Getting Started: New Book Urges Gen Y To Take Control Of Finances

By Carolyn Bigda
Chicago Tribune.

Back when she was in college, Sophia Bera was studying theater and planning to make a career as an actor. Then, at age 21, she bought a house and her life changed.

“All my friends started coming to me with money questions, and I was fascinated by it,” she said. So Bera became a certified financial planner and, in 2013, launched Gen Y Planning, which provides financial advice to 20- and 30-somethings, an age group that often gets overlooked in the financial planning industry.

Now Bera, 31, has put some of that advice into a book, “What You Should Have Learned about Money, but Never Did,” published Feb. 4. In true Gen-Y style, it’s only available electronically ($4.99 on Kindle), and in a recent interview, she talked about some of the major points she hopes to make to her peers. Here is an edited version of our conversation.

Q: What is a common mistake that young people make when doing financial planning?

A: A lot of people focus on what’s going on in the economy, but what you should look at is what’s going on in your personal economy. Take mortgage rates. They are very low today, so I’ve had clients ask if they should buy a house. But there are other things to consider: Do you have a down payment? How much are you paying in rent? My parents bought a house in 1986, when mortgage rates were around 10 percent. But at the time they were living in an apartment with rats, and they had a 2-year-old child. They had to move. It was a good time in their personal economy to make that decision.

Q: Financial planning can seem overwhelming. You suggest tackling the to-do list a little at a time.
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A: When you try to do too much, it’s unsustainable long term. I’d rather have people make a few small changes that you can stick with. If you increase your 401(k) contribution by just 1 percent, you probably won’t miss the money in your paycheck. But that 1 percent is going to have a big impact on your financial future, especially when we’re talking about 30 or 40 years of compound growth. If you increase the contribution by 1 percent again in six months, and do that again and again, pretty soon you’re maxing out your 401(k).

Q: How should young people balance saving with paying off debt, such as student loans?

A: I’d rather have people save one month of their net (or take-home) salary before they begin to aggressively pay down debt. Ideally, you want to have three- to six-months of net pay saved. But if you have at least one month and you’re aggressively paying down your student loans, for example, and something happens, there’s a medical expense or a car repair, you don’t have to put it on a credit card.

Q: You say saving is critical, but so is making more money.

A: I don’t know why this is a radical idea, but for some reason in the personal finance world it’s been all about slashing your expenses and saving every penny you can. That’s the only way to reach your financial goals faster or get out of debt. However, in reality, my clients who find a lot of financial success are the ones who are really motivated about increasing their income. A lot of times, there’s only so many things you can cut from your budget, and even if you’re able to squeeze out another $100 or $200 per month, it can still take you a while to pay off debt or build up savings. But if you do something on the side and you’re able to make another $500 per month, all of a sudden, you have a ton more money that can go directly toward your financial priorities. You reach your goals faster, and how motivating is that?

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