Millennials can be drop down drunk and still become millionaires. Just follow these (admittedly simple) 5 steps:
- Just Say No…
I had several roommates in college who wanted to live a lavish lifestyle while in college to impress their peers. This included one fella maximizing as many student loans as possible every year, and living his lavish life on these funds while refusing to work. He purchased a $1K flat screen TV on the loan, financing for a truck, free drinks for everyone, you know the story. Name any stupid impulse buy that made him feel cool and he had it, but will be paying it off for the next 30 years. My friend graduated with a degree in Architecture with over $100,000 in student loans (not including credit cards) and landed a posh drafting job making $20,000 a year after graduation. Of course he blames the system in that he “deserves” a six figure income, but the fault of his predicament lies solely on his shoulders. He didn’t have time for a job because of his strenuous school schedule but still managed to find at least 20 hours a week to party with financing from his perpetual money printing machine. Without an internship/college job he also had ZERO work experience when job searching.
I’m not saying this to pick on him, rather to use him as an example of what not to do because I know he’s not the only Millennial living the aristocratic college lifestyle. I definitely didn’t do everything right in college, however my parents taught me one valuable lesson: work (AKA Grind Hard). I lived a decent college lifestyle but didn’t take out many student loans (~$10,000 for 4 years undergrad 2 years graduate). College should be about sacrificing now in order to live your dreams later. I know bright eyed freshmen see college as a time to experience the world and make memories that last the rest of your life but let me pop that bubble now and say you don’t have to maximize your student loans to live like that. You’ll regret if for the rest of your life, and set yourself back longer than you realize.
The best case scenario: don’t take out student loans. Next best option: take out as few loans as possible. This brings me to step 2, to defeat an enemy (debt) you have to have a coordinated strategy… so get organized!
- The B Word.
As soon as you make the decision to change your life and take control of your financial future you may think to yourself, “where do I start?” The answer as you may have predicted (and inherently already know) is to start a budget. It probably took Rachel and me 6 months before we had a workable budget and we still iterate that budget every month as seasons and situations change. What’s worked the best for us is to spend time together on the 1st of every month and on a piece of paper (or excel file) write all of our projected income that comes into the household that month. Next, we write down all of our projected expenses. For all forecasted expenses (food, entertainment, etc.) do your best job of setting a limit and then stick to that limit. We had to constantly adjust these figures and most naturally evolve every month anyways.
This sounds way easier than it is, especially at the start. We struggled to meet and stick to our “budget” discussion as we have distractions everywhere. My personal recommendation is to drink wine during the budget meeting. This is the Drunk Millionaire after all! This will make this process more enjoyable for those who don’t enjoy number crunching.
The budget helps to insure that you don’t spend more than you make, thus avoiding debt and ensuring you save monthly. Remember, try to stick to the budget. Sign your names at the bottom if you have to as a contractual obligation to follow the budget. The goal is to get more and more accurate from month to month.
Learn more about Budgeting HERE.
- Pay off debt, STARTING NOW!
Six months after graduating college you will have a rude awakening. You will start to receive letters saying you owe money for student loans, and interest will begin to generate for federal loans. Within the letter, the lending institution will offer a payment amount suggestion that will pay off your loans in 10 to 20+ years. Run from that recommendation…. Laugh at that number…. Said company wants to milk interest money off you for as long as possible, making you a financial slave! You have to KILL your loans as fast as possible. Payments are the biggest hindrance to your future financial stability and success. Can you imagine working a job, getting paid, and paying NO payments?
Most people want to change the world by donating to Cause A or volunteer for Organization B but you can’t do any of that when your entire paycheck goes to pay off loans and interest. It’s easy to just accept a small payment amount each month, continue to live like a false king/queen, and be a slave for 10 to 20+ years. I’m telling you don’t do it. Rachel and I paid off my student loans in a matter of a few months because we got into attack mode. We refused to buy that new car that everyone expects you to purchase when you land your first job. We kept driving our “used” car that we had in college. This has allowed us to now live our lives completely FREE! We now have the money to build wealth, give generously, and basically do whatever the flip we want to do (planning a “paid for” Europe trip now).
Learn more about Paying off Debt HERE:
- Start a Disaster Fund.
As you finish up paying off all debt, it’s time to start thinking about saving for a rainy day fund. If you haven’t already noticed, unexpected (sometimes costly) events always happen. It’s just a fact of life. Many call this Murphy’s Law which is an old adage that says, anything that can go wrong will go wrong. Now that you are an adult, it’s your responsibility to take care of Murphy. The disaster fund adds a buffer between you and this jerk.
We recommend saving between 4-6 months of household expenses to adequately protect against unforeseen risk. This has worked out well for us as we had just finished paying off my student loans and the alternator went out on our car. Thanks to a robust disaster fund we paid the bill and problem solved. We didn’t have to put the emergency on the credit card.
The greatest benefit that we’ve experienced from the disaster fund is a sense of security. If you have a chunk of money sitting in the bank, all of the sudden you don’t wake up with cold sweats in the middle of the night wondering how the current emergency will be paid for. Additionally, you don’t have to put emergencies on the credit card when you have a disaster fund. This means we avoid the whole debt trap circle all together!
Learn more about starting a Disaster Fund HERE:
- If you build it, Millions will come!
You’re young, debt free, organized with a budget, and have a wad of cash in your savings account. Time to relax right? Not quite. Now is the best time to start saving to ensure that you build wealth and have options.
Just a Note: money is a tool, not inherently bad or good. If you’re naturally more of a Bruce Wayne, you can use the fortunes you cultivate to do good in the world. If you’re more of a Joker, well this probably isn’t the post for you….
The secret sauce to becoming a Millennial Millionaire is to save early and take advantage of Compound Interest. For example sake, by starting out saving $100 a month (the monthly value of Starbucks visits) from age 25 to 60 in a basic mutual fund earning 10-12% interest you will have half a million dollars at retirement. The average household income in America is $53,657 a year. One hundred dollars a month is the equivalent of saving 2.3 % of the average family’s income, but equates to more than 8 times the average amount saved by the typical American by retirement.
We recommend that Millennials first pay off all debt, then build a disaster fund, then begin to build wealth. We recommend saving 10% of your income each month. As a millennial, this amount will make you extremely wealthy for retirement, and allow you to live and give like crazy! 10% savings from the average American income from age 25 to 60 equates to about $2.5 million when you actually invested only $188,000 throughout your saving time period. That’s the benefit of starting early, you have time and compound interest on your side.
For more precise recommendations on building wealth, check out our in depth article HERE.