The largest generation in America is “Millennials”. They are born in the early 80’s to early 2000’s so the oldest batch of Millennials would be 35 or 36yrs old. The Millennials are starting to invest not only for their future but also for the future of their children or family. In this article, we will find out how the Millennials are doing in their personal finances.
An Overview Of The Generation Causing All The Buzz
Based on the research conducted, Millennials outnumber their counterpart generation like Baby Boomers by 15 million. According to History.com, Baby boomers are born between the years of 1946 and 1964, ranging their age from 51 and 69 years old. It is easy to say that if your boss is already 50+ years old then he/she belongs to Baby Boomers. Pocket-sized banking is the new trend for Millennials. 80% of them like accessing their financial institutions on their phones and on their tablet or small computers. Also the average income of American Millennials is $30,000 compared to all other generations which is $50,000
The Millennial Credit Portfolio
There are 4 forms of credit that Millennials are most likely to get which are credit cards, student loans, car loans and mortgages. Almost 30% of the Millennials have opened their own credit card accounts. They use their credit accounts to pay off their utilities and to purchase their needs like food, clothes, and appliances. Credit cards are more convenient than cash because of safety reasons. If you have a lot of cash in your hand then robbers can easily spot it. Some credit card companies use promos that can immediately get you the thing that you want and pay it some other time. Most Millennials have kids as of this time and they need student loans to safeguard the future of their children and that is why almost 25% of Millennials have taken out student loans. Only 15% of Millennials have auto loans because some thought that car is only for luxury and they will just put their money to pay off bills in their credit cards or for student loans. On the other hand 3% of Millennials have taken out a mortgage.
Millennial budgets can be categorized into two: first is for their own needs and the second would be for their family. Their first priority is their health, wealth and happiness. The second would be organic food. In order for them to have good health, they need to eat organic food which doesn’t contain any preservatives or substances that can harm their body. Their third priority would be beer or drinks. Almost 90% of the Millennials have tried drinking beer and ending up liking it so it is justifiable. For their family the priority is their house, who would want to sleep on the street right? The second would be cars. Based on the statement earlier 15% of Millennials have taken car/auto loans. The wedding would be the third priority and maybe second special thing that happened after having a child.
Why Millennials Credit Scores Aren’t As High As Previous Generations
The average annual debt for Millennials is $52,120 which includes payment for mortgages. Credit utilization of Millennials is only 43%. They spend more money by consolidating their debts. In addition, only 48% are aware of their credit score and only 38.6% of them have equity in stock.
The Millennial Credit First Aid Kit
Millennials understand and check their credit score, pay bills on time to avoid late payment interest and surcharge, keep their credit card balances low, utilize only 30% of total credit available, diversify their credit by using different credit cards, and apply for open credit only in case of emergency.
You cut coupons to save at the grocery store, maybe put money away in a jar for a special purchase, but are you doing anything to save on your home expenses? This infographic has a few tips you can use to make your home more efficient and keep money from falling through the cracks.
Inspired to make things greener? Find out more information on the Department of Housing and Urban Development‘s home improvement page. For information on financing, visit SunTrust, Avant and Wells Fargo
Upgrade Your Lights
Make the switch to LED bulbs
Unlike appliances and other energy-efficient products, LED bulbs that are Energy-Star rated are rated for quality as well as efficiency
LED bulbs feature many benefits like:
- Less heat emission
- No toxic materials
- More eco-friendly
- $4 – $10 per bulb depending on bulb type and application
- Annual energy cost – $1 based on 2 hrs/day of usage and an electricity rate of 11 cents per kilowatt-hour
- Bulb Life – 25,000 hrs (in most cases)
- 75-80% over traditional bulbs
- 72% over halogen bulbs
- 5+% over CFLs
ROI – 100% in 24.9 months
Level of difficulty – Easy
Install Reflective Roofing
Reflective roofing can help you lower your energy costs by reflecting light and heat away from your home
Reflective roofing feature many benefits like:
- Reducing your heating and air conditioning costs
- Maintaining consistent indoor temperature
- Decreasing heat damage on your roof
- $0.75 – $1.50 ft2 for low or flat roof coatings
- $0.05 – $0.10/ft2 for cool-roof upgrade on new
- $1.50 – $0.10/ft2 for single-ply membranes
- $0.10 – $0.20/ft2 for a built-up roof with a cool coating
- An average of $0.50 on heating and cooling costs over traditional roofing materials
ROI – 75%
Level of difficulty – Difficult.
