How one woman got (and stayed) out of debt

Transcript: How one woman got (and stayed) out debt  

Nancy Snedden:

Hello everyone and welcome to Your Money with Nancy Snedden. I am Nancy Snedden. Thanks so much for tuning in today. On today's show, we're talking Millennial money management. So, if you're a Millennial struggling to make ends meet or struggling to manage your debt and ready to move forward financially, my guest just might be the person to motivate you. Jordann Kaye is a Millennial money expert and founder of her own personal finance blog. She's also a contributing writer for RateHub.ca and Young and Thrifty. Jordann, thanks so much for joining me today.

Jordann Kaye:

Thanks for having me. 

Nancy Snedden:

Your backstory is really inspirational. So, you are a success story of how you can make changes in your life and how it's possible to be financially secure, even as a Millennial. So, can you share your story and achievement with our listeners?

Jordann Kaye:

Yeah, absolutely. So, I first became interested in money when I was a new graduate from university. What I actually had happened to me was I had just graduated and I had just started my first job, so I wasn't making very much money.

And I was just sort of starting to get things organized. And I got my student loan letter in the mail, which is essentially the letter that you get once you've graduated to tell you how much that you borrowed through the full four years and then what your monthly payment's going to look like. 

And frankly, I was quite shocked. I hadn't really been keeping track of how much I was borrowing. I was just borrowing as much as they would give me. And I had faith that I would be able to pay it off when the time came because that's what everybody told me to do. So, the payment was quite a bit higher than I expected and especially relative to my low income. 

That was quite a shock. And then on top of that, in the summer after graduation, I was in a car accident. I totaled my car and broke my wrist. And suddenly, I found myself in a position where I needed to buy a new car. I had absolutely no money to do so. 

I needed to factor in this new car payment and now these student loan payments into my budget. And I just felt very backed into a corner. And I wasn't really sure what to do. It was extremely stressful.

And fortunately, I did come through that part of my life. But once I had everything settled down and I had my car and I was making my student loan payments, I was just like, whoa, I never want to go back to that.

So then like all Millennials, I got on Google and I started looking around and realized that there was a whole world of young Canadians who were managing their money and writing about it online. So, I thought I'm really interested in this. I'm going to consume as much as this is possible. But you know, maybe some people are interested in what happened to me as well.

To eliminate or avoid debt, “live your life, don't buy your lifestyle.”

Nancy Snedden:

Yeah. And I'm sure many are, many will be after hearing the show today, Jordann. But I think what you're talking about as happening with your student loan happens to so many. I mean, I hear the level of debt that students have been carrying long after graduating from a lot of my clients.

And you know, one of the questions we always ask when they say they have some student loan debt, when we're going through the application, is “Have you been out of school seven years?”. Because you know, student loans do need to be seven years old in order to get discharged as part of a proposal or bankruptcy. And time and time again, I hear from them, “Oh yes, they're way more than seven years old. I can't believe I'm still carrying this level of student debt.” So I know there's many out there that will relate to your story. 

So, your website says "live your life, don't buy your lifestyle." What does that statement mean to you? And what do you hope those who go to your site and see this will take away from that?

Jordann Kaye:

I include that phrase on my website because I know that a lot of millennials feel very pressured to live these, you know, glamorous lifestyles because of social media where there's a lot of travel and eating out and, nice cars; or just societal pressure to have two cars, have the fully detached, have these things that we think we're supposed to have. But what they don't realize is that anybody they know, that has that stuff is probably putting the things on credit and not making wise financial decisions.

So, the phrase “live your life, don’t buy your lifestyle” is more about making mindful choices for yourself and living your best life and not worrying so much about that lifestyle that you think you're supposed to have, or that you thought you were going to have.

Nancy Snedden:

And I think, with social media, that gets ramped up a little bit too, right? Millennials are in the age bracket that, I would say, spends a fair amount of time on social media. So, the fear of missing out is something that drives people, I think sometimes to buy their lifestyle and they find they get themselves in trouble.

Jordann Kaye:

Exactly, exactly. And when I actually came up with that phrase, social media was not as big as it is now, but it's just ringing even more true as time goes on.

Nancy Snedden:

Yeah, for sure. And you also wrote an entry in your blog, titled “debt is the enemy of millennial prosperity”. You wrote that becoming an adult as a millennial was a rude awakening for you. So, talk to us about that because I'm sure there are many millennials feeling that way as well. 

