Expert Interview with David Weliver on Personal Finance for Millennials

Personal financeAt the tender age of 25, David Weliver found himself buried in debt (about $80,000 of it), mostly the product of student and car loans and credit card overuse.

While trying to wade through his money woes, he found himself wishing there was a resource like SmartMoney - the Wall Street Journal's former personal finance publication - that was written for younger people like himself.

"While the advice in SmartMoney focused on managing your stock portfolio and preparing for retirement, I needed to know how to get out of debt ASAP, how to accelerate my career and earn more money and how to just get started investing," he says.

So he started Money Under 30 - a financial resource for 20-somethings. He started by writing about his own struggles with debt and learning how to manage money. Today, David and several other contributors use Money Under 30 to offer advice on nearly every situation most young adults find themselves in.

Here, David talks about the biggest personal finance lessons he's learned over the years and shares his insight on how today's 20-somethings can better manage their money.

Read what he has to stay - and then take steps to get your finances in order by signing up for Mint.

What's your professional background? How did you become interested in personal finance?

During college, I interned at SmartMoney, what used to be the Wall Street Journal's monthly personal finance magazine. That internship led to my first job out of school as an editorial assistant at the magazine. Unfortunately, I was kind of like the character in the book and movie Confessions of a Shopaholic - someone writing for a financial magazine who is terrible with his/her own money.

While I was there, personal finance was just a job; it wasn't until a year or two after leaving SmartMoney that I actually got interested in money.

What do you think are the biggest financial challenges facing young professionals today?

By far, the biggest challenge young professionals face is that wages simply have not kept pace with the cost of living. Although this is a crisis that affects most Americans, young adults are hit hardest because they tend to live in expensive urban areas and their entry-level salaries are low to begin with. And for the increasing number of 20-somethings with student loan debt, the burden is even greater.

Large loan payments, expensive housing and stagnant wages are squeezing young professionals. As a result, young adults are waiting longer and longer to buy homes or start families - some because they want to, yes, but many because they simply can't afford it. But worse, young professionals' razor-thin personal budgets mean many aren't able to take crucial steps toward their own financial security by establishing an emergency fund, buying health insurance or starting a retirement account.

What advantages do young professionals have when it comes to making savvy financial decisions?

Fortunately, I think we have several advantages.

For one, many of today's 20-somethings experienced the recession of the late 2000s when they were still teenagers or college students. They witnessed the consequences of greed and over-borrowing. As a result, I think young professionals have a healthy skepticism of debt. I think, too, younger generations are adopting a more balanced approach to what we want out of life. I've read articles that make generalizations about Millennials such as we don't want to own homes or cars (at all) anymore.

Data I've seen actually doesn't support that, but there are some noticeable trends, such as more Millennials want to live in cities rather than suburbs. And that may be partly so they can take advantage of public transportation, or maybe (as a couple) own just one car. I think there's a generational shift in thinking that you don't need to want the 5,000 square foot McMansion with three brand-new cars in the garage to have "made it." If my assumptions are correct, that in itself is a great thing for our collective finances.

Finally, the biggest advantage we have is time. As life expectancy grows, we're going to have longer retirements to plan for; but that also means we'll have more healthy years to work and save. How we spend those extra years depends on how much saving we can do while we're still young; so our age, by itself, is a huge advantage.

What are some money-management lessons you'd wished you'd learned when you'd just started out in your career?

For me, the biggest one was "the younger you are, the easier it is to be broke. And that's OK."

I never wanted to feel poor, even though I was REALLY broke in my early 20s. And that led to overspending on credit cards and not saving. If I had been smart, I would've just accepted that 22-year olds are SUPPOSED to be broke! If I had lived like that and saved some money instead of going the other way and adding to my debt, I would've had a lot more freedom in how I spent the rest of my 20s.