You will need to hire professional roofers
Upgrade Your HVAC
Cleaning your HVAC system at least once a year will keep it operating smoothly
You can also make upgrades to your HVAC system:
- Upgrade your HVAC fan to move air more efficiently through your house
- Upgrade your furnace, and/or hot water boiler to a more efficient model
- Upgrade to a heat, pump, will will move air from the outside indoors
- Upgrade to a biomass stove, which can burn wood, plant material, and agricultural waste
- Consumer Cost for regular maintenance – $237-$428
- Savings – Up to 80% depending on the severity of the problem
ROI – 75%
Level of difficulty – Medium
Buy New Windows and Doors
New windows and doors can dramatically reduce the amount of heat loss or gain you experience in the winter and summer
- Replacement windows should be thermal insulated windows
- Use replacement windows with a silicon-based, or foam-based window seals
- Reinforcements in the window frames will help reduce buckling and sagging over time
- Only buy replacement windows with insulated frames, as these will provide the best performance and energy efficiency
- Buy solid core doors or doors with significant foam insulation
- If buying wood doors, opt for hardwood cores
- If buying steel or fiberglass doors, a thermal break is required
- Consumer Cost for standard double pane windows – $300 per window
- Triple-pane high efficiency windows – $1,000-$2,000 per window
- Per Door Installed – $500 – $1,400
Up to 40% on energy costs, depending on window efficiency and installation method
ROI – 85% for windows
98% for doors (depending on quality and construction)
Level of difficulty – Medium to Difficult
I was happy when I graduated from college in 2012. I entered a healing job market with plenty of opportunity not only to become gainfully employed, but be in a position to do what I love. That opportunity came when I took a job at a startup as a writer and editor.
Things were looking up, until they weren’t
Although “cutting-edge” and “exciting” are two words that come to mind when working at a small company trying to wedge into the market, “secure” doesn’t. The time came when sacrifices had to be made: me and ten other coworkers. I tried to be optimistic and take this as an opportunity to focus on where I wanted to take my career.
I thought I would easily lock down a job by the end of the month. I had good experience and a solid network. Finding a new job seemed like a non-issue.
After a month, I no longer received severance and had to enroll in unemployment benefits. It was enough to survive, but not live. I barely had enough for rent, utilities and groceries.
I had tried my best to do what I could with what money I received, until I committed the cardinal sin of spending money I didn’t have thanks to two bendable objects: my will and a credit card.
Enter Mr. Big Spender
I was sure that I would be employed soon enough. I foolishly thought a manageable amount of debt is fine and I would be able to pay it off after I got my first check at this elusive job.
told lied to myself that it was “okay” to go out to dinner three nights a week, go to a concert every so often, and even splurge on travel. I made more than the minimum payment on my card, but didn’t pay it off entirely. Enter: interest charges.
My inner big spender’s monologue became louder and louder. I found myself in over $7,000 of credit card debt, had one delinquent payment, and my credit score declined more than 100 points over the course of six months. After all of that, it hit me like a brick wall: I mismanaged my money and consciously ignored my financial situation.
Although I never maxed out my card, I paid no mind to how much credit I was using. I had a $10,000 limit on one of my cards. When I had a $1,000 balance, I paid just part–say $500. Once that part was paid off, I used this as permission to put $500 back on my credit card–and then some. Slowly, but surely, extra spending piled on and the interest charges grew.
Doing more to spend less
I knew then I had to discipline the big spender within or find myself in a downward spiral of debt. I learned three simple lessons and changed course:
1. Pick up freelancing or part time work.
In the time I was unemployed looking for full time jobs, I was able to pick up writing gigs here and there. It wasn’t enough to replace a full time job, but it kept me sharp and broke up my daily job-hunting routine. I still have those clients, and it’s nice to have that work as supplementary income.
2. “A couple dollars here and there” can add up.
It’s only human to create the blurred line between “want” and “need”, but I started making the honest distinction. I began to rethink visits to the coffee shop, buying the name brand over the store brand and monthly subscriptions. It’s not fun to let go of comforts and conveniences, but it’s a necessary step.