Jordann Kaye:

Yeah, absolutely. So for me, the debt that I had was, as I mentioned, my student loans and my car loans and what I came to find out when I was making those monthly payments, was that anything that I wanted to do with my life, that required money to do it, my debt was basically dragging me down. I likened it to sort of a ball and chain where, you know, if I wanted to start saving for retirement, I had to focus on my minimum payments first. If I wanted to travel, I, I had to make sure I had room in my budget also to pay off my debt.

So, it was really hindering me from doing the things I wanted to do. And that's why I made the choice to pay off my debts quite quickly so that I could be free and not hindered by those debts, not hindered by those interest rates to pursue the things that I wanted to pursue, which at the time were mostly travel and home ownership.

The path to a debt-free life

Nancy Snedden:

And I'm sure a lot of people out there would love to be living their best life, living life debt free. So, what steps did you take at that time to accomplish that? 

Jordann Kaye:

I took some fairly aggressive steps to become debt free. The first thing that I did was I looked into what student loan forgiveness programs there were for myself living in New Brunswick at the time. So, I looked at both federal and provincial programs available to reduce the amount of student debt that I had. And at the time there were a few programs available I did take advantage of, and I was able to shave thousands of dollars off my student loan debt to just by putting in some paperwork and doing the legwork that way. But beyond that, the big steps that I took were to minimize my living expenses as much as possible. I lived in a 400 square foot cottage in a very small town because the rent was so low. And then I also did what I could to maximize my income. 

Beyond my full-time job, I also took on some freelancing roles. I had started writing my blog by that point, so I started writing for some other websites and all of that extra income, including, money from birthdays, income tax returns, all of the extra money that I got, I put towards my debt.

And by taking these fairly dramatic steps, I was able to eliminate all my debt in about two years, which was probably as long as I would've wanted to live like that. I think anything longer than that, I would've had to loosen that up a little bit and, you know, sort of enjoy some creature comforts a little bit more, but that sort of short-term intensity was useful for me. And it was doable with the amount of debt that I had.

Nancy Snedden:

Yeah. So, I guess the old adage, short-term pain for long-term gain is what you really focused on — you know, doing everything you could to get that debt paid down in a short period of time. And we know that youth graduating today, you know, they're carrying an estimated 28,000 plus in debt. And that really is covering an undergraduate degree. If you look at Master’s or PhD programs, those can bloom to over a hundred thousand dollars. And we also know, of course that this past year has been particularly tough due to the pandemic. 

A reason for the re-skyrocketing of debt in Canada

Nancy Snedden:

Many Canadians are experiencing substantial debt-related stress. And some surveys are showing millennials are really in that most worried at 48%. So, how concerning is that statistic to you? And what advice can you offer those who have been impacted by the pandemic?

Jordann Kaye:

Well, I think given the very unique circumstances that we're in right now, that statistic sounds exactly right. We know the millennials have been disproportionately affected by the pandemic in terms of job loss or income reduction. So, my best advice right now for anybody significantly worried about their finances is that these are extenuating circumstances. If you had to take on debt or if you had to postpone your goals, or if you're just making ends meet that's okay right now. Don’t feel bad. Don't feel like, you know, oh, I'm, I'm never going to get back on track. These are very strange times.  

If all you can do is limit the amount of debt that you're going into, that's a good step to take right now. And then once things open back up and you can go back to work or (or something like that) then you'll take stock of your situation and then make a plan to move forward from there. But if I was having issues with, debt or anything like that, I wouldn't feel bad. I wouldn't feel like a failure. You know, that's very, very normal for these crazy circumstances we're in.

Nancy Snedden:

Right, absolutely. We know there are many, many Canadians out there, millennials and other age brackets as well. Millennials certainly aren’t alone feeling financial stress. Insolvency rates are starting to rise after being at an all-time low in 2020 due to the pandemic. So, I think that is showing that people are getting sort of to the end of their financial rope in some cases and really looking for the help that's out there.

So, we know paying down debt was just one of your many accomplishments. Another success story for you was your ability to save, so we're going to talk about that and you can share some advice with our listeners when we come back, please stay with us. 

