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7 Money Mistakes For Young Professionals To Avoid

August 14, 2018

As a financially aware young adult, you know that not all millennials are working part-time and living in mom and dad’s basement. There are many young professionals today who work hard to bring home the bacon (or tofurkey). A bigger salary doesn’t mean that you’re automatically great at managing money. Adulting is hard, and the answers for how to manage money aren’t always clear. You’re probably going to make some mistakes, but that’s why we’re here to lend a hand!

We’ve already covered these 5 financial mistakes to avoid in your 20s. To help you up your adulting game, here are 7 more money mistakes young professionals commonly make. Also included are how you can avoid making them.

  1. Investing without a plan
  2. Spending over your means
  3. Ignoring your credit report and score
  4. Spending too much on housing
  5. Going into debt for the wrong reasons
  6. Avoiding money conversations with a significant other
  7. Letting fear stop you from checking out your options

Investing without a plan

Investing is easier than ever! Websites allow you to manage your investments with ease, and there are even some great apps that can help in the investing arena. You can invest just a few dollars at a time and watch your few dollars turn into a few dollars more. The problem a lot of young professionals make is investing without a plan. Some people focus only on stocks that have dividends while others try to pick the next big thing. Some people buy an app or pay for a subscription that sounds like it’s investing your money, yet the details are fuzzy. If you’re going to start investing, have a plan. Talk to someone who knows the industry and can walk you through what makes sense for your budget, age, and goals.

Spending over your means

What does it mean to live within your means? Well, in a nice little nutshell it means not spending more than you make. And in an even better nutshell, it means making good decisions for how much to spend on various aspects of your life, while also allocating money to go to your bills, savings, emergencies, retirement, and so on. It might not be a problem to occasionally splurge on brunch or craft whiskey, but if you are eating lunch out every day or spending more than 25% of your income on housing, you might be in trouble. When you spend over your means, you dip into savings or use credit to get you through to the next check or next month, and it’s a big ol’ recipe for disaster. It’s an easy trap to fall into as a young professional because you might start making more money and just assume you’re entitled to eat out or get a better place, but don’t make those upgrades without looking at all of your finances first.

Ignoring your credit report and score

No one has ever claimed that they super love getting their credit report and checking the document for errors or red flags, but ignoring your credit report and not knowing your credit score can really come back to bite you. With how comfortable many of us are sharing our household information—and with the increasing sophistication of hackers—identity theft is all too common.

Put a reminder on your calendar to check your report each quarter, which you can do for free through the main credit bureaus once per year. Just have a glass of wine and read through to make sure that there’s nothing anomalous on there. If there is, figure out the discrepancy and make sure your report is clean. As far as your credit score, this pesky little number comes in very handy when it’s time to get a loan or buy a house. Lots of places let you check or track your number, so there’s no reason not to know. If it’s no good, fix it now! You can do it with a little time, smarts, and persistence. Don’t wait until you’re trying to apply for a loan and then realize that you should have been on top of your credit all this time.

Spending too much on housing

With the outrageous rents in many of America’s top cities, and because the suburbs are a snoozefest, it’s tempting to increase your housing budget even if you can’t really afford it. Being house-poor (or apartment-poor!) is a big mistake. The reason most experts will tell you to only spend about 25% of your income on housing is because that’s a constant line on your budget. You can’t negotiate it down. You can’t skip a month. So if you have a major expense one month or your income changes or you just decide you need to save more, you’ll be up a creek with a big rent or mortgage payment. Know what you can reasonably afford and look into other options like roommates if you can’t get the place you want on your solo income.

