goals, because we all know what makes us happy. You have to start to align your money to your values, to the things that make you happy. That can be at least an important first step in trying to not compare yourself too much to others.”
— Kelly Lannan
Don't wait until tomorrow or next month to get back on track
“When you're looking at your spending for the month, if you go over on a category and then you say, 'OK, well, I'll just start over next month,' I always tell people that's not the way to go about it.
“It's the same with nutrition or health goals.
It's not , 'OK, I'll just start over next month' or 'I'll start over next year,' but it's 'OK, what can I do for the rest of the day to make this better?' Or 'What can I do tomorrow to make this situation better?' So maybe it's 'OK, if I overspent on this category, is there another category that I can cut back on for the rest of the week or month?'”
— Katie Oelker, financial coach
Aim to be good with money, not perfect
“Being good with money doesn't mean you're perfect with money. None of us are. I think that's one of the things that we have to tell people to come to grips with: You will do things that you'll look back and wonder why. But no one's perfect with money.”
— Rod Griffin
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The grim reality of millennials who rely on their parents for money: ‘I pay for lunch at work, and I pay for my Netflix account’
many people her age, 28-year-old writer Kristine lives with her parents. “It’s both embarrassing and a necessity,” she told MarketWatch.
“I am an only child, so it’s just my parents and me at home,” she said. “Anything communal — family cellphone bill, cable, food at home, family vacations — my parents will pay for. But I pay for lunch at work, and I pay for my Netflix NFLX, -3.45% account.”
She’s got plenty of company.
“ Roughly half of millennials and Generation Z expect to be financially reliant on their parents in their early 20s. ”
Despite a decade-long expansion and record-low unemployment, studies suggest that between 60% and 70% of 18- to 34-year-olds rely on their parents for financial assistance.
But most young Americans don’t agree with Kristine’s confessed embarrassment, according to a recent study released by TD Ameritrade US:AMTD. (Parents had a slightly different opinion.)
Though roughly half of younger millennials and Generation Z members expect to be financially independent in their early 20s, according to a recent study, and over 90% of parents surveyed expect their kids to be financially independent by the age of 25, previous research suggests those are optimistic goals.
Participants in the TD Ameritrade online survey of more than 3,000 people conducted by Harris were grouped into three categories: Generation Z (ages 15 to 21), young millennials (ages 22 to 28) and parents (ages 30 to 60).
“ Some 63% of millennials say their mom and dad are their best friends, and 77% of parents feel the same way. ”
For all those groups, reality can be the enemy of aspiration. Kristine aimed to move her parents’ place, located within a 30-minute commute of New York City, by 25, but lost her job.
She began freelancing, and paying a New York rent without a dependable paycheck did not seem possible without some assistance.
She now has a steady job, but “it’s an hourly wage, and it’s much less than what I was making in the job I had when I was 22,” she said.
For millennials who are financially reliant on their parents and/or still live with them, there doesn’t appear to be much associated shame, and, fortunately, the TD Ameritrade survey found, both parties regard each other as friends,with 63% of the millennials saying their mom and dad are their best friends, and 77% of parents feeling the same way.
Roughly 15% of millennials live with their parents, up from 10% of Generation X members when they were in their 20s and 30s, the Pew Research Center found.
“At 30,” said Kristine, “I should probably figure it out.” Until then, living with her parents has allowed her to save some money and do the work she wants to do.
“I’ve had a lot of conversations with my parents about the privilege of being able to pursue a career in journalism,” she said.
“This isn’t something I would be able to do if my parents didn’t live near the city and I couldn’t live with them.”
Student loans and rising rents don’t help
Young people living off their parents’ generosity in decades past may have been seen as freeloaders. But today, parental help is seen more as a financial imperative.
“Financial help from your parents is an economic necessity for this generation,” Lindsey Pollak, author of “The Remix: How to Lead and Succeed in the Multigenerational Workplace,” told MarketWatch. “This generation has been faced with the highest level of student-loan debt in history.”
“ ‘Financial help from your parents is an economic necessity for this generation. It’s unfair to compare a 30-year-old today to one 30 years ago.’ ”
— Lindsey Pollak, author
Over 40 million borrowers collectively owe about $1.5 trillion in student debt. This is up from $600 million a decade ago. One in six of these borrowers has debt that’s greater than his or her annual income, and the average borrower owes almost $30,000 upon college graduation.
This wasn’t the case three decades ago, Pollak said. “It’s unfair to compare a 30-year-old today to one 30 years ago,” she added. In the past 10 years alone, the number of borrowers who owe more than $100,000 has quadrupled.
For the most part, meanwhile, the U.S. economy is doing well.
It’s been growing for a record stretch of 121 months, or more than a decade, and the unemployment rate recently hit its lowest point since 1969 at 3.7%.
Despite these improvements, wages aren’t moving much — at least, not in the right direction. Real wages have effectively declined by 0.8% in the past year, according to the PayScale Index.
Rent increases are outpacing wage increases. In San Francisco, the median monthly rent for a one-bedroom apartment is $3,690, according to Zumper. In New York City, it’s $2,870.
“ In San Francisco, the median monthly rent for a one-bedroom apartment is $3,690. In New York City, it’s $2,870. ”
While narrow majorities of Gen Z and millennial survey respondents predicted they’d ultimately fare better financially than their parents have, Jason Kirsch, the author of “The Millennial Advantage” and the president of Grow, a financial-planning company for millennials, advises all of his clients to try to get as much money from their parents as possible. “Even if they have a good job, the best possible financial decision they can make is asking their parents for money, either as a gift or as a loan,” he said.
‘Parents could end up as an enabler’
It can be taken too far, he conceded. “Most professional motivation for our generation is purpose-driven,” Kirsch said. “So even if kids are getting money from their parents, they are still ly to be motivated at work.” He adds one caveat: “Parents could end up as an enabler if they are giving too much money.”
Christine Russell, a senior manager of retirement and annuities at TD Ameritrade, also said there was a possibility of giving kids too much money. “Are you borrowing from your parents to fund a lifestyle that you haven’t earned yet?” she asked.
Failure to launch can take a toll on young people’s self-esteem. “My parents aren’t pushing me out the door. There’s even the question of would they want me to be alone in the city,” Kristine told MarketWatch. But she says she’s “not fine” with her current situation, “and it is frustrating.”
“I want to have something that I have earned,” she said. “I wish I was paying my parents’ phone bill and cable — not the other way around — but that just isn’t the case right now.”