The joys and yawns of savings goals

Nancy Snedden:

Welcome back. You're listening to Your Money, here on VOCM. I'm your host Nancy Snedden, Licensed Insolvency Trustee with BDO Canada here in Newfoundland and Labrador. My guest today is Jordann Kaye. She's a millennial money expert and founder of the personal finance blog, My Alternate Life. She's also a contributing writer for ratehub.ca and Young and Thrifty.  

So, Jordann, before the break, you had some great advice for our listeners about paying down debt. You openly admit in your blog that you were not as motivated when it came to saving as you were about paying down debt. You still managed to meet your goal of saving $25,000 by the time you turned 25. So, let's talk about your approach to saving and how were you able to achieve your goal there? 

Jordann Kaye:

Absolutely. So, once I had paid down my debt, I set my next sights on, first of all, accumulating an emergency fund, because I had been working with a fairly small emergency fund of just a few thousand dollars, just to cover unexpected car repairs or those sorts of things. But the general rule of thumb is that you have three to six months of living expenses, which for me at the time equated to about $10,000. So, I was coming off my debt freedom, I had all this extra room in my budget because I had eliminated my minimum monthly payments for my car loan and my student loan and I was ready to start saving. And what I found was that saving is really boring.

Paying off debt is exciting because you get to see that extra room in your budget at the end. You get this instant feeling of winning. Once you achieve your goal, saving isn’t quite the same because there isn't really any big finish line for saving. What I ended up doing was essentially gamifying it for myself. So that meant that every time I hit a goal, say save $5,000, I had to come up with a little reward for myself. And as time went on, my savings goals got bigger. 

I graduated from just saving that $10,000 emergency fund, to then also wanting to save for a home, which was a little bit more motivating because the goal at the end of that was to have a house. But saving for a down payment is a big, big, big job, and it takes a very long time. To stay motivated, I had to set these little mini goals for myself. And then I also widely publicized them on the blog because I found that having that out there gave me a little bit of extra accountability and helped me stick to my goals because I knew that other people knew about them. So, if I didn't reach them or if I gave up on them altogether, I would have to explain myself.

Nancy Snedden:

Yeah, and that's a good point and I think people in their lives look for accountability when they're setting goals, whether they're financial goals, or fitness goals, or dieting goals. Whatever people are doing, if they have a buddy or if they talk to people about it, or in your case, writing on your blog, that accountability helps you in some cases stay on track. But you've also noted the importance of making savings fun. And I think that goes to what you were saying about saving being boring. Accountability does help you stay on track, but what are some tips that you can share with our listeners about making savings fun?

Jordann Kaye:

I think the important thing is to recognize that while paying off debt is a sprint, saving money is a marathon. So, the very aggressive approach that I took to paying off my debt would not work for savings. Saving needs to be done in a sustainable way, and that's a good way to make it fun. 

If you are restricting yourself all the time, you're more likely to fall off the wagon. I would say that you should make room for savings in your budget, but not so much that you are actively or heavily restricting your budget to a point where you're not having any fun.

To stick to the savings goal long-term, you need to budget in some fun stuff. On top of that, again, gamifying it. So, setting yourself a reward at the end of a certain savings goal, whether that's like taking a trip, or buying a new outfit, it's a very scalable thing. So, it could be as small as treating yourself to a meal out or as big as going on a trip, those are the things that make savings more enjoyable. And then also where you put your money. If you put your money in a high-interest savings account, it's going to earn interest on interest. So that's always beneficial as well, because then you feel like your money is helping itself, it's earning interest on itself, and it's not entirely left up to you to save all of it. You do get to see it grow a little bit.

Nancy Snedden:

I love it. And I guess it's funny what motivates you, but I agree. There's another writer I really like, and have seen on this show, Shannon Lee Simmons. I don't know if you're familiar with her, but she has a similar approach to what you're talking about. She says don't budget to where you're miserable, right? Budget for the things that you enjoy so that you're able to stick to your budget. And I think that's what you're saying, where if there's something that you really enjoy and something that you really love, just make sure that you're fitting it into your budget. And it may mean that you need to adjust your budget in other areas to make sure that you can accommodate that. But if you're doing that, you're going to be more likely, I think, to be successful in your saving, because you're not going to feel like you're scrimping and not enjoying what you can to save, right? 