Instead, between the ages of 25 and 28 I worked nonstop at two, sometimes three jobs to pay off my debt. Those are three prime years of my life that are kind of just gone, and a little bit of voluntary poverty the first couple years out of college could've prevented that. On the upside, I'm so glad I turned things around when I did; because now, as a 34-year-old father of two, I realize it's way easier to be broke when you're 22 and single.

What are the smartest things young professionals just starting in their career can do with their money?

First of all, just invest something.

It doesn't have to be much. But start investing as soon as you can to take advantage of the many, many years ahead. If you have a 401(k) at work, start there. If not, open an IRA and just buy an S&P 500 index fund. Put the money in and let it sit there. In 20 or 30 years, you'll look at the balance and say "that's the best thing I ever did."

Second, pay cash for everything you "want." I'm not totally anti-credit. Borrowing money has its place, such as financing your home or even buying a car that you NEED to get to work.

But you should never borrow money for stuff you just "want" as opposed to "need." So don't use credit to pay for vacations, clothes, motorcycles or whatever other wants you have. If you really want them, save up and pay cash. It all comes down to that old saying: "Whoever understands interest earns it, whoever doesn't understand interest pays it." It's a cliché, but it's true.

What about the worst decisions they can make?

Sadly, one of the worst decisions I see many young professionals make is borrowing a ton of money to get a graduate degree that doesn't have a positive return-on-investment. Going $50,000 or more into debt to get a degree that's not going to substantially increase your income isn't a great decision. And once you're in student loan debt, you can't get out.

I think a good rule of thumb is that you can feel OK taking out as much in student loans as you can reasonably expect to earn your first year on the job.

That simple metric creates an interesting test. A med student could borrow $250K feeling pretty good about earning that as a specialist's salary (after residency). An artist should probably think twice about borrowing $80K for an MFA. Meanwhile, a prospective law student has to be careful borrowing $150K for law school. It might be possible to earn that much as an associate if you're the BEST, but many lawyers might start out at half or even a third of that salary, which will create a messy financial situation for years to come.

What advice do you have on changing our spending and saving habits in a positive way? How can we overcome our frustrations and setbacks?

First of all, we need to put our money in perspective. Unless you're an aggressive entrepreneur, building wealth takes decades. It's the ultimate marathon. We're all going to have setbacks: little splurges here and big unforeseen expenses there. That's OK. What matters is the overall trend: is more money coming in than going out? And am I earning a positive return on the money I have?

Technology has done wonders for helping us make good financial habits automatic. An online savings account with automatic transfers is all you need to begin setting some money aside.

But to complement the technology, I find the most satisfying thing is to manually track your net worth from month to month. Either on paper or in a spreadsheet, list all of your debts and all of your assets. Update them once a month and see how they change. It's the best indication of whether you're on the right track. And once you're on it, the exercise will motivate you to look for even more opportunities to save and grow your bottom line even faster.

What money management and investing basics do you think everyone should know before they head off on their own?

I think what I was just talking about is the most important financial concept: that finance is a marathon, not a sprint. So that means everyone needs to understand how interest works and how valuable a dollar today could be in 30 years.

But they also need to understand that just because you earn $1,000 a month and have expenses of $800 a month, that the $200 a month isn't theirs to spend free and clear. Life is messy, and some months there's going to be $1,200 in expenses. If during every previous month before you spent all of your remaining money, you're going to be in trouble.

Everything else is secondary. Unfortunately, it's the hardest lesson to teach. For me, experience was the only way I could learn.

What are some of your favorite money management tools or resources?

Obviously, I've always been a fan of Mint; it transformed the way we can track our spending and see the (often surprising) patterns in where our money goes.

Two new tools that I'm excited about and watching closely are Dig.it and Acorns. Both are services that help you automate saving. Dig.it simply links to your checking account, analyzes your spending, and makes small savings withdrawals that (purportedly) you won't even miss. Acorns is an app that helps you start investing with just a few dollars at a time. It also has the option to round up your credit and debit card purchases and invest the difference.

Both tools help you save without even realizing you're doing it. And that's the best way I know of!

Start tracking your spending by signing up for Mint.

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