Between FIRE and YOLO: A Millennial’s Dilemma & Useful Tips on Saving & Splurging

Happy New Year, family!

Welcome to a new year and decade of hope, prosperity and abundance. Tis the season we assess our lives, strategize for the year regarding careers, finance, relationships, self care, and every life part that makes us a whole person.

This year, I am focusing more on my finances as a career woman and Millennial: savings, retirement, income streams etc, but at the same time, I love the finer things of life and treat myself if and when I can. After all, you only live once – YOLO!

Being the introspective Capricorn, I’m musing on the dilemma Millennials experience between actively saving for home ownership and retirement as well as prioritizing our well-being. This post helps to draw a balance between both and hopefully, we crush this Cirque du Soleil financial balancing act.

 

What is FIRE? Do you mean fire, as in flames?

No beloved.

I mean FIRE aka financial independence, retire early, which encourages Millennial saving and investing – between 50-75% of income – to retire in your 30s and mid-40s.

Now, you read this and laugh maniacally because you struggle to save 15% monthly with all that Millennial debt load, but there are hundreds of laser focused Millennials and Xennials performing this aggressive saving and investing method to retire debt free with enough savings to not have to work. Goalssss!!

If you are keen on this FIRE train, there are a few steps to take up this ladder, but do them according to your lifestyle and comfort level. I cannot say that I’m firmly on the FIRE train but in the past year, I increase my millennial savings but also splurge on my pleasure spots. You see my dilemma?

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

#Reduce Debt Load

The average American Millennial has an $8,000 net worth, less than $5,000 in savings and earns $35,000. What is missing in these stats? You got it…Millennial debt load. The list of debt goes on and on from student loans, credit card debt to medical debt, car and personal loans.

Student loans are the most common loans with millennials with these loans being the second largest in the U.S. ($1.52T) after mortgage loans. The average student loan debt per person is a little over $31,000, and tuition costs keep rising.

Furthermore, credit runs America and the ease with which college students receive credit cards is staggering. Granted, some have no choice but to live on credit cards thus increasing debt load and reducing credit score.

Here, you require a credit score for apartment applications and it is part of a background check when employers or anyone run a search, and a high debt load has been known to scare prospective employers and even partners. For better or worse? Apparently not, when it comes to finances.

So, how can you reduce your millennial debt load?

• Consolidate student loans. Reach out to your loan provider(s) to work out repayment plans for some or all loans. I consolidate my grad school loans 3 years ago to a manageable monthly payment that gives me extra dollars in savings.
• Pay off high-interest credit cards. Some prefer paying off high balance cards; either method, prioritize a number and stick to it. I finally pay off a credit card in December 2019 by throwing $500 at it and I feel so light.

Start with these chunks and get them under control as they are the crux to achieving FIRE and reducing millennial debt load.

Updated April 2020

In light of the covid-19 pandemic, many people have lost jobs and income and 1 in 4 Americans were unable to make April rent with rent confidence decreasing into May and subsequent months. With developed nations giving citizen bailouts – U.S. citizens are receiving a $1,200 stimulus package – what will you invest your money in?

You can choose to spend your stimulus funds this way:

• Pay down high interest or high balance credit card debt

• Invest all in a Roth IRA and purchase lucrative stock for cheap

• Increase emergency savings OR start one if you have none

• Split the funds: squirrel $600 into emergency savings and $600 to pay down debt

These are very strange times and not the time to splurge on big budget items. For those of us still lucky to draw salary, do not be lulled into a false sense of security. Reduce spending and save more.

The severe economic impact of covid-19 is still unravelling and will have repercussions for years to come. See how long it took people to recover after the 2007-2009 recession?

Invest that $1,200 wisely!

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

Create A Budget…and Stick To It!

I know, it’s hard.

So many things to splurge on and not enough money to do so. Sigh. Have discipline, brethren, and create a simple budget with Excel. At this point in your life, you can make a pie chart, so… itemize all overheads to include utilities, rent, phone, food, miscellaneous, and deduct from your salary.

There are apps for this but head over to Nerd Wallet for their review of the best budgeting apps. I have a simple Excel pie chart and I know my remainder dollars after each fortnightly wage. Having a representation of your budget helps in knowing where major expenses are and how you can reduce them to increase savings.

This is what I do: I know what my main monthly payments are – electricity, gas, internet, phone, student loans – and I have a separate account for these where I transfer money to monthly from my main account. Summer is tricky because of a/c use and electricity cost increase but I try not to let it skyrocket.

Since these bills are on direct debit from a separate account, that leaves rent and savings from my primary account. Now, I’m not professing perfection by saying I stick to my budget wholesomely because I sometimes eat out, travel and indulge in experiences, but I know that if I splurge one month, I have to be diligent in upcoming months. Budgeting helps in reducing millennial debt load.

Either way, I don’t skimp on saving and we’ll get to that below.

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

Don’t Deprive You of Life’s Pleasures

It is easy to get carried away with aggressive budgeting and saving but please, leave room for life’s pleasures.

After all, YOLO, and you don't want to regret not experiencing life all because you are literally counting pennies. Many millennials on the FIRE track resort to ridiculous methods of saving money and reducing expenses. Click To Tweet

Some of these methods are absolutely frightful, such as turning off heat in deep winter, wearing $20 threadbare shoes, having a $25 entertainment budget or no social life at all. These millennials pull in 6 figures and save at least 50% of their take home pay so one would think that a new pair of winter boots wouldn’t break the bank…but apparently, it can throw you off your FIRE track. Tragic!

