Erin Lowry is the writer behind BrokeMillennial.com and her first book, "Broke Millennial: Stop Scraping By and Get Your Financial Life Together." Now Lowry is back to help millennials start growing their money through investing in her new book "Broke Millennial Takes On Investing." We talked to