Broke Millennial

Broke Millennial Plot Summary

Introduction

Financial freedom isn't just about having money—it's about having choices. When you take command of your finances, you gain the power to design your life according to your values rather than being constrained by financial limitations. This journey begins with understanding that wealth building isn't about overnight success or get-rich-quick schemes, but rather about consistent habits that compound over time. Many people feel overwhelmed when thinking about their finances, unsure where to begin or how to make progress when faced with debt, irregular income, or competing priorities. The good news is that financial empowerment doesn't require a finance degree or a six-figure salary. By mastering a few fundamental principles and implementing simple systems, you can transform your relationship with money from one of stress and avoidance to one of confidence and control.

Chapter 1: Start Small: Build Your Emergency Fund First

An emergency fund is your financial safety net—the buffer between you and life's unexpected challenges. Without this foundation, even minor setbacks can derail your progress and force you back into debt, creating a frustrating cycle of financial instability. Emily Goetschius learned this lesson the hard way. As a college student, she accumulated credit card debt across three cards with interest rates between 17% and 24%. When she finally received a raise at age 27, Emily aggressively focused on paying down her debt, reducing it from over $4,000 to just under $1,200 in one year. Then disaster struck. Two days before Christmas, someone crashed into her parked car and fled the scene. With no emergency savings, Emily had to finance her $4,000 insurance deductible using a credit card—instantly reversing her year of progress. This painful experience transformed Emily's approach to money. She reworked her budget to contribute 10% of each paycheck to savings while continuing to pay down debt. She even found a roommate to increase her debt contributions from $100 to $300 above the minimum payments. By July 2016, she had reduced her debt to under $600 while simultaneously building an emergency fund that protected her from future setbacks. To build your own emergency fund, start by setting a modest initial goal—$1,000 is often recommended as a starter emergency fund. This amount can cover many common emergencies without being so large that it feels unattainable. Automate your savings by setting up a direct transfer from your checking account to a separate savings account on payday, even if it's just $10 or $20 per paycheck. The consistency matters more than the amount when you're starting out. Keep your emergency fund in a high-yield savings account that's separate from your checking account but still easily accessible when needed. This separation creates a psychological barrier that helps you avoid dipping into these funds for non-emergencies while still allowing quick access during genuine crises. Remember that your emergency fund isn't an investment—it's insurance. Don't worry about maximizing returns on this money; focus instead on accessibility and stability. Once you've built your starter fund, you can gradually work toward the recommended three to six months of essential expenses while simultaneously pursuing other financial goals.

Chapter 2: Create a Budget That Actually Works

A budget isn't a restriction—it's a plan that aligns your spending with your values and goals. The right budgeting approach gives you permission to spend on what matters while ensuring your financial future remains secure. Erin Lowry, fresh out of college and living in New York City, developed her own budgeting system to manage her multiple income streams. Working three jobs—at a late-night talk show, as a barista, and as a babysitter—she received about half her income in cash. To keep track of it all, she created an envelope system with four categories: rent, savings, fun fund, and utilities (labeled "money for Anna," her roommate). She allocated 50% of her income to rent, 25% to utilities, and 25% to savings, with tips and extra cash going into her fun fund. While effective for her situation at the time, Erin later realized storing hundreds of dollars in cash in her apartment dresser wasn't the safest approach. As her career evolved and her income shifted to direct deposit, she transitioned to what she calls the "No-Budget Budget"—a system that focuses on saving first and spending mindfully without tracking every penny. Finding the right budgeting style for your personality is crucial for sustainability. If you're detail-oriented, a zero-based budget where every dollar has a specific job might work best. If you prefer simplicity, a 50/30/20 approach (50% needs, 30% wants, 20% savings/debt) might be more suitable. The key is choosing a method you'll actually stick with rather than one that looks perfect on paper but feels overwhelming in practice. Start by tracking your spending for 30 days to understand where your money currently goes. This baseline awareness often reveals surprising patterns and opportunities for adjustment. Next, identify your non-negotiable expenses (housing, utilities, food, transportation) and ensure these are covered first. Then allocate remaining funds toward debt repayment, savings goals, and discretionary spending based on your priorities. Remember that budgeting is an iterative process—your first attempt won't be perfect, and that's okay. Review and adjust monthly, celebrating small wins along the way. A successful budget evolves with your life circumstances while consistently moving you toward your financial goals.