Am I up for this brutal self-denial?

Absolutely not! For those who follow me, you know that I love to solo travel and often do so, but I aggressively research affordable tickets, penny-pinch for expensive cities, travel during off-peak season and do hostel stays to reduce expenses. As much as I actively save and reduce expenses, I cannot go without survival basics, like winter gear and heat.

Figure out affordable pleasures you can manage without breaking the bank and stick to it.

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

Save Aggressively As Your Lifestyle Can Manage

A typical Millennial savings is less than $5,000, and I wonder what the number is for our counterparts in developed countries. Is it similar to the U.S. or are you better off? I know that regarding tuition, European and Canadian millennials fare much better than us Stateside. Sigh.

An MIT research states that if you want to live off half of your salary by the standard retirement age of 65, you need to save 40% of income over the next 30 years. Hah! The standard savings recommendation is 15% of income but I can assure you that not many Millennials are doing that let alone the 40% rate MIT recommends. Oh boy! We’re in deep…

Despite a high Millennial debt load, many Millennials still stick to their budgets, but other than increasing income and living from hand to mouth, these are some useful tips to buttress savings and/or supplement income.

• First, I hope everyone has online savings not from conventional banks and without a bank card. Savings from conventional banks are at a pitiful rate of bubkiss dot zero one percent so why do you still have your money there, brethren??
• Switch to high yield online savings like Marcus, (no affiliate), and get up to 1.70% APY. It used to be over 2% but with the lowering of interest rates in 2019, it was slashed. Still, it is higher than conventional bank savings.
• Contribute to a 401k, Roth, or other savings and investment vehicle. My previous job offered no 401k so I bit the bullet and opened a Roth IRA where I regularly save and invest in ETFs. My current position offers a 401k and I’m going to be honest and say that I do not save 15%, but I plan on upping it with an upcoming raise.
• Have separate emergency savings preferably in a high yield interest account. A minimum of 6 months of expenses is advised to buttress against job loss etc. but how many Millennials have that?
• Download Acorns, link your cards to invest spare change in the market. I have this app and with round-ups, currently have $500. Use Acorns referral link to get on the Millennial saving and investing train sans deprivation.
• Another fave app is Rakuten where I regularly receive cashback on products and services. For example, I use Expedia to book a hostel for my last Amsterdam solo travel and receive over $30. Use Rakuten referral link to receive $10 when you spend $25 on products & services.
• I know other millennials that actively coupon but that is something I do not do. If you’re an expert at this, more power to you.
• Cut the cord and stream everything. Put that spare $140 to emergency savings and find a friend you can borrow Netflix or HBO from.
• Curate memberships to see what is still useful to your lifestyle. When was the last time you went to that pricy gym? Cancel it. Receive too many subscription boxes that have lost their allure? Suspend them and put those dollars to emergency or retirement.

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

You Can Cheap Splurge At Home Too

 

As we balance FIRE and YOLO, let’s not forget to have fun in our own backyard. Depending on your city or town, there are many affordable & free things to do for entertainment. I’m so blessed to live in NYC where there are free activities, like lounging by the seaport, Governor’s Island, Roosevelt Island, self-guided tours, affordable food and free movies.

Find similar in your town or city by accessing the tourist site, if available. Buying a latte won’t get you off an aggressive saving and investing track but if your latte run is twice daily for a year, those add up significantly. Everything in moderation.

 

Between FIRE and YOLO: Dilemma on Saving & Splurging

Renting & Home Ownership

The main way a millennial can reduce expenses for aggressive saving and investing is by reducing or eliminating rent.

Ideally, rent should be one-third of income but that fraction is laughable as many easily pay up to 70% of income as rent. This tragedy is more pronounced in NYC, Boston, San Francisco and San Diego, where rents are so expensive that older individuals still room share.

It’s easier to tell people to move but while cost of living might be lower, there are trade-offs when you move. E.g. I live in NYC and moving to a cheaper Midwestern city means buying a car (and associate costs), no reliable public transport, much lower salary (nahhh), limited cultural activities, etc. Like I say, I enjoy life to the best of my pocket and cannot make this compromise. Hello dilemma!

If you’re not fortunate to live with family rent free, grit your teeth and house share for a third of the cost of a studio. Sure, you will share amenities and come closing to throwing hands with filthy housemates, but… you will save precious dollars to store in emergency savings.

There is a way for millennial homeowners to pay off mortgages in record time and that is via house hacking – buying a house, renting out rooms and living a minimalist lifestyle. Many millennial homeowners use this method to pay off the mortgage, invest in a second property, pay off student loans or even become digital nomads.

I think the ends justify the means on this one and is no different to Air bnbing your apartment for the weekend while you stay with friends or family.

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That was a read, wasn’t it!

Seriously, 2020 is the year we take control of our finances and reduce Millennial debt load because, the times, they are a-changing.

Click to Resources for a list of the financial and cashback apps I mention and start socking those coins for the future!

Don’t forget to comment on what you think of the FIRE movement or whether you are firmly on Team YOLO!

Share this post and see you on the social streets. xxx

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