Going into debt for the wrong reasons

It may seem like a great idea to borrow money for a trip or rack up some hefty bills for a wedding—#YOLO, right!?—but don’t go into debt for the wrong reasons. Considering the average American wedding is over $35,000, just keeping up with your peers might put you up to your eyeballs in debt, but you’re smarter than that. If you really want the trip of a lifetime, look for inspiration from blogs with the best tips on cheap dream destinations or how to find the best hostels or work while you travel. There are thousands of ways to save money on a wedding if you’re willing to compromise and use your network to put together a great community event. The problem is when you start thinking you deserve something and will get it no matter the cost. That cost might be starting off next year with more debt than you can afford, and no one deserves that.

Avoiding the conversation with a significant other

Thankfully, 73% of millennials in relationships talk about money with their significant other at least once per week. That still leaves a surprising number of couples who rarely talk about money, or don’t have a plan for how they want to manage finances or build credit. Couples, especially young professionals who have many earning years ahead, need to talk about their financial goals, budgets, and spending. In fact, couples who talk about these things rate their relationships as better and happier than their peers. Not sure where to start? We’ve got you covered with some tips on how to talk about finances with your significant other.

Letting fear stop you from checking out your options

Don’t put off financial changes because you’re afraid. Know what options are available to you, and use those trusted sources of information to learn how to improve your situation.

 

What’s the Best Way to Repay Student Loans? 

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2020-03-27
Millennials and Money: Surprising Facts You Should Know

When it comes to millennials and money, they have a bad reputation. The Pew Research Center defines millennials as people born between 1981 and 1996. Despite this wide age range, many stereotypes exist about millennials, including poor work and financial habits, especially when it comes to student loan debt, managing a monthly budget, and saving for the future.    But you may be surprised by how frugal millennials really are. Here are some facts about millennials and money that you should know.   

1. Nearly half of millennials have a side gig

During the 2008 recession, many millennials watched their parents lose their long-time jobs and investments. They learned the importance of diversifying their investments and of having multiple income streams.    With that experience in mind, millennials are leading the charge when it comes to side hustles. In a BankRate survey, 48% of responding millennials said they earned extra money on the side.    On average, people with side gigs earn $1,122 in extra income per month, working 12 hours a week. They use those additional earnings to boost their savings, pay down debt, and even afford their regular living expenses.   

2. Millennials have one of the highest student loan balances of any generation

Millennials are dealing with unprecedented levels of student loan debt. However, that’s not entirely their fault.    In recent years, college costs have skyrocketed. The College Board reported that from 1989-1990 to 2019-2020, the average cost of tuition and fees at a public four-year university tripled. With such high expenses, millennials have had to take out more in student loans to pay for school.   In fact, the average loan balance for millennials is $34,505. That’s the third-highest average balance for student loan debt. Only Gen-Xers and Baby Boomers have more.    Such a high loan balance affects millennials’ ability to pursue other goals, like buying a home, getting married, or starting a business.   

3. Millennial households are earning more than ever before

Despite their substantial student loan debt, millennials have very high earning potential.    According to the Pew Research Center, the median income for millennial households is $69,000. That’s significantly higher than the median household income for all age groups, which is just $61,937.    While that’s good news, much of that higher income goes toward their student loan payments and living expenses, so the economy is not reaping the benefits of millennials’ salaries as much as you’d expect.   

4. Millennial credit card debt is lower than average

After watching their families struggle with debt, millennials are notoriously wary of taking on consumer debt themselves. That’s especially true when it comes to credit cards.    Experian reported that consumers carry $6,028 in credit card debt, on average. But for millennials, the number is much lower; they carry an average of just $4,712.    That’s a good decision. Credit cards often have sky-high interest rates. According to the Federal Reserve, the average interest rates on credit cards that assess interest was 16.88% as of November 2019, the last available data. But some credit cards have interest rates of 25% or higher, which can cause you to owe far more than you initially charged on your card.    Keeping your balances low — and paying off your statement balance in full each month — helps you reap the advantages of credit card rewards without paying interest charges.   