Jordann Kaye:

Yeah, absolutely. Especially because the timeline for saving money is so much longer, so you can't restrict yourself forever. You can restrict yourself for short periods of time if you want to make dramatic improvements. But if you want something to be sustainable over the long-term, you need to budget in those things that are important to you, and make sure that you leave room in your budget for enjoying your life. 

Young people’s money-saving power is waning

Nancy Snedden:

Absolutely. So, what do you feel some of the challenges millennials face today when it comes to saving and being able to grow their savings?

Jordann Kaye:

I think probably the most pressing challenge is the fact that costs are rising and wages aren't. So, the average millennial has a lot more pressure on them to make their budget balance, which makes prioritizing saving difficult. A good thing is that most of the time, you can get started with saving with as little as $10 a month. And I think that some millennials don't realize that. They feel like “oh, I need to be making significant contributions to my savings every month for it to be worthwhile,” but that’s not true. 

Part of saving is just establishing the habit. So, if you only have $10, $20, $50 a month to put away, get started with that. It will add up eventually, and eventually you will have more room in your budget as your income increases to be able to save more. And at that point you already have the habit established, you know where the money's going, you have your bank accounts linked, it's just a matter of increasing.

Saving for a rainy day: everyone should do it

Nancy Snedden:

That's all really great advice. And I know that you had said the part of your savings also included an emergency fund and that's great, because I think the pandemic showed Canadians the importance of an emergency fund. And those that they didn't have it now know it's something they need to be planning for. And to your point, you need to start somewhere. 

So sometimes when I ask my clients about if they budget or how do they budget? They'll say “I don't have enough money to budget.” Or, have they been saving? “I don't have enough money to save.”

But you need to start somewhere, and even your banks make it easy as well. Now you can just, if you're making a purchase, you can have it rounded up to the next dollar and automatically put into a savings account. So, it might only be a few cents here and there, but it is all going to add up over time, right? So, there's different things that you can do. 

But how do you encourage others to, when they're planning for their saving, not only plan for the things that they're saving for, so for example, a down payment on a house, or a new car, but also ensuring that you're allocating money for an emergency fund?

Jordann Kaye:

I refer to it as your financial ABCs. So first comes your baby emergency fund, which is a few thousand dollars, then comes paying off debt, then comes your bigger emergency fund, which is three to six months of living expenses. And then after that comes... After that, then you can save for things like a house down payment or travel. I think that saving for an emergency fund is extremely important. Your house is no good to you if you can't afford to pay for it because you lost your job. 

So, I would always very strongly encourage my family and friends to save at least three months of living expenses before taking on the responsibility of owning a home, because it is a responsibility. I've been a homeowner since 2016 and things happen. And you'll be really happy you have that emergency fund after you become a homeowner. 

Nancy Snedden:

I couldn't agree more. There's probably something like a repair or something that's going to come up right, that you want to make sure you're planning for.  

Finding and correcting a bad money mindset

Nancy Snedden:

So, when it comes to money and moving forward with your finances, do you think it comes down to attitude? And the reason I say that is because on your blog, you say understanding how you feel about your money, and being mindful of your attitude surrounding money is an important part of overall healthy money management. 

If you've got bad money habits, recognizing that you feel this way is the first step to fixing the problem. So, let's talk about that. What are some bad money habits that our listeners out there should be aware of and some red flags that they should be paying attention to?

Jordann Kaye:

Yeah, absolutely. So, I like to use the example that I come across often, which is people looking to consolidate their debt onto a line of credit. So, if they have high-interest debt, like a credit card or multiple credit cards, sometimes, and they're looking to lower the interest rate on that. So, they say, hey, should I move this debt onto a line of credit, which has a lower interest rate? And I always say “yes, but…,” with but being you need to look at why you accumulated this credit card debt in the first place. 

So, if you accumulated it because of an emergency or something like that? Right, move it on to the line of credit, it's a lower interest rate, you'll pay off your debt faster.

But if you accumulated this credit card debt because you're just spending more every month than you earn, or because you look at your credit card as a free source of money, or because you have a really, really hard time saying no to your friends, these are bad money mindsets that you need to examine and understand because if you don't, you're going to move that money onto your line of credit, and then you're going to just run up your credit cards again. And now you're going to be in an even worse position. 

