Bellwethr Magazine

Let’s Get Fiscal

Whether it’s student loans, monthly budgeting, or retirement planning, Sophia Bera answers millennials’ financial questions.

WORDS BY Rong Lin

Your rent is three days late. The mechanic says fixing those squeaky breaks will set you back $200. And, to top it all off, that unpaid internship that would guarantee your dream job led to a temp position in the mailroom. The problem? You’re a millennial, and you’re flat broke. Just ask Terry Savage, former stockbroker and longtime personal finance expert. “You are graduating into a period of slow economic growth but huge economic opportunity,” Savage writes in her column for Townhallfinance.com. “The American dream is not really so much about buying things as it is about having financial peace of mind and economic freedom.”

Thankfully, some financial planners are taking action, and Sophia Bera is one of them. The Minnesota-based financial planner and millennial specializes in managing our generation’s funds — millennials make up 75 percent of her clientele. Most financial planners charge a flat rate or require a percentage of investments. Luckily for you, these tips are free.

Bellwethr: What are common mistakes made by millennials?

Bera: One of the mistakes I see people making is to live beyond their means. The biggest things to take up the monthly budget are housing and auto costs. The lower you can keep those things, the more room you have in your budget to go toward the fun stuff, savings, or debt repayment.

What’s the best option for restructuring student loans?

As a rule of thumb, I generally recommend people try not to take out more student loans than they expect to make in their starting salary. Another thing is you have a six-month grace period before you have to start paying back those student loans, and that’s a wonderful time to build your emergency savings.

And the last thing is making sure you know your options. If you get a good job out of school, and you don’t have a ton of student debt, you can afford to pay them off with the 10-year standard repayment program that can save you the most interest.

I really encourage people who are going to be recent graduates to think about keeping that job you had in college while you are looking for a full-time job so that you at least have something. That way, you don’t put yourself in the position where you don’t have a job.

What’s a good savings strategy?   

I think it’s a really good idea to separate your checking from your savings account. One of the best things you can do is open an online savings account because having a little bit of separation — you can link it to your already set-up checking account — you can set up an automatic monthly contribution that goes to your saving account and makes it just a little bit harder to see.

How should we budget for food, rent, utilities, recreation, and vacation?

Budgeting is always something that people look in the past and say, ‘Oh, I shouldn’t have done that.’ I try to budget forward. By that I mean figure out those recurring monthly costs, like your rent, your gym membership, your cellphone.What are the things that could be cut? How much do you have going toward your financial goal and toward your financial priorities? How much is going toward your loan repayment? How much do you have for everything else?

If you gain $3,000 net per month, after taxes, and [you have] $1,500 going toward your fixed costs and $500 going toward your financial goal, then you have $1,000 to go toward all your discretionary costs: eating out, buying clothes, shopping … Just know how much you have for those discretionary costs.

When should I rent, and when should I buy?

I talked to a lot of millennials who are pressured from families to own a home, and it might not be the best for them. Home ownership use to be the American dream, but I’ve noticed millennials value mobility and flexibility. So a lot of times, I tell people if they’re going to be changing jobs in the next couple of years or moving to a different state, these might be reasons to wait a little bit, just to make sure they will be in the same spot for the next five years.

How should I plan for retirement?

 People should first look into a 401(k) to see if their company offers that. It’s better to contribute to an employer’s plan and receive that whole company match. I think that 401(k)s are the best way to save for retirement. And if you don’t have an option for retirement plans through your employer, there is no reason you can’t start a Roth IRA on your own, as long as you make the income prior. So if you make too much money, you can’t open a Roth IRA.

Are money management tools worth a try? Do you recommend any tools?

Things like that can be very helpful. People should use whatever works for them. So if you want a spreadsheet, and that works for you, great. If you want an app, you want to track your expenses, great. It should be whatever you’ll use consistently. I like mint.com. There is also another program called youneedabudget.com. A lot of people are speaking highly about that.

 Featured image courtesy of Sophia Bera.

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