5. Millennials are delaying home ownership

While previous generations considered home ownership a huge step in becoming an adult, millennials are delaying this milestone.    According to CNBC, the home ownership rate for millennials is eight percentage points lower than it was for Gen X-ers and Baby Boomers when they were in the same age group.    There are a few reasons behind their reluctance to buy: 
  • Fear of commitment: Many millennials prize flexibility. They want to be able to take advantage of new opportunities that come along, like a dream job in a new city. They feel like home ownership would prevent them from being able to pursue those opportunities, while renting allows them to be more nimble. 
  • Lack of starter homes: Business Insider reported that there is a massive shortage of starter homes in the real estate market. Baby Boomers looking to downsize and real estate investors making all-cash offers are swooping up available homes, making home ownership unattainable for many millennials.
  • Prevalence of student loan debt: With high monthly student loan payments and a high debt-to-income ratio, millennials struggle to qualify for a mortgage and keep up with their payments. Until they pay off a significant portion of their debt — or eliminate their loans entirely — many millennials simply don’t feel comfortable making such a large investment. 
   

Millennials and money: Maximizing your finances

If you’re a millennial with student loan debt and it’s causing you to put off your other financial and personal goals, there are some steps you can take now to improve your situation: 
  • Create a budget: If you don’t have one already, spend some time creating a budget. Make sure you earn more than you spend each month and look for areas where you can cut back so you can free up extra money to put toward your debt so you can pay it off faster. 
  • Use your side hustle strategically: If you have a side hustle — such as graphic design, driving for a rideshare service, or delivering groceries — set aside your earnings solely for debt repayment. By using your extra income to make additional payments, you can pay off your student loans months or even years ahead of schedule — and cut down on interest charges. 
  • Refinance your student loans: To pay off your student loans even faster, consider refinancing your student loan debt. With this approach, you consolidate your loans together by taking out a loan through a lender like ELFI. The new loan has different repayment terms; you could even qualify for a lower interest rate, helping you save money over time.
        If you think that student loan refinancing sounds like a good idea for you, use ELFI's Student Loan Refinance Calculator to get a rate quote without affecting your credit score.*  
  *Subject to credit approval. Terms and conditions apply.    Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
2020-03-23
How to Appropriately Ask for a Raise

So you’ve been taking on more responsibility at work, your boss says you’re a real asset to the company, but your salary hasn’t changed in a few years. If this describes your current work situation, it might be time to ask for a raise.    According to PayScale’s “Raise Anatomy” report, only 37% of workers have asked for a raise. Of those that did ask, 70% received some sort of increase in compensation. Those are pretty good odds so if you’re excelling at your job, you should ask! The average raise in 2019 was 3%, according to the 2020 Compensation Best Practices Report. This means that if you are earning $40,000, your raise would increase your income by $1,200 per year. The amount of a raise depends on the sector of work, location, and demand for the position. Typically, jobs in the private sector usually receive higher raises than jobs in the government. As a best practice, you should usually wait to request a raise after you have worked for the company for at least one year. Additionally, in most cases, you should not ask for a raise more than once a year.    If you feel it is time to ask for a raise, here are some tips on how to appropriately request one.  

Prepare for a Meeting 

When you are ready to ask for a raise, request a meeting with your boss and let them know you’d like to discuss your salary.   

1. Plan your request at the right time

When you want to ask for a raise, pay attention to the timing of the meeting with your boss. An appropriate time for a meeting would be:
  • After you successfully completed a big project that brought value to your company
  • During a performance review meeting when you have exceeded expectations. Performance review meetings are a typical time when companies award raises. Being prepared to ask for a raise during this time could allow you to negotiate for more than the planned raise. 
  Times to avoid a meeting:
  • During a busy season of work when your boss will not be able to focus on your request 
  • When you are behind on your work. If you are not able to perform your current workload, it will be hard to justify a raise to your boss.
 