So, the credit card debt is a symptom, the root cause is a bad money mindset. And you need to fix that. Otherwise, you're just going to run into the same issues over and over again. 

I think people don't think about, or don't spend much time sitting and thinking, okay, why am I doing what I'm doing? And if you don't, then you're just doomed to repeat the same habits over and over again.

Nancy Snedden:

And I've seen that in my practice too, Jordann, you're absolutely right. In fact, I had a young couple come see me and their words were "I feel like I've been on a merry-go-round. Every five years when our mortgage comes up from renewal, we consolidate our debt, pay off the credit card, the next five years we're doing the same thing, we just have to end the cycle." So, it took them some time, but they came to the realization that they needed to get off that merry-go-round and change the habits and change the things that they were doing. So, you've got some great advice on your blog, around credit cards and home ownership and investing in your financial future. I'd like to hear about that when we come back. Do stay with us. 

Millennial money advice, starting with credit card debt

Nancy Snedden:

Welcome back. You're listening to your money with BDO. I'm your host Nancy Snedden, Licensed Insolvency Trustee with BDO Canada here in Newfoundland and Labrador. Joining me today is Jordann Kaye, she's a millennial money expert and founder of the personal finance blog, My Alternate Life. She's also a contributing writer for Ratehub.ca and Young and Thrifty. 

So, Jordan, we know that millennials face many challenges when it comes to money management, but you’re proof that you really can overcome these challenges and really become financially secure at a young age. 

So, in your articles, you'd offer some great advice to your readers. I'd like you to share some of this advice with our listeners now. The topics we're going to touch on, and those that you write about starting with credit cards. What advice do you have for millennials out there when it comes to credit cards and credit card debt, and really managing and paying down this debt?

Mind the credit card interest rates

Jordann Kaye:

When it comes to credit card debt, the real killer is the interest rate. We talked a little bit earlier about examining your money mindset, and if you're confident that you can manage a line of credit, then transferring your credit card debt to a lower interest debt tool like a line of credit can be a really good option. There are also low-interest credit cards and balance transfer credit cards that also serve the same purpose. But ultimately, if you're trying to pay down your credit card debt, getting that interest rate down is what's going to help you the most because credit cards have some of the highest interest rates in the industry, and it's very hard to pay off debt when you're constantly getting those interest charges lumped on to it each month.  

The next most important thing is to just look at your budget and make sure that you are accounting for every dollar you're spending, and you're not accidentally overspending on your credit card each month. 

The way I like to make sure that I don't overspend is that every time I get paid, I pay off that credit card, which for me is weekly. So, I just look at the transactions for the past week and pay them off with my paycheque. And that way they can make sure that I never incur interest charges and my credit card is always cap has a low balance or no balance.

Find the best credit card for you

Nancy Snedden:

I get an email every week this is the balance on your card and I go in now through my online banking and pay it right away. That's obviously the best practice and for many people out there they can't always do that, but I always say if you're looking at buying something on your credit card first of all, step back and go "Do I really need that?" and "How long is it going to take me to pay back?" If the answer is more than three months, then I would say think again about making that purchase because the interest on credit cards to your point Jordan is often 20 or 25 per cent.

Another pitfall that I find people get themselves into is they'll get a loan from a finance company to consolidate and pay off their credit card debt. But interest rates to your point are very important to look at.  

Finance company loans are at 30 to 35 per cent so you're consolidating and getting one monthly payment, but you're now actually paying higher rate of interest than you were paying in your credit card. So always important to understand what your interest rates are when you're looking at those things.

You've also got some advice for your readers on finding the right credit card. 

So, should listeners be looking at low or no fee or points of rewards? What's the best option for them when they're looking at that? 

Jordann Kaye:

Finding the best credit card really comes down to what you're using that credit card for. You'll find that changes as you progress through life. For example, when I got my first credit card, it was a student credit card. The goal of that credit card was just to get one and whoever would give me one, that's what I would take. It had a really small balance, but it was mostly there for booking online hotels and that sort of thing.  

As I graduated, I then wanted a credit card that would basically act as an in-place emergency funds. For that credit card, my goal was low interest. I looked for the credit card with the lowest possible interest rate. There are some credit cards out there with interest rates between 11 and 13 per cent so that was the one that I went for. Now that I'm older and I have an emergency fund and I have a good handle on my spending now I'm interested in a rewards card. 