After I built a safety net, I was able to throw in little luxuries here and there, but because I had better control of my habits. It goes to show: I needed to let go of certain conveniences to get back on track for a time. I now see how many small expenses play a role in the big picture.
3. Save for unexpected situations (like unemployment).
Believe it or not, money doesn’t appear in your bank account unless you actually put it there. I’ve started to put a percentage of my paycheck into a savings account where it will remain until I need to use the money for an unexpected expense or emergency.
I also went the extra mile and entered my debit card information into an app that rounds my purchases up to the nearest dollar and deposits them into an investment portfolio. I found this particularly convenient since it takes minimal action on my part.
With my debt paid off, I have more disposable income, but that doesn’t mean I’ve reverted to my old habits. My approach to a more secure financial future means responsibly budgeting and investing for down the road, and not taking the big spender along for the ride.
I wish this story was about how I decided to use my credit cards to fund a crazy adventure where I learned to laugh, to love and to live. I learned that the best things in life are free, but buying everything on credit made it better.
I wish I could tell you that, but in reality I ruined my credit through sheer ignorance and laziness. I learned nothing and only laughed a little.
Immaturity is expensive
When I was younger, I didn’t care about having a good credit score because I had no desire to buy a house or a car or a boat. I just wanted a credit card so I could feel empowered to make poor financial decisions like a real adult.
And I did. I really, really did. I’ve created a bullet list of decisions I thought made sense at the time because I was an idiot:
- Closing accounts that were in good standing because the credit limits weren’t high enough.
- Defaulting on two credit cards because they doubled my interest rates and I didn’t think it was fair to continue paying them off.
- Getting into a 2 year gym contract where the only escape clause involved faking my death.
Aside from those genius moves, I also only ever made the minimum payments on my cards (when I was still paying them) and often forgot to make payments. I figured I would make payments if and when I felt like it.
Can you guess what happened to my credit then?
My score tanked. At one point I think it was in the low (low) 500s. Pre-approved credit card offers stopped coming in the mail and debt collectors were calling me like clockwork.
When I started caring a little about having a good credit score, I paid a credit repair agency to help me remove the negative marks from my file. I couldn’t be bothered to do it myself, so I paid money to have someone else do it for me (I never learn). The agency helped me negotiate settlements so I could remove the debts from my credit history until only one was left.
The one that’s still there today.
I would if I could
I’m only now realizing the immense responsibility that comes with managing your credit. It takes time and effort to not only get it where you want to be, but to keep it there as well. I’ve learned my expensive lesson and I have changed my ways.
I decided to own up to my past mistakes and take out an installment loan to pay off that delinquent account. The loan would show how responsible I am now and boost my credit score, while removing the account that was killing my score.
Unfortunately, that one derogatory mark has lenders running the other way. I cannot get a loan to pay off the account and they won’t settle for less. I can’t get any loans or credit cards or boats. The lowest APR I’ve seen lately isn’t low at all, and that’s before they reject me.
My credit score has climbed over time without any effort on my part, but I also can’t put in any effort because I don’t qualify for any credit lines outside of store cards with low credit limits. While it can be inconvenient, not having access to credit cards has forced me to spend more responsibly.
These are the consequences that have turned into valuable life lessons:
- You can’t buy something on impulse if you have to save up for it first.
- There’s no need to worry about monthly payments when you use a debit card.
- I either pay for it now or I don’t get it at all.
- Debt is freaking scary!
It’s not glamorous, but it keeps me out of financial trouble.
I wish I could consolidate my debt. I really, really wish I could.
Unfortunately, my credit score is not great which is why most companies won’t lend me money. It’s going to take time to improve my score and until that happens I have to deal with higher interest rates and lower credit limits.
I am paying for my mistakes every month and let me tell you, it’s expensive. Consolidating my debt would save me so much more than just money.
The convenience of ONE monthly payment.
Convenience for me boils down to having many things become one thing. One interest rate. One monthly payment. One debt to focus on.
Having one monthly payment to deal with would make things so much easier for me because I wouldn’t have to:
1. Constantly schedule different monthly payments.
There are things I actually want to remember, knowing exactly how much money I owe and exactly when I have to pay it every month is not one of them.