2. Prepare talking points

Go into the meeting prepared to advocate for yourself. Although you don’t have to memorize a speech, it’s good to be prepared with the following information: 
  • Specific examples of accomplishments you have achieved at work recently. This could be anything from securing a big client to implementing an idea that brings in extra revenue for your company. 
  • How you have exceeded expectations for your position. 
  • Additional responsibilities you have undertaken. If you have taken on more responsibilities by taking initiative, be sure to highlight those. 
  • The value you will continue to bring to the company in the future and examples of how this will be accomplished. 
 

3. Do your research

It’s important to know that the salary you are requesting is realistic for your position and your location. A great resource is Glassdoor. You can compare salaries for your sector or receive a personalized salary estimate based on your market and position.  

4. Practice, practice, practice

Asking for a raise can be a nerve-wracking conversation. By preparing and practicing before your meeting, you can walk in confidently and armed with data to back up your request. In addition to practicing your talking points, you will want to be ready for any questions or negotiations that may arise. While it’s good to have a specific salary in mind, you should also be open to other numbers or benefits that your boss may offer. For example, the company may offer you work from home or extra vacation time in place of a salary increase.  

In the Meeting 

You’ve requested a timely meeting, prepared extensively, and now it’s go-time. Once you’re in the meeting here’s what you should focus on:  

1. Your Demeanor

Pay attention to your tone and body language when speaking. You want to appear confident in yourself and your abilities. Show a positive attitude about the value you bring to the company, but do not appear arrogant. If you get questioned about why you deserve a raise, keep your cool and answer with the talking points you prepared.   

2. Communicate Your Accomplishments

Instead of just rattling off a laundry list of accomplishments, focus on a few incredible examples and, if possible, bring proof of your work. Here are a few ideas of what you can present in the meeting:
  • Two-three examples of big projects you accomplished 
  • Work you did that was beyond the scope of your job
  • Specific examples of when you took the lead and were successful
  • Examples of work brought that brought monetary value to the company
  • Ideas for your future at the company. Companies value loyal workers so be sure to point out how you have demonstrated loyalty and your desire to remain with the company.   
 

3. Explain Why You’ve Earned It

Be sure to avoid talking about why you need the extra money and instead focus on how you have earned a raise. For example, if you are in sales, instead of saying you need the money because of increased living costs, say you have earned this raise because you are the most successful sales associate, have brought in $100,000 in revenue, and receive great reviews.   

4. Bring a Specific Number

It’s best to have a specific number you are requesting, according to a study by Columbia Business School, instead of a range. For example, you want to request $55,000 as opposed to saying $52,000 to $57,000. Provide the reasoning for how you arrived at that number and, if applicable, give examples of how it is in line for the type of work you do.    

Bottom Line

If you have been in your role for over a year and are killing it at your job, you should seriously consider asking for a raise. But before you do so, preparation is absolutely critical. Follow the steps above and you’ll be in a great place to have this discussion with your boss. Good luck!  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
2020-03-18
How to Plan a Wedding While Paying Student Loans

By Caroline Farhat   Congratulations, you’re engaged! Planning a wedding is an exciting time! From choosing your attire to picking out a venue and decor, there are a lot of decisions to make and many that can be costly. If you’re starting to plan your big day, you might be wondering how you’ll pay all of these extra expenses while still paying your student loan debt and regular bills. Don’t worry, we’ve got your back! Read on for some tips on how to plan a wedding with student loans on your radar.    

1. Set Realistic Expectations

A majority of the costs for a wedding are based on the number of guests, so you can save money by keeping your guest list relatively small. For example, if you plan a wedding for 350 people you will most likely need a bigger venue than you would for 100 guests. Venue costs typically account for one-third of ceremony and reception costs so this can be a major budget buster. Food and beverage and wedding favors are also typically charged per person. Because weddings can be expensive and extravagant or budget-friendly and low-key, it’s critical to discuss your desires and budget with your partner before you start planning.  