First I started it with a rewards card that had no fees because I wasn't spending that much and I didn't know how much I would earn in rewards. Once I used that for a few years and got used to using a credit card for my daily spending and I wasn't going over budget and I wasn't carrying a balance because I was managing my credit card habits well, then I finally opted for a fee-based travel rewards credit card which would give me the greatest rewards. 

And I had already known from tracking my spending that I would earn more rewards than the annual fee so that it was worth it overall. What credit card is best for you ultimately depends on what you're going to use it for. If you're going to use it for an emergency, or if you're going to use it to earn points, and then of course always the most important thing being, trying not to carry a balance if at all possible.

Buy the right home at the right time for your family 

Nancy Snedden:

Yeah. That's awesome, really great advice and of course, next to credit cards, many of your articles focused on home ownership, buying a first home as well as mortgage advice. What can you tell us about that? What advice do you have? We know that surveys show many millennials are often forced to delay life milestones and buying the first home is among them. How can people get there?

Jordann Kaye:

I think that home ownership in Canada or real estate in Canada has kind of reached a fever pitch right now, and more and more millennials are feeling just absolutely hopeless like they're never going to be able to afford a home in the area that they want, et cetera, et cetera.

My biggest advice would be to get your financial house in order before you start looking to qualify for a mortgage. That means checking your credit score, making sure that's in good condition and also paying off any extra debts that you have, because those will affect how much your mortgage will be approved for. 

My next suggestion would be to get very comfortable with compromise. I bought my home in 2016 and even with housing prices as low as they were back then I ended up compromising a lot on the things that I thought that I needed in order to get the home, to get any home ultimately. It's more pronounced now because housing prices have risen significantly during the past five years. So, I would say beyond being willing to compromise on location, millennials should expand that to being willing to compromise on city as well. We’re seeing many people move out of major cities because they can now work from home and they're getting more bang for their buck elsewhere. I know that having to compromise like that can feel demoralizing, but ultimately if home ownership is your goal, I think that's something that should be on the table. 

Nancy Snedden:

Yeah, and I agree with you: compromising and knowing what compromise you're going to be comfortable with is really important. Something that I think people do when they're looking at their overall budget, for example, or if the bank is approving them for a certain amount, is that they're not considering always the things the bank is not considering, and they assume that if the bank approves them for a particular mortgage, then that they can afford it because the bank wouldn't approve them if they couldn't afford it. 

But there's other things that people should be keeping in mind to ensure that they don't become what we call “house poor.

Jordann Kaye:

Oh yes, absolutely. I always like to make the point of the amount that you're pre-approved for by the bank is the amount that they know that you can pay, but they're not accounting for whether you can save or pay down debt or pay for your daycare or anything like that. That's not their business. They just want to make sure that you can pay your mortgage. It's up to you to make sure that you still have room in your budget for those other items. The place that I like to direct people is a mortgage calculator online, that also includes the extra costs like utilities, insurance, property taxes, all of these extra things that renters often don't think about and add all of those totals up and then put that in your budget and see if you still have room in your budget for savings, debt repayment, childcare, things that are important to you. 

What you'll probably find is you'll need to buy a house for a price that is lower than the maximum pre-approval amount you got from your bank.

Nancy Snedden:

Absolutely, and we've just been talking about how important it is when you're saving and paying down debt that you make sure by making savings fun by not budgeting for the things that make you happy or not budgeting for the things that are going to help you live your best life. If you're house poor and you're maxed out when you take in your necessity spending and then the amount of mortgage payment you have, you're not going to be able to do that.

So, you might have the house that you want, but is that really going to make you happy? Right? So, there's lots of things that you need to think about.
 
 Any other advice you have for people on searching for the right home for them?

Jordann Kaye:

I think the best advice that I can give would be to save more than you think you're going to need, because it's possible that you will find the right house for you, but it's going to be for a higher sale price than you anticipated. Having that extra cash on hand to either bump up your down payment or to give a bigger deposit, or to maybe supplement buying furniture or doing the renovations that need to happen immediately can take so much pressure off, because buying a home right now is an incredibly stressful process.  

