Financial Life Hacks for NextGen in a Challenging Economic Environment

Perpetual demands on discretionary funds are fierce for all clients but knowing how to allocate among competing priorities – especially in a challenging economic environment – is particularly difficult for NextGen clients. Many wish to pay off debts (from student loan balances that have ballooned or credit cards with punishing interest rates) and create savings goals for key life events (including a bucket list trip, new vehicle, or home purchase) – not to mention invest and build for retirement, business formation, etc.

Walking alongside clients undertaking these challenges is one of the greatest planning wins as a financial advisor. We have the privilege of ushering clients through the experience day after day, week after week, year after year – cheering for the heroic steps they take to achieve these goals or picking them up when things don’t go according to plan.

With this experience, we’re happy to share some of the key hacks to getting you to the life you want to live:

Get to Know Your Numbers
This, of course, touches on that vulgar B word: Budget. But rather than thinking of a budget as an artificial governor on how you can spend, I prefer to reverse engineer it: start with what your goals are for the life you want to lead, then decide how you want to spend and save to achieve those goals. This approach crystallizes your commitment to goals and turbocharges activities to make sure you are making progress – but, of course, it starts with knowing what your inflows and outflows look like.

Know Thyself
Aristotle’s aphorism of “knowing yourself is the beginning of all wisdom” is apt in these discussions. Much like a person who is trying to quit smoking should avoid going in the grocery store aisle with cigarettes, or people on a diet should refuse the dessert menu, knowing when you are financially vulnerable to mistakes is key. For example, I happen to love music and reading, and I’m always at risk of overspending at record stores and bookstores, so I avoid those or set a strict limit. I have found it is also helpful to avoid going when I have had a tough day (avoiding retail therapy).

We are all just perfectly imperfect – knowing when you stumble can help make sure you stay on even ground and keep your footing.

Take Advantage of Company Benefits
Very few of us are experts in employer benefits, so we see misalignments in benefits selection. Make sure you take full advantage of your employer’s benefits but also make sure the benefits you select are aligned to your needs. I have been guilty of paying too much for the “Cadillac” health insurance plans (knock on wood, I have been healthy, so I rarely use my expensive insurance). There is nothing wrong with selecting coverages that are most beneficial for treatments and procedures you are expecting for the upcoming year. Use those benefits wisely.

If you can afford to do so, make sure to take full advantage of any retirement plan matches. This is a wonderful return on your investment, and it is part of your compensation package – you do not want to leave any money on the table! If you cannot quite make that work for your budget at home, work up to it, as your 65-year-old self will appreciate it!

Commit to Starting Small
The most difficult step in a journey is always the first step, and this is one of my favorite hacks for clients. Small things done consistently over time lead to bigger results. I have seen so much success with this strategy.

One of my favorite clients was skeptical of this approach. We started with $25 going into an investment account because that was all she could afford. She was dejected because she never thought it would amount to much, but as her income grew, she was able to increase to $50, then to $100, then to $200 and beyond. Before she knew it, there was more than $50k in the account. And while I would love to say it was my brilliant securities selection, it was not. Her consistency and perseverance paid off, just as it has for countless other clients.

Don’t Shoot Yourself in the Foot
As a corollary to “Know Thyself,” know how you make mistakes and take progressive steps to avoid them if you can. Early in my career, I got a Starbucks on the way to work (and another one midday) and went out to lunch with friends and colleagues often. I realized after a while that a couple bucks for coffee (twice a day) and $10-15 for lunch every day adds up. If it was $4 a day on coffee and the low end for lunch, it was $14 a day or $70 per week or $280 a month. So, it was over $3,000 a year to feed and caffeinate myself. (The company I worked for at the time had free coffee at the office . . . it smelled and tasted like feet. So, I learned that the nausea from drinking it kept me awake!)

Also, being a financial nerd, I knew I would be able to construct a healthy lunch for a fraction of the cost of going out every day. Granted, grocery prices have been up quite a bit since then, but the premise still applies. (Sad fact: I ate the same lunch every day for three years . . . I was saving so much money by bringing my lunch that I was able to cobble together enough money for a down payment on my first house and start my first non-401k investments.)

Give Yourself Some Grace
This one is probably the toughest. We all make financial mistakes. Sometimes it’s a curveball that life throws you that you weren’t ready for (like a blown tire on the freeway, the furnace going out, or a medical test you weren’t planning for). Sometimes it’s a job you were counting on that fell through or an assumption you made that turned out to be wrong. It could even be an impulse purchase . . . those self-inflicted wounds hurt the worst.

Most of us have had those things happen at one point or another – and the important thing is to pick yourself up, dust yourself off, and get moving in the right direction again. Guilt is not helpful. Neither is shame. Taking that next step is – forgive yourself and move on.

Celebrate Your Success
I collaboratively set SMART goals (Specific, Measurable, Action Oriented, Realistic, and Time Oriented) with my family, as I have always believed we can accomplish more collectively than individually. One of the most crucial elements of financial goal setting is setting those targets, and celebrating when you hit those milestones is critical.

Whether it is getting savings and investments to a particular threshold, paying off a debt, or tactically saving for a particular goal like a bucket list vacation, it is important to celebrate the success you have had in a way that is meaningful for you and your loved ones. It may be going out to your favorite restaurant, going on a trip, or having a celebratory beverage. It does not have to be of great magnitude, but it must be meaningful.

Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.