2. Make sure I have enough money in my account.
I use my checking account for everything, but I don’t like it when everything happens at once. I’ve been hit with quite a few penalties because an automatic payment occurred before payday.
3. Figure out how to use the snowball method for all debts.
I’ve never been in a rush to pay off all of my debts, but there are times when I’d like to eliminate all of it. Then I come to my senses and realize that I do not have the kind of dedication it takes to work out individual strategies and tactics to conquer each debt I owe.
I don’t want to dedicate any more time than I absolutely have to to make sure my debts are in order. Owing money is stressful. Remembering to make timely payments for every single debt is stressful.
Consolidating would be the easiest way to set it and forget it without making things worse for myself in the future.
Don’t make it a last resort
If I could, I would make it my first resort. You should do the same.
Don’t wait to get your finances in order after they’ve completely fallen apart. Take control of your finances now before they take control of you.
Consolidate now so you can focus on other things.
If you can’t be bothered with the hassle of shopping around for a better interest rate for your existing payments, then think of it this way: put in the time now, so you can rack up the savings later. Know exactly how much interest you’ll be paying and how long you’ll be paying it.
And the benefits, oh those sweet benefits. You can set up automatic payments (that are on-time every month, of course) and watch your It’s like getting rewarded for being responsible. Want to make additional payments to get done faster? Feel free, it’ll even save you some money on interest.
Don’t make debt consolidation a last resort. Make it the best decision you’ve ever made.
I know I would.
Finances like an adult
My finance goals are simple. Make money so I can save more money. I get a sense of satisfaction with every bit of my paycheck I’m able to put into my savings and I know that I’ll be able to save more once I can consolidate my student loans into a single payment at a lower rate.
That means I need to continue paying my bills on time and managing what little credit I have responsibly. When my score is good enough I’ll consolidate and pay everything off as quickly as I can.
There’s no pressing need for me to pay off my debt sooner rather than later. I’m not planning on buying a house or a car or a boat anytime soon. But when the time comes for me to make a big purchase, I want to make sure I get the best rates possible.
Save now. Save more later.
Make more money. Spend more money.
At first glance, it seems logical. The amount of things you can afford goes beyond basic necessities (toilet paper) which means that you can now afford to treat yourself to the finer things in life (two ply, baby!).
Then you do the math and realize that you can keep treating yourself with other finer things. Go you!
- Go get a newer car.
- Go get a better apartment, condo or house.
- Go get a nicer wardrobe.
- Go get a trenta at Starbucks.
Go get it because you deserve it.
You’ve also just managed to get yourself debt. Hey, nice(r) things don’t come cheap. It’s the way of the world and instead of jumping off of the lap of luxury (it’s just so comfy), you figure you can just carry a balance on your credit cards. That’s what they’re there for anyway, right?
Welcome to Lifestyle Creep. The most pleasant way to get yourself into more debt.
You Might Be Creeping Too Hard
Here are a couple of things you probably already know, but are worth mentioning anyway:
- While more money makes it easier to afford things that used to be out of your price range, it’s easy to get into the habit of overspending simply because you can.
- Having more money to spend makes it easier to justify your new spending habits.
Here’s a list of possible justifications that you may or may not be using on a daily basis:
- I deserve this
- I can afford to treat myself
- I make more so it’s okay
- I work hard for this
- Why work hard if I can’t treat myself every once in a while single time I want to?
There’s nothing wrong with treating yourself to nicer things on occasion or even regularly. You do deserve them. You should have nice things. You work hard for a reason. On the other hand, you shouldn’t get carried away.
You don’t eat an extra five thousand calories a day just because you work out twice a week, do you?
All things within reason
Like most things in life, it’s all about finding a compromise. Correction: it’s about finding a compromise and actually sticking to it.
You don’t want to deny yourself the finer things, but you also don’t want to spend it before you get it. Lifestyle Creep is something you can easily control.
1. Feel free to upgrade yourself… within reason
That means don’t splurge on everything every single time you can. Can you switch to organic goods? Sure. Should you switch to a $10 cup of coffee every morning? Probably not (unless it helps you eliminate the need for sleep, then maybe).
If whatever you own isn’t about to break down, it’s safe to say you don’t need to get a better version of it right now.
2. Spend more. Save more.
We get it. You can’t show off about how much you saved.