Most people are going to be dealing with multiple offers and bidding war situations. It's extremely stressful. So just having that extra money in the bank can help alleviate that stress a little bit because you know that if you do have to end up bidding more than you expected, or if you do have to jump on that house that needs the renovations right away, you have a little bit of extra money in the bank to help you achieve those things instead of just scraping by, by the skin of your teeth and going all in on a house.

Nancy Snedden:

That’ some really great advice, and you've also got some good advice on investing in your financial future. So, we're going to talk about that when we come back, please stay with us.

Nancy Snedden:

Welcome back. You're listening to Your Money here on VOCM I'm your host Nancy Snedden. My guest today is Jordann Kaye. She's a millennial money expert and founder of the personal finance blog, My Alternate Life. She's also a contributing writer for RateHub.ca and Young and Thrifty.  

So, Jordann, let's talk about the future and the importance of investing.  

For many millennials out there, retirement might seem a really long ways away. But that doesn't mean they shouldn't be thinking about it. So many of them believe that they've got years to save, not to mention we know that surveys for many young people say they can't afford to look at the future because they're struggling to make it through today. 

So what advice do you have for millennials when it comes to retirement planning and investing in the future?

Start saving for retirement. Now. Like, today.

Jordann Kaye:

My best advice is that the best time to start saving for retirement is yesterday. Even if you feel like you don't have enough money in your budget to save for retirement even if you feel like you have years and years and years to do it. 

Because of the magic of compound interest, the sooner you start, the better.

Nancy Snedden:

Compound interest is so, so important. I remember a financial planner that we had on the show some time ago had talked about the difference in two twin brothers, and one started saving 10 years prior to the other and saved less each month and ended up with significantly more at retirement than his twin brother did because of compound interest. So, so, so important.  

So, what would you say to millennials that think they've got lots of time to plan for retirement?

Jordann Kaye:

We've seen the proliferation of robo-advisors and the online investing platforms. It's never been easier to get started with investing, right now. It doesn't have to be a big thing. You don't have to make an appointment with your bank branch. You don't have to do a bunch of research on your risk tolerance. You don't have to have thousands of dollars. You don't have to even leave your house. If you use one of the popular online robo-advisors that are available in Canada, you can start saving for retirement in about 15 minutes and the robo-advisors are great. They're just as good as, or better often than investing through your bank. 

So, you're not even giving up performance or anything like that for convenience. It's literally never been easier and you can get started with as little as $50. So, really the barriers to getting started have been systematically dismantled by the rise of FinTech and the changes in the available products in this area.

In my opinion, there's no reason to not start now. You don't have to put thousands of dollars away every month. You can put $50 away every month. You're still getting started. You're still taking advantage of that magical compound interest. 

Nancy Snedden:

It is so very important. And you're right that things are easier. And there are a lot more options for people when they're thinking about investing. But do you have advice on the types of investments that millennials should be considering?

Jordann Kaye:

Absolutely. 

So, when it comes to investing for your future, you want to stay away from, so, especially you want to stay away from meme stocks. But you should choose an investment portfolio that reflects your risk tolerance and that's where these robo-advisors and online investing platforms really shine.  

Because when you sign up, you have to complete a questionnaire that basically assesses your risk tolerance. So that means it assesses how stressed out you're going to be when the market takes a dip and then they build you a portfolio that reflects that.

So, it's going to be a mixture of stocks and bonds. They do it all for you. They make sure that your asset allocations stay steady. They'll do all your rebalancing for you. And that way it's very, hands-off; very “you don't have to think too much about it.”  And it's all just handled for you.  

Usually, younger people can afford to have more risk in their portfolio. So, for example, my portfolio, I'm 31 now, and it has about, 80 per cent stocks and 20 per cent bonds. So that means that there's good potential for growth there because there's a lot of stocks. But also, the bonds sort of temper the risk enough that when the market takes a big dip, my portfolio doesn't plummet. It still goes down, but it's not quite as stressful. And then it will recover nicely. But the downside being that there is a little bit less growth because the bonds sort of temper that growth a little bit. And that's what I would recommend for everybody in my age group. You don't need to have a super risky portfolio. You don't need to have a super conservative portfolio, just somewhere in the middle is usually ideal for most people. 

Nancy Snedden:

Something, in let's say your age, if it does take a dip, you've got some time to recover. So, you can do that more tempered approach, as opposed to the opposite where you're doing really high level of bonds and only a small number of stocks. So, that's some good advice, I think. 