Here are some good points to discuss:

  • Parameters for the guest list: Do you want to invite your college roommate you haven’t seen in three years and every cousin on your partner’s side? Or are you looking for a more intimate affair with just your closest family and friends? 
  • Your near-term financial goals (besides the wedding): Are you saving for a down payment for a home? Considering starting a family? Understanding your joint financial goals is a great way to guide your expectations. 
  • Location of the wedding: Agreement on location is key because it will drive all of your other planning. If you’re eyeing a destination wedding and your partner wants a backyard wedding, you will want to understand each other’s individual desires so that you can create a joint wedding that makes both of you happy!
 

2. Set a Budget and Stick to It

Before you plan a budget, it helps to know who will be contributing to the wedding costs. Will you be paying for wedding expenses equally with your partner? Do any family members want to help with costs? This information can help shape your budget.     The average cost of a wedding in 2019 was $28,000 according to
The Knot 2019 Real Weddings Survey. This figure only accounts for the ceremony and reception and can vary widely depending on your location. When you add in the average costs of an engagement ring ($5,900), a honeymoon ($5,000), and other wedding events such as the rehearsal dinner, bachelor/bachelorette parties, and engagement parties, the actual wedding costs can be much higher. If these numbers are making you want to elope in Vegas, don’t panic. There are some ways you can try to lower the cost of a wedding: 
  • Going DIY - DIYing at least some elements of the wedding can save you a good chunk of money. If you’re a Pinterest aficionado, try creating your own wedding invitations or centerpieces. Better yet, homemade wedding favors would be extra special for your guests and can save you hundreds of dollars.
  • Barter - Do you have friends that are photographers, florists, musicians, or bartenders? Bartering can help keep your expenses down while still getting the services you need. 
  • Timing - Are you dead set on having a June wedding or are you more flexible? In some areas, the month you pick can have a big impact on cost! Typically, June is a higher cost since it’s considered peak season, while winter weddings tend to be less expensive. Additionally, having your wedding on a Friday or Sunday can save you some money compared to a Saturday wedding. 
  Tip: It’s important to keep in mind that most wedding vendors do not require full payment upfront. Many vendors require a downpayment to secure their services and final payment closer to the wedding date. Open a separate bank account or flag any money you set aside for final wedding payments so that it doesn’t get used for other expenses that might pop up.   

3. Cut Expenses

In the midst of all the wedding costs, it may seem like any money you had leftover at the end of the month is now going towards the wedding. If money gets tight, think of ways to cut expenses: 
  • Refinance your student loans: Refinancing can be a great way to get extra cash now and set you and your partner up for a better financial future. Refinancing can save you on your monthly payment, as well as save you on interest costs over the life of the loan. For example, if you have a $35,000 loan with an 8% interest rate and get approved for an interest rate as low as 3.99% you could be saving up to $70 per month and over $8,000 in interest costs. Check out our student loan refinance calculator to see how much you could be saving.*   
  • Cut cable or cell phone bill: If you still have cable, it’s easier now than ever to cut the cord and still watch the shows and sports you want to see. Still paying a high cell phone bill? Compare carriers and call your existing provider to see if you can lower your bill.  
  • Reduce eating out or other entertainment expenses: It may not seem easy or fun to stop eating out or to cut back on entertainment, but reducing these expenses now could be just what you need to afford the band or DJ you really want at your wedding. 
 

4. Start a Side Hustle

A side hustle is a way you can earn money outside of your day job. The possibilities for a side hustle are endless: You could babysit, walk dogs, pick up a part-time job, etc. The extra money can help pay for your wedding expenses or you could put it towards your future financial goals. Earning extra money is not only helpful during wedding planning when you will experience extra expenses, but it can also help you after the wedding to make additional payments on your student loans, save for a new car or fund a dream trip.   

Bottom Line

Planning a wedding with student loans can be a stressful time. Don’t let your student loans be a part of the stress. With realistic expectations and a budget, you can manage to have the wedding of your dreams while still paying down your student loan debt!   
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.