I've gone dark for a few months while I've been on maternity leave. Growing a human and keeping it alive has taken almost all of my energy but personal finance is still TOP of mind.
While I was out I had the opportunity to contribute to an article in The Wall Street Journal - Your Parents Financial Advice is (Kind of) Wrong....the premise being that if you were born after 1975, your parents financial advice doesn't necessarily apply to today's world.
Now vs. Then - Here's what's different:
1. Debt - higher education has gotten a LOT more expensive and younger generations have had to take on onerous loans to get a degree and the salary commensurate with your degree may not justify the cost.
A good rule of thumb: does your starting salary equate with the amount of debt you're taking on?
Example: If you're taking $50,000 in loans for a nursing degree. Your current salary as a home health aide is $30,000. Your starting salary as an RN is $80,000. Then it makes sense.
You're taking $100,000 in loans for a master's in Chinese medicine. Your current salary as a massage therapist is $60,000. You starting salary as an Acupuncturist and Herbalist is $75,000. Doesn't make sense.
2. Housing Costs - more and more industries are concentrating high wage growth in coastal cities where the housing market is extremely expensive and competitive. Your primary home is a place to live, not an investment.
Considering the transaction costs, maintenance and property taxes - it's best to buy a home when you know you'll stay put for 8 or 9 years. Many professionals move often as their jobs shift or their family makeup changes.
Your parents might tell you 'Renting is throwing your money away' but they're wrong. Holding out as a renter isn't necessarily a bad thing, it gives you flexibility and saves you from losing money on an expensive real estate transaction if you bought before you were truly ready to settle down.
3. Wage Stagnation - Traditional personal finance advice (I'm looking at you Dave Ramsey and Suze Orman) tells us that if we just skip the lattes and avocado toasts, we'll work our way to wealth. This doesn't account for the fact that wage stagnation has decreased purchasing power for many young Americans.
In 1979 my dad was 36 years old and his annual income amounted to $1656 more than mine did in 2017 when I was 36 years old. (Adjusted for inflation) So enough with the lifestyle shaming, our money doesn't go as far these days and that's the truth.
Knowing how much you're spending is empowering - it will help you figure out where to save and where to splurge. It can be a chore to get started but once you have a system - be it your own spreadsheet or a tool such as Mint - you'll be in a better position to reach your financial goals.
A financial check up can help you get started. Reach out if you'd like to learn more!