And I think technology is changing for us too, right? So pretty much everything today is done on your smartphone. From paying the bills to doing your investing, tracking your spending, there are apps for that. There's so much things that technology has allowed us to do. But do you feel that technology is supporting us or helping us make money management easier?

Jordann Kaye:

I think that there are a lot of apps out there that purport to make money management easier, but I'm not necessarily convinced they do. That's the personal preference for me. 

I've used all of the big budgeting apps, but I ultimately keep coming back to my Google spreadsheet. There are plenty of apps out there that claim to help you budget or claim to analyze your spending so you can pay off your debt better and I’m sure that they're helpful. But ultimately it comes down to you taking an active role in the management of your money, not necessarily your investments, but the management of your money: making sure that you're meeting your savings goals, you're staying on budget. All of these apps can help, but they can't ultimately make you stay on budget 

Nancy Snedden:

That's right. You need to be an active participant. That's an actually really good point. The apps that are out there may be helpful for people that find it difficult to stay on track. It could be a support, and technology sometimes is good for that. But you're right. You need to be an active participant and make sure that you're staying on track with the budget that you're setting for yourself. 

Usually with things where there are pros, there are also cons. So, any cons when it comes to technology that people should be aware of?

Jordann Kaye:

One of the downsides of making all of this technology available at your fingertips is that it's never been easier to spend money. With Apple Pay, now you don't even need to put your credit card number in when you're making a purchase on your phone. You just have to double tap the power button and there, you've made a purchase. With Uber Eats it is extremely easy to order food and not even have to interact with anybody and it just arrives on your doorstep and you pick it up. These types of apps, they do make things easier, but they also reduce the barriers to overspending. And I think that, that is probably a contributor to quite a bit of credit card debt that many millennials have. It's unfortunate, but it is a by-product of the evolution of technology.

Nancy Snedden:

So, it goes back to being an active participant in your money management, right? Really paying attention and making sure that the purchases you're making, although easy, are affordable for you. 

Beware of the debt-related dangers of social media

Nancy Snedden:

So, we talked a little bit earlier in the show, we touched on social media, Jordann and the fear of missing out and how the fear of missing out sometimes means that people go and make purchases or go out on vacations, or even go to dinner regularly with friends that they really can't afford to do, but it's because they don't want to miss out. So, when you consider the level of debt that millennials are taking on, because of influences like social media does it concern you?

Jordann Kaye:

I think that we've had a nice little break from FOMO for the past year or so, which has been really nice because people just, they can't travel, they can't go out to eat, so it's not as in your face as it has been. 

But I do think now with the pandemic hopefully winding down a little bit and some restrictions being eased, that it is going to become an issue again. And honestly, I think the best way to avoid FOMO and as hard as it is, is to avoid social media or limit the amount of time you spend on social media or be very careful and curated about who you follow on social media. So, this again comes back to the mindful money habits.

So, if you find yourself, after I've viewed this certain person’s stories, yes, they are beautiful and it's lovely to see her traveling. But it makes me want to book a trip that I don't have the money for. Maybe you should unfollow that person. It's entertaining, but it's not healthy. It's not good for you. It's not going to benefit you in the long run. It's just giving you that little hit of enjoyment when you watch the story. So maybe ultimately, it's better to unfollow that person. And that requires a lot of discipline. And it requires a lot of insight into your feelings that people maybe aren't used to spending that time, pondering those things? But ultimately you will be more at peace with your life and more content with your life, if you don't have that stuff in your face all the time.

Nancy Snedden:

Well thanks Jordann. Some really great discussion today, some great advice for our listeners. If, people wanted more information, if they wanted to connect with you, read your articles for the blog, what's the best way for them to do that?

Jordann Kaye:

They can visit my blog at myalternatelife.com or they can check me out on Twitter, which is @myalternatelife.

Nancy Snedden:

Great. Thanks so much for joining me today.

Jordann Kaye:

Thanks for having me. 

Nancy Snedden:

So I also want to thank our listeners for tuning in as always. I want to hear from you. If you have a comment or question or maybe a topic you'd like me to discuss here on Your Money. You can email me at [email protected] or give me a call at (800) 563-8337. Until next week I'm Nancy Snedden. Stay safe and be well, everyone.

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