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The YOLO Effect: Millennials and Money

Good choices

As millennials we experienced the dotcom crash and then the mortgage fiasco at the important ages of development through our early teens and then our career stage of our early twenties.  We were also raised in a period where we’ve been in a constant state of war and for some millennials this accounts for more than half their lifespan. These were the foundations of the YOLO mindset.

When we were coming of age, YOLO was at its peak pop culture usage.  YOLO stands for “You Only Live Once.” I used to hear the acronym more often exclaimed while shopping at the mall or taking shots at the bar.  It became akin to making irrational decisions in the heat of the moment.  Why? Tomorrow isn’t guaranteed so better act on it today.  Financially speaking the action tends to be swayed to support spending.

The YOLO Effect has influenced the millennial mindset around banking, saving, spending and investing.  We’re less likely to save, spend way more than we make and forgo long-term investing for instant gratification.

If we only live once, why not make sure the decisions we make support a healthy and financially stress free lifestyle?

YOLO as a mindset is great when its applied to the understanding that today is the best day to learn more about money, start saving, curb spending and create the actual YOLO life.

A few weeks ago, I held a financial literacy seminar at my alma mater Norwich University in Vermont.  The moment I mentioned YOLO I got a few chuckles from the group.  Being an older millennial, I’ve learned how YOLO can be applied in making better financial decisions today to ensure I’m living life optimally in this lifetime.

Millennials have the right mindset but we need a better understanding of how to apply that mindset to sound financial decisions.  The YOLO effect has caused us to do the following:

Delay savings for instant spend gratification.  We know that saving money is important but spending is so much more fun.  The thought is that since we worked hard for our money we should have the right to spend it anyway we choose.  But, choosing to spend rather than save has its drawbacks.

Spending allocates future fun time to work.  YOLO is about living life now but if you’re spending most of your time working than how much life are you actually living?  Are those purchases worth the extra hours on the job?

Debt reserves your future time.  Debt is a ball-and-chain and once shackled prevents you from YOLO experiences like fancy dinners, exotic vacations and luxury goods.  I don’t subscribe to the idea of never spending but I am against debt holding.  The more indebted the less YOLO living and more time spent at work trying to pay off the debt.

Just because we’ve made some poor financial decisions doesn’t mean we can’t ever regain control of our lives.  We can incorporate the YOLO mindset in our finances. So what can you do?

Envision your dream lifestyle.  YOLO emphasizes today over tomorrow but remember tomorrow is just the following day.  Retirement is closer than you think as days turn into months and years into decades.  How many of you never imagined that you would be 30 years old in a few years?  Retirement for millennials isn’t an age but more a lifestyle.  Create a plan for the life you want to live and take action today that gets you closer to living that life.

Pay yourself first.  YOLO is putting you first so make the decision to pay yourself first.  This means putting money into savings accounts.  My strategy combines the YOLO mindset with our desire to have a purpose for things we do.  I call this the Purposeful Savings Strategy.  Allocate money each pay period to various savings account titled with a purpose.  The purpose can be to retire early, buy a home or car, for gifts and holiday spending, for a dream vacation or extended travel, or save to purchase the new fashion line of your favorite designer.

Pay off debt.  Debt serves no purpose other than prevent you from doing more of the things you want.  Have a mortgage? Well you can’t simply quit your job to travel the world.  Have a car loan? You’ll need to keep burning the midnight oil to make the payments.  As you prioritize saving make sure you prioritize debt repayment.  Every extra dollar you have should be used to pay down debt and get rid of it for good.  Find extra cash by cutting expenses and limit spending.  The extra dollar you save should go to paying off those high interest loans or credit card debt.

Cut expenses and limit spending. Some of our spending leads to ongoing expenses. For instance, we spend $200 to buy the new smartphone that ties us into a two-year contract.  Reducing your expenses is very powerful as it saves you money today and limits the amount of money you’ll need tomorrow.  By limiting your spending today, you’re choosing regain more of your free time.

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