Millennial Money: A Financial Pro Analyzes a Local Woman’s Monthly Spending & Saving

When it comes to saving money, millennials don’t have the best reputation. And last year’s avocado toast meme only further reinforced stereotypes. The problem is, overspending can lead to issues down the road. A recent report found that more than 66 percent of millennials have nothing saved for the future. It’s unfair to place the blame on avocado toast or $4 lattes, but it’s safe to say there’s work to do. While some millennials regularly splurge on weekly brunches, plenty of folks do keep their budgets in check. We caught up with a local woman — we’ll call her “Lisa F.” — who’s managed to rein in her spending. Lisa has opened up her wallet and set some ambitious goals for the future, but is she on track? We tapped a local financial planner to find out.

Lisa F.

Occupation: E-commerce Age: 31 Monthly take-home pay: $3,368.95 Side hustle income: $75 – $160 per month

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Snapshot of Lisa’s Monthly Expenses

Rent: $450 (living with a roommate) Car payment: $328 Car insurance: $109.38 Renter’s insurance: $4.16 Identity theft protection: $9 Cell phone: $72.99 Gym: $10.93 Gas: $112.37 Groceries: $130.40 Toiletries: $10.61 Make-up/cleanser/lotion: $11 (average) Restaurants: $83.01 Fast food: $30.69 Pizza: $25.13 Food at work: $71.26 Bars/alcohol out: $64.01 Alcohol at home/trips: $31.50 Coffee: $0 Car maintenance: $0 Shopping: $56.25 Gifts: $33.24 Charity/giving: $53 Red Box: .55 Movie Theater: $0 Medicine: $1 Medical: $79 Groupon: $0 (for massage, haircuts, nails) Uber/parking: $20 Entertainment tickets: $63.50 Shipping: $0 (for selling things online) Vacations: $125.44 Total expenses: $1,971.26

Snapshot of Lisa’s Saving

401(k) — $276.94 (automatic deduction w/ full 6% match from employer) Savings — $1,000 (split between brokerage account, Roth IRA)

Lisa’s Financial Goals

1. Pay off her new (used) car within 1-2 years.
2. Leave her emergency fund intact.
3. Continue investing in index funds.
4. Continue investing in Robinhood account.
5. Max out her Roth IRA every year.
6. Contribute enough to get her company’s 6% 401(k) match every month.

The Keys to Successful Financial Management

Tracking your spending is the first step.

The first thing Lisa gets right is the detail — down to the penny — in which she tracks her monthly expenses. “Lisa knows exactly how much is coming in and going out. It’s the basis for any financial plan,” says Jennifer Pagliara, a Nashville-based financial advisor with CapWealth. She admits budgeting isn’t fun for most people. If spreadsheets feel like too much work, there are apps to make the process easier.

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Mint is a great free tool, but they use your data to serve ads and make product recommendations (that’s how they make money.) YNAB is another popular choice. The app enables you to get ahead on future expenses. It’s a bit more complicated — and not free — but her clients do love it. Quicken is another tool she hears about often, but there have been rumblings of account syncing issues. Ultimately, the “right” option for you is the one you will stick with.

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Aim to save 10 to 15 percent of your income.

Lisa gets the thumbs up from Jennifer for snagging her company’s 6% 401(k) match. Combined with her Roth IRA and additional investing, she is right on track to meet the savings rule of thumb Jennifer recommends — 10 to 15 percent of her income. “A match from your company is one of the closest things to free money you can get,” Jennifer says. When offered a 401(k) match, she urges her clients not to miss out. She’s pleased with Lisa’s goal to max out her Roth IRA every year. The money goes in after paying taxes, so it grows tax-free. As an added bonus, there’s more flexibility for withdrawals.  There’s no penalty if the money is used for a first home purchase or education expenses.

Don’t ignore retirement savings while paying off student loans.

With her student loans gone, Lisa is eager to focus on investing and saving for the future. Jennifer commends her for paying them off by her early 30s. But she suggests others pause before embarking on an aggressive repayment plan. If you work for a non-profit or government job, she recommends seeing if you qualify for Public Student Loan Forgiveness. The program requires you to have federal loans on an income-driven repayment plan. The benefits can be two-fold: 1) The government forgives your balance after 10 years, and 2) freeing up cash to invest for retirement. Even if you don’t qualify, saving for retirement shouldn’t fall to the wayside. The earlier you begin, the longer your money has to grow — thanks to the power of compounding. Investing a small amount every month is far better than none at all. “If you start saving for retirement in your 40s, you’ll be so far behind that it may be hard to catch up,” Jennifer warns.

Bigger down payments aren’t always better.

It’s hard to consistently invest when your money is tied up elsewhere. If debt makes you uneasy, large down payments may seem like a good option. Lisa followed this strategy by putting 50 percent down on her recent car purchase. By paying more now, she will make fewer payments — and spend less in interest — over the next 1-2 years. “Putting more down isn’t a bad idea, but Lisa has some big life events she hasn’t hit yet,” Jennifer points out. Throwing extra cash into a down payment could be a mistake if that money could have been invested and earmarked for another goal. Lisa’s not currently saving to buy a home, but her feelings could change.

Make a plan for uneven expenses.

Nothing throws off savings goals faster than a big, unexpected expense. Baby showers, weddings and holidays are costly — but predictable. Other big expenses like a car repair or an unexpected move happen suddenly and may require tapping your emergency fund. Lisa notices July and December are most expensive for her, and Jennifer applauds her awareness. It’s the best way to plan ahead. Years of tracking expenses will help you estimate the cost of being a bridesmaid or hosting a holiday meal. Budgeting will continue to get easier as time goes on.

Don’t be afraid to work with a professional.

Many of us learn about money through the school of hard knocks. Jennifer says it doesn’t have to be this way. Making time to improve your financial literacy is well worth the investment, and knowing more will empower you for years to come. Peering into someone else’s wallet is fun, but you shouldn’t let it become your benchmark. We all have different starting points, obligations and unique financial needs. Juggling the demands of your career, health and family is overwhelming enough. It’s too easy to put off your finances when your to-do list is already a mile long. If you keep saying, “I’ll get to it later,” it may be time to outsource your family’s finances. You’ll sleep better knowing your money — and future — is in good hands. CapWealth is located at 3000 Meridian Blvd., Ste. 250, Franklin, TN 37067. To learn more about the services they offer or to book an appointment with one of their team of financial experts, call (615) 778-0740 or visit capwealthgroup.com. This article is sponsored by CapWealth.