Chapter 3: Master Your Credit Score and Debt Strategy

Your credit score is more than just a number—it's a financial passport that influences your access to housing, employment opportunities, and favorable loan terms. Understanding how to build and maintain strong credit gives you significant advantages throughout your financial journey. Rod Griffin, director of public education for Experian, explains that credit reports are used to judge your level of responsibility—how well you're succeeding at adulting. Landlords check them for red flags like missed payments or high debt-to-income ratios. Employers review them to verify your identity and assess how you handle finances, especially if you'll be managing company money. Kenneth learned the hard way about credit card debt traps. After moving to New York for his dream job in television, he used a credit card with 21% APR to purchase a $1,200 high-end TV. Seeing a minimum payment of just $33, he thought it was manageable. What Kenneth didn't realize was that paying only the minimum would take nearly five years and cost him an additional $724 in interest. Had he increased his monthly payment to just $50, he could have cut the repayment time in half and saved over $350 in interest. When tackling multiple debts, two primary strategies emerge: the Debt Avalanche and the Debt Snowball. The Avalanche method prioritizes paying off the highest-interest debt first while making minimum payments on everything else. This mathematically optimal approach saves the most money in interest over time. The Snowball method focuses on paying off the smallest balance first, regardless of interest rate, to build psychological momentum through quick wins. Both strategies work—the best choice depends on whether you're motivated more by mathematical efficiency or visible progress. To build or improve your credit score, focus on the five factors that influence it: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit (10%). Make all payments on time, keep credit card balances below 30% of your credit limits, maintain long-standing accounts, and avoid applying for multiple new credit lines in a short period. Monitor your credit reports regularly through AnnualCreditReport.com, where you can get free copies from all three major bureaus once a year. Review them carefully for errors or signs of identity theft, and dispute any inaccuracies promptly. By understanding and actively managing your credit, you gain control over a crucial aspect of your financial health.

Chapter 4: Automate Your Way to Wealth

Automation transforms good financial intentions into consistent action by removing human error and emotional decision-making from the equation. By setting up systems that operate without your daily intervention, you create a financial infrastructure that works even when willpower falters. Marshall, a 25-year-old earning $50,000 annually with a 3% employer match, demonstrates the power of automation through his retirement savings. By automatically contributing $250 monthly to his 401(k) with his employer adding $125, he accumulates $4,500 yearly toward retirement. If he maintains this automated habit for 40 years with an 8% average return, he'll have over $1.1 million at retirement. However, if he delays starting until age 35, the same contribution rate would yield only about $500,000—a difference of over $650,000 simply from automating ten years earlier. The impact becomes even more dramatic when comparing investment returns to traditional savings. Had Marshall simply saved $4,500 annually in a low-yield savings account earning 0.01%, he would have only about $180,000 after 40 years—less than one-sixth of what his automated investment approach would generate. Setting up automation begins with establishing direct deposits for your paycheck and creating automatic transfers to various accounts on payday. Start by automating contributions to your employer-sponsored retirement plan to capture any matching funds—this is essentially free money. Next, set up automatic transfers to emergency savings until you have 3-6 months of expenses covered. For debt repayment, schedule automatic payments above the minimum due to accelerate your progress. Many lenders offer interest rate reductions for setting up autopay, providing additional savings. For recurring bills, enable automatic payments to avoid late fees and potential credit score damage from missed payments. Remember that automation doesn't mean setting and forgetting forever. Schedule quarterly reviews of your automated systems to ensure they still align with your financial goals and make adjustments as your income and circumstances change. The power of automation lies in removing daily decisions while maintaining strategic oversight of your financial journey.

Chapter 5: Invest Wisely for Long-Term Growth

Investing is not gambling—it's a methodical approach to growing wealth that favors patience and consistency over quick wins. Understanding this fundamental difference transforms investing from an intimidating prospect into an accessible tool for financial freedom. Erin Lowry's journey with investing began with hesitation. Like many millennials who witnessed the 2008 financial crisis, she initially viewed the stock market with suspicion. However, she gradually educated herself by reading books about personal finance basics, then progressing to economics and investing. Despite her self-professed "loathing of mathematics," she discovered that numbers attached to dollar signs made intuitive sense to her. The foundation of investment success starts with understanding your time horizon and risk tolerance. If you're investing for retirement decades away, you can generally take more risk than someone investing for a short-term goal. This translates to a higher allocation of stocks versus bonds in your portfolio. As Erin learned, investing isn't gambling when approached with knowledge and a long-term perspective. For beginners, index funds and exchange-traded funds (ETFs) offer an excellent starting point. These funds provide instant diversification by investing in hundreds or thousands of companies at once, reducing the risk associated with individual stock picking. A simple portfolio might include a total stock market index fund, an international stock index fund, and a bond index fund. Compound interest makes investing particularly powerful for young people. At age 25, investing $3,000 in an S&P 500 index fund with an 8% average annual return would grow to approximately $44,000 by age 60 without any additional contributions. Waiting until age 35 to make that same investment would yield only about $20,000 by age 60—a difference of nearly $24,000 from just a decade's delay. Warren Buffett, arguably the most successful investor in history, advocates for simplicity through index funds. In a letter to Berkshire Hathaway shareholders, he wrote: "Put 10 percent of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. I believe the trust's long-term results from this policy will be superior to those attained by most investors." Remember that investing should be boring—the excitement of day trading might be enticing, but consistent, patient investing in low-cost index funds has proven more effective for building wealth over time.