Nobody talks about how much they’ve got stored away unless it’s followed by how you’re going to spend it all. Still, aside from increasing your disposable income, the best thing about getting a bump in pay is being able to save more without having to cut back on the things you love. Don’t give it a second thought. Whatever you were saving before, save more.
Save as much as you can. The more you do it, the easier it becomes.
3. Track your expenses
There’s plenty of options out there to help you track where your money is going. Take advantage of them so that you’re not scrambling to figure out how you’re going to survive on one jar of peanut butter (the luxury kind, of course) and moldy (artisan) bread until your next paycheck.
How bad do you want it?
No one enjoys being scolded about financial responsibility.
We know that being responsible is usually the best way to go about things, especially things that have to do with money. We also know that we live in the real world where what’s best for you isn’t always what feels the best.
Spending feels good now. Saving feels good… eventually.
It’s hard to keep the latter in mind when the former is so tempting. That being the case, we won’t say that you should always have an absolute, concrete justification for everything you buy. Whenever the urge to splurge hits, ask yourself this:
How much do you want it and will you still want it as much after you get it?
Source: Nic McPhee (Flickr)
When you apply for an unsecured loan, you probably expect to receive that amount in full. What you might not expect is for there to be an origination fee attached to that.
With unsecured loans through Avant.com, there is no origination fee – the amount of the loan is exactly the same as the amount of money that will be put into your bank account. We believe that lending should be a transparent process that empowers customers to access credit in a way that they can afford to repay.
What is an origination fee?
If you’re borrowing for the first time or haven’t taken out a mortgage, chances are you haven’t heard of origination fees.
An origination fee – also known as an “activation fee” – is a percentage cut out of a loan that is kept by the lender. For example, if you’re approved for a personal loan for $10,000 and your lender charges a five percent origination fee, that percentage is immediately taken out of your loan amount by the lender as a lump sum. When all is said and done, $9,500 is what you’re left with, but you’ll still pay interest on the full amount.
One question you might ask is “what’s the fee for?” The answer could be different depending on the loan provider. The fee is usually explained as an administrative fee, opening a loan file, underwriting, or just a loan charge.
How Avant compares to other loan programs that charge origination fees
Unsecured personal loan through Avant
(0% origination fee)
Other loan provider
(5% origination fee)
5% – $500
Effective monthly payment
Total fees & interest
Why unsecured loans through Avant don’t charge origination fees
An efficient underwriting model backed by Avant’s proprietary technology eliminates the need for origination fees. That was a bit of a mouthful, so we’ll put it in plain English: we look beyond FICO® Scores so we can better analyze borrowers’ creditworthiness and we don’t need additional sources of funding to service loans.
Origination free is how Avant operates – it’s as simple as that. And we’re working everyday to improve the lending process and reduce the barriers to receiving a loan that can help you and your financial situation.
See the rates available to you without impacting your FICO® Score here.
(This is a guest post by Jon Dulin of MoneySmartGuides.)
Let’s face facts, if you want to get ahead financially, you need to make sure you are not spending more than you make. It’s the first habit of the successful and wealthy and it is vital in reaching your goals. But if you are like most, you never created a budget before in your life. You have no clue where to start or how to even create one for that matter. Luckily for you, this is all about how to create a budget for first-timers. I will take things slow so you can digest everything and by the end, you will be on your way to living within your means and reaching your goals.
Your Guide To Creating A Budget
Step #1: Focus on Your Mindset
The first step to creating your budget has nothing to do with actual budgeting. It has everything to do with getting yourself in the right frame of mind. What do I mean by this?
When most people hear the word “budget,” bad things come to mind. They think their spending will be restricted and they suddenly have to live a life of going without things. This is a negative mindset around budgeting and what holds many people back from even getting started.
To be successful with budgeting, you need to change your mindset. Don’t look at a budget as restricting your spending, see it as a tool for helping you to reach your financial goals. Look at it as a positive thing, as something that will help you better understand your finances. When you can make this switch from a negative to a positive mindset, you increase your odds of following through with your budget.
Step #2: Determine Your Ideal Budget System
Once you have the right mindset, you can begin to work on a budget. Now, thanks to technology, there are all sorts of tools at your disposal for budgeting. Just like a carpenter needs to have the right tool for the job, you too need the right tool for budgeting.
