Desirae Odjick is the creator of Half Banked, a personal finance blog for millennials who want to be great at money and still enjoy the occasional latte. We recently sat down with Desirae to discuss the types of money management challenges that millennials are facing today, and she gave us some hints on some appropriate, attainable goals on how to rein in spending and take control of your personal finances.
Tell us a little about yourself and your personal finance story. Why did you decide to start a blog about this topic?
I’ve always been pretty interested in personal finance, but I never got that serious about it until I looked at my laundry list of long-term goals and realized I’d be in my late 30s before I hit any of them at the rate I was saving. Since I had high hopes of not waiting that long to do things like buy a house, I knew I needed to ramp up my savings game. So I decided – on a total whim – to save half my income and track my progress by blogging about it. I’ve now been blogging about it for coming up on two years, and I’ve learned so much about how to do money – and how NOT to do money! – along the way.
OK – were you really able to save half of your income? Is this an attainable goal for many (or even all) people?
I was, actually, but not right away! When I first set that goal, I hadn’t really thought through the fact that irregular expenses pop up all the time, and I kept getting thrown off track with surprise expenses. It took me the better part of a full year to finally start hitting my savings goal. And to be perfectly honest, it was because my income went up – I had already cut my expenses down pretty much as far as they could comfortably go.
I think that this specific goal is entirely dependent on your personal situation and where your “comfortable spending point” is. That’s a hard number to change, and moving your income up is, comparatively speaking, a breeze. A much more reasonable goal would be to bump up your current savings rate by 5%. If you’re saving 10% now, try tacking on another 5%. It’ll really force you to take a look at your budget situation, and you’ll hit your savings goals way faster at the same time!
What types of conflicting or stressful messages are young professionals hearing about money and personal finance these days that are causing them confusion?
Oh my gosh, THE LATTES. It seems like every other week, there’s a new article about how millennials are spending more on lattes or other indulges than they’re saving for retirement, and I think it totally misses the point of what “doing money well” is all about: using your money to live the life you want, in a way that keeps you safe and protected at the same time. If lattes are part of that for you, and you spend money on them intentionally? More power to you. If you hate coffee? Then yeah, don’t drink lattes.
What types of personal finance challenges are today’s young professionals facing that perhaps their parents didn’t have to worry about very much (or at all)?
We’re all starting careers at a time when the really big monthly expenses – like housing, transportation, and healthcare – are, quite frankly, bananas. It’s one thing to cut down on expenses that are within your control, but outside of a certain range, you can’t really avoid paying for food or housing or your health insurance bill. Oh, and don’t forget your student loan payments while you’re at it! I think a huge number of millennials are doing exceptionally well given all of these things, and we deserve a lot more credit than we typically get in the media for it.
Since you tout a “one-minute budget” on your blog, could you tell us a little about what it is and what people can actually accomplish in 60 seconds of budgeting?
While a real, balanced budget that suits your priorities and goals is something that takes a bit longer than a minute, this tool was one I created to answer questions that I kept getting about whether or not people were spending “too much” on certain expenses. The best example I can give is housing, since my friends would consistently ask me if they could afford apartments they were looking at! I built the One Minute Budget to quickly calculate how much they could afford to spend, based on recommended budget percentages and their income. It’s meant as a quick budget health check, and it’s a great first step toward building a custom budget that works for you.
Give us some examples of appropriate savings goals that people can set for saving money (i.e., X dollars in an emergency fund, how much to put away for retirement, etc.)
I think aiming for even one month of expenses in your emergency fund is a really powerful place to start saving. That’s enough that you could handle most unexpected expenses that came your way, and it’s not so much that you’ll feel overwhelmed even starting. It’s easy to put off saving $25 a month towards a $10,000 goal; but if your goal is $2,000, it feels a bit more impactful!
As for retirement, I’ve always lived by the rule that if you’re saving 10% of your pre-tax income every year, you’re on the right track. Recently, I’ve seen people advocate for saving more, but aiming to hit that 10% number is a great place to start (and nothing to sneeze at, either!)
How can young professionals utilize a prepaid debit card in order to manage their spending more effectively?
I’m a huge fan of setting a “fun” budget for yourself, and giving yourself a set amount of money every month to spend on things that are purely fun just because you want to. That said, it’s easy to go over budget in a category like that, and sticking to it is so important. If you’re not into carrying cash around to help keep yourself accountable, a prepaid debit card with your fun budget loaded onto it can be a great way to stay on track! Once the money’s gone, that’s it for fun spending until the next month.
What are some of the advantages of using a prepaid debit card as opposed to a credit card for everyday purchases?
When you can only spend up to what’s on your card, it’s a built-in fail-safe against going over budget – or worse, into credit card debt! If you know that you like to play fast and loose with your budget categories, setting some hard limits like “I only have so much money on my card” is a really easy, simple way to make sure you stay on track.
Finally, give us one thing that people can start doing today that will help them reduce their spending.
The advice I’d give to anyone and everyone who wants to cut back on their spending is simply to track your spending for a week. Pretend you’re writing a money diary or a feature article on how much you spend and on what, and then keep track of every penny. You’ll be amazed at how much you really spend and where over the course of a week, and it can be a powerful way to motivate yourself to implement some changes!
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Disclaimer : “The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation.”