Chapter 6: Navigate Money Conversations with Confidence

Money conversations can feel awkward and uncomfortable, but developing the ability to discuss finances openly is essential for both personal relationships and professional advancement. Learning to navigate these discussions with confidence can transform potential conflicts into opportunities for growth. Kristin Wong, a 33-year-old freelance writer, admits she didn't negotiate her first job offer out of college. "It didn't seem like negotiating was an option, and at the time, I didn't understand the whole process of negotiating. I felt grateful just to have a job, and I think that's a problem for a lot of people." This common mistake can be costly—a study from George Mason University and Temple University found that neglecting to negotiate your first salary could result in losing $600,000 over the course of your career. When offered a content manager position at a startup, one professional agonized over the compensation request, eventually asking for $50,000 plus benefits. When the cofounders immediately accepted without countering, she realized she had significantly undervalued herself. They hadn't even attempted to negotiate, suggesting she could have asked for much more. Preparing for financial conversations requires knowing your worth through research. For traditional employment, investigate what others in similar positions earn using resources like Salary.com and GlassDoor.com. For freelancers, talking with peers about rates is crucial, even if these conversations feel uncomfortable. Many clients underpay freelancers precisely because of this lack of communication among professionals. Before any negotiation, gather concrete evidence of your value. Keep a "success folder" with screenshots of metrics, client praise emails, and documentation of your achievements. Track improvements based on previous feedback to demonstrate growth. During performance reviews, present this evidence to support your compensation requests. When asking for a raise or setting rates, be specific about what you want rather than waiting for an offer. Kristin Wong recommends adding 15% to your initial instinct: "There was a report from Clarke University that said employers can typically afford to offer 15-20% more than their initial rate, so I think it's a safe rule of thumb." The skills developed in financial conversations extend beyond salary negotiations to discussions with partners, friends, and service providers. Practice in low-stakes situations like negotiating at yard sales or with your cell phone provider builds confidence for more significant financial conversations.

Chapter 7: Balance Social Life with Financial Goals

Navigating friendships while managing your finances can feel like walking a tightrope. The social pressure to participate in expensive activities often conflicts with budget constraints, creating awkward situations that can strain relationships if not handled thoughtfully. Erin Lowry experienced this tension firsthand at an overpriced Manhattan restaurant for a friend's birthday dinner. She researched the menu beforehand and budgeted $40 for her meal, including tax, tip, and a contribution toward the birthday girl's dinner. However, as the evening progressed, other guests ordered multiple pitchers of sangria and appetizers without considering the cost distribution. When the check arrived, Erin discovered that the first seven people had significantly underpaid, leaving the remaining three guests to cover a $240 deficit—$80 each, double what Erin had budgeted. Fortunately, the birthday girl's boyfriend intervened and confronted the underpayers, saving Erin from an uncomfortable financial situation. This scenario illustrates a common dilemma: how do you maintain friendships without compromising your financial goals? The answer lies in honest communication and creative alternatives. When invited to an activity beyond your budget, try the "compliment sandwich" technique: express appreciation for the invitation, acknowledge your budget constraint, and offer an alternative. For example: "I love spending time with you, and it's really important to me. But I can't spend $50 on a bottomless mimosa brunch. How about getting bagels and going to the park instead? That way we still get to hang out!" For group dining situations, consider offering to handle the bill calculations yourself. This allows you to ensure everyone pays their fair share without creating awkwardness. And embrace technology—apps like Venmo, Popmoney, and Square Cash make it easy to split expenses without the uncomfortable cash exchange. As you mature financially, you'll develop different dynamics with different friends. With some, you might always split bills precisely; with others, you might take turns treating each other. The key is establishing a consistent pattern that works for both parties. Remember that true friends value your company more than your spending power. By being honest about your financial boundaries and offering alternatives, you can maintain a healthy social life while staying true to your financial goals. Sometimes saying no is necessary, but with creativity and communication, you can often find ways to participate that work for everyone's budget.

Summary

The journey to financial freedom isn't about becoming wealthy overnight—it's about building sustainable habits that compound over time. As Paulette Perhach wisely noted, having money saved gives you "the power to choose your life and not be subject to the whims of others." This power doesn't require extraordinary income or perfect financial decisions from the start. Your next step is simple but profound: choose one area from this roadmap and take action today. Whether that means setting up an automatic transfer of $10 to savings, researching income-driven repayment options for your student loans, or opening a retirement account, the most important thing is to begin. Financial freedom isn't achieved overnight, but with each step forward, you move closer to a life where money serves your goals rather than dictating your choices.

About Author

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Erin Lowry

ERIN LOWRY is the author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together and Broke Millennial Takes On Investing: A Beginner's Guide to Leveling Up Your Money. Her first book was named by MarketWatch as one of the best money books of 2017 and her style is often described as refreshing and conversational. Erin's appeared on CBS Sunday Morning, CNBC and Fox & Friends. She has written for Fast Company, Cosmopolitan Magazine and Refinery29 and regularly speaks at universities and conferences around the country. Erin spent most of her childhood living in Asia, but now settled in New York City with her husband.

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