This is where you have to take an honest look at yourself and determine who you are. Do you like more manual processes so you can dive deep in the information? Or do you like more automated things so you can get the job done with the least amount of work?
Neither one of these is good or bad. You just have to know which type of person you are so you can choose the right budgeting tool. Here are a couple budgeting ideas for you:
- For Those Who Like Manual Processes: check out free excel budget spreadsheets. Instead of creating a budget from scratch, you can use a pre-made template and fill in your information. This link takes you to a handful of options. The great thing here is that they all vary in level of detail, so you can go as deep as you really want.
- For Those Who Like Automated Processes: check out some free software programs, such as Mint and PowerWallet. Both of these allow you to link your accounts so you don’t have to manually enter in transactions. You basically set up your budgeting categories (more on this in the next step) and the software pulls the transactions from your bank.
There are also paid pieces of software as well, like You Need A Budget, that works essentially the same way, but is more robust.
Step #3: Begin Tracking
OK, you have the right frame of mind and you have the budget tool that meets your needs. Now we can get started tracking your spending. For beginners, I suggest you keep track of everything. It’s better to develop good habits from the start rather than change bad habits later.
So, simply create 2 – 4 categories as follows:
- Fixed Spending
- Variable Spending
- Debt Repayment
Now, I say 2 – 4 categories because you could put debt repayment into one of the spending categories, but many people choose to break it out.
In the fixed spending category you list everything that has a fixed cost from month to month. This would include your mortgage/rent, a gym membership, a car payment, etc.
Variable spending is everything that fluctuates from month to month. Cable bill, cell phone bill, groceries, dining out, etc.
Debt repayment will be any debt you might have. So student loans, credit card debt, etc. can go here. Note that I put the auto loan in the fixed spending category. It could easily go here instead.
Savings is all of the long-term savings you want to have. Building an emergency fund, saving for retirement, a house, etc. all would go here. When deciding on the amount to save each month, try to make it 10% of your income.
Once you have all of your expenses set up, you have to put a dollar value on them. Look back at a few months worth of spending and put in what you tend to spend/save for each category. Then total them up and see how this compares to your income. If your income is higher, great, you can assign that extra money towards debt repayment or savings. If your income is less than the spending, then you need to cut something out.
The best place to cut something out is the variable spending category. Cut back here and not on your debt repayment or savings. Learn to live on less.
If you chose a manual budget method, you will have to update the spreadsheet every time you spend money. If you chose an automatic budget method, you only have to log into the account to see where you stand.
Step #4: Make Adjustments
As you follow your budget, there will be some growing pains. In the beginning, you will most likely have a lot of money in a miscellaneous or unknown category. This is OK. Spot these random events and make sure to set up a category for them. Some people they donít realize how that cup of coffee every day actually makes a difference to their budget in the long run. Over time, work to make the miscellaneous category smaller and smaller. It will never go away as there will always be one-time charges, but the key is to not have it be your biggest spending category.
Also, you may find that in some categories you overspend. Again, not the end of the world. If you overspend by $50 on groceries and under spend on dining out by $75, then you are still ahead of the game. The goal is at the end of the month to simply live within your means. In other words, spend only what you make.
Step #5: Make Changes
As time goes on and you get more comfortable with budgeting, you can start to make bigger changes. These are changes that keep budgeting interesting to you and not seem like a second job.
Take me, for example, I started budgeting everything. After a few years, I changed things up by no longer tracking my fixed spending. I still had the categories on my budget with a dollar amount, but I didn’t actively track them. Since I knew the amount was set, I wasn’t going to overspend. I was more interested in keeping my variable spending in check.
Furthermore, I made other changes by trying to save more. I started to tweak the amounts I would spend in some categories and direct more money towards my savings and investments because I wanted to reach financial independence.
I know this was a lot of information regarding budgeting, but take the time to go through it and set up your budget. If you never create budget, you have no idea if you are getting ahead financially, and most likely you are not. You will spend the rest of your days in a situation where you always seem to have just enough money to get by.
While this might be OK now, how is that going to work out for you when you want to stop working? With no income coming in, it is going to be hard to survive. Set up a budget and begin tracking your spending. Your future self will thank you.
Author Bio: Jon runs a personal finance blog, Money Smart Guides, who helps readers pay off their debt and start investing in their future. To learn how to get out of your debt for good and start reaching your financial dreams, be sure to check out his blog.
Some people feel friendship and money don’t mix, and if you want to protect a relationship, don’t lend money to anyone. Of course, this is easier said than done. It’s hard to turn our backs on a close friend or relative who needs legitimate help, especially if they have no other alternatives. Ultimately, it’s your decision. But before writing a check or pulling out cash, seriously consider whether this is the right move. Lending money can change your relationship with the other person, and you have to acknowledge possible consequences of this action.
Here’s a look at six reasons why you shouldn’t lend money to anyone.
1. You Could Lose Your Money
This might be obvious, but it needs to be said. The person borrowing the money may promise to repay the cash within the next few days, weeks or months. But the truth of the matter is, there’s no way to know with certainty whether this person will actually return the money. If he’s having financial hardship today, who’s to say these challenges won’t continue into the near or distant future. A good rule of thumb: don’t lend money unless you’re prepared lose it.
2. You Don’t Like Confrontation
Take into account your personality when deciding whether to lend money to someone. If you’re the kind of person who likes to keep the peace and you don’t like confrontation, chances are you won’t approach the person or bring up the loan if they don’t repay as promised. This can trigger pent up frustration or anger, which might strain your relationship. It’s okay to lend money to someone, just make sure the person is clear about your expectations, and make sure you have a written agreement explaining the terms. Also, only lend money if the person can repay within one or two weeks — before they start to get selective amnesia.
3. They May Request More Money
If you give someone money, the person may come back for more. He may think you have a lot of disposable income, or that you’re in a position to help in his times of need. And if he runs into problems again, you might be the first person that comes to mind. Some people are habitual borrowers, and one act of generosity can start a pattern. But if you turn down a money request the first time someone approaches, they won’t think of you as a money source and they’ll look elsewhere.
4. They May Tell Others About Your Generosity
It’s awkward enough to deal with one person who repeatedly asks for money, and the last thing you need is the borrower sharing details about your loan agreement with others. Some people have big mouths and they can’t keep anything to themselves. And if you give them a loan, they might tell others how you helped with their situation. An innocent mention of your assistance might give others the idea that they can come to you if they experience a similar hardship. So, if you’re going to lend money, make sure the borrower understands that this is a confidential agreement, and you would prefer if he didn’t tell others about the arrangement.
5. You May Need the Money
Never lend money that you’ll need in the immediate future. For example, if your friend needs $200, but the only cash available is for your rent or mortgage that’s due in the next couple of weeks, you’re better off telling the person you can’t help. Going back to the first point, there’s no guarantee this person will repay the money before you need it, which can complicate your finances. You might deal with late fees, or have to seek a loan for yourself.
6. It Can Create Issues in the Relationship
If you have a solid relationship with someone, don’t ruin it with money. You’re trusting this individual to repay the money as promised, and if they never return your money, this may always be in the back of your mind and trigger trust issues. And if you confront the person and ask for your money on more than one occasion, he may become defensive and wrongly upset with you. It’s a no-win.
If you decide to help someone financially, it might be better to simply “give” them the money, if you can afford to. If you don’t have any expectations regarding repayment, and if the other person doesn’t feel pressure to pay you back, the money won’t come in between the relationship.
What are some other reasons you should never lend anyone money? Let me know in the comments below.
AvantCredit’s CEO, Al Goldstein, who has started three successful companies, often serves as a mentor for many young or first-time entrepreneurs, a role he’s embraced since founding Startup incubator Catapult at the University of Illinois.
Al is often asked what advice he’d give to first-time entrepreneurs. The advice he gives may vary from person-to-person, but these five themes are nearly always repeated.
Just starting out?
- Take people with you. If you encounter smart, talented people through your years of experience, take them with you. From the beginning, entrepreneurs must identify the key skills that the founding team will need to get the business off the ground and sustain success. Two of AvantCredit’s co-founders, Paul Zhang and John Sun, started as interns at Al’s first business, but are now Chief Technology Officer and Chief Credit Officer at AvantCredit.
- Find a market for your product. Finding a unique, hard-to-copy position within an underserved market is the foundation for your success. After the financial crisis, traditional banks started to limit everyday consumers’ access to credit, but there was this massive amount of demand from consumers for credit solutions. That’s AvantCredit’s industry macro-demographic, which sets the stage for a lot of demand and limited supply.
Trying to improve your business?
- Sit where the action is happening: You need to be totally entrenched in what’s happening. Culture and teamwork are so important early in your company’s development and being on the ground floor allows you stay close to the details. You’ll also understand the issues and changes as they happen, allowing you to help problem-solve before anyone comes knocking on your corner-office door.
- Embrace accountability and mistakes: Your team needs to be accountable without throwing each other under the bus. Reward those who both acknowledge their own slip-ups and offer solutions to fix them. Some of the best learning can come after mistakes are identified and ultimately lead to a better product/process in the end.
- Never turn down a coffee: You can always afford to spend 30 minutes with someone who requests some of your time. Maybe you can help them or maybe they can help you. Call it business karma, but inevitably a connection who you helped in some way will come back to help you in return. On the flip side, never be afraid to request 30 minutes of someone’s time.
Have a questions for AvantCredit’s leadership team? Ask it in the comments!
The AvantCredit team is made up of people with diverse and interesting backgrounds, whose different talents help AvantCredit become the digital lender for the everyday consumer.
We sat down with the company’s CFO, Suk Shah, to get his perspective on the team, the culture and the growing business.
Q: What is your vision for AvantCredit as CFO?
A: The vision is to be a dominant player in the consumer lending space, which is massive. I came from a big bank, and after the Great Recession, banks have essentially retreated from providing credit to this consumer base. The combination of a strong executive team that Al put together in conjunction with a really good product in an unserved market creates really long runway.
Specific to my role, I’ll work to continue to support the business from a finance perspective and ensure that there’s appropriate operating discipline across the business; whether it’s ensuring our credit models price risk appropriately, managing costs, or creating access to cheaper capital.
Q: What’s your background and how does it prepare you to bring that vision to life?
A: Outside of Finance, the experience that I bring from an organizational perspective and from a leadership perspective is really on the people side. I’ve structured and led large teams during my tenure at GE and HSBC. Our teams have been recognized for having a knack to get a lot done. In particular, I’ve had the opportunity to learn what is important and what is not important. Having said that, there is still a lot for me to learn in the consumer tech space.
Q: One of your major focuses here is talent – we’ve been fortunate to build a smart, well-rounded team – how do we continue to do that as the company gets larger?
A: The one thing that we don’t want to lose sight of is our fabric, which is really why the people who are employed by AvantCredit are here – their dreams, their goals and their career paths. First and foremost, we must make sure that our people are able to fulfill their career goals, both short term and long term. That infused with the right culture, attitude and camaraderie is the right recipe to ensure that people here will want to stay here and never leave.
We haven’t had any attrition here in the corporate ranks for the last six months, which means that people are here for a reason, that they believe in this company and that they want to be here day in and day out. As we get bigger, we need to continue to live that vision and to have good management discussions with the folks that are at the lowest levels and also our managers who are taking on more responsibility to make sure that they understand communication, development and career paths. All that stuff is really important.
We’re making sure that things like performance management, corporate perks and Town Halls are a part of daily life at AvantCredit. We’ve done things to make everyone feel and continue to feel like we’re a family so that people stay here and never want to leave. If anyone feels otherwise, I want to be the first to know.
Q: As the company grows, how do you envision the culture shifting?
A: What we want to hold onto is that entrepreneurial spirit. Everyone came here for a reason. As much as possible, we want to try to ensure that every individual still feels empowered to make their own decisions and that they have a voice in how our business continues to grow and manifest itself.
As we get bigger, we need to continue to live that vision and to have good management discussions with the employees that are at all levels. We need to ensure that managers who are at all levels understand communication, development and career paths. All that stuff is really important.
Q: Your role is a hybrid – you’re both CFO and heading up Talent and HR – what led to that combination?
A: I spent 8+ years at GE where leading large teams and Talent management were part of every day life. They’re known for grooming really great talent through their leadership programs, particularly in the finance space. Al and I agreed, that at this point in Avant’s growth, this was a natural fit, albeit temporary as we continue to grow larger. A lot of my background revolves around operational finance and people development. The basic finance disciplines of strong data analytics and reporting, and tactical execution are easily transferrable to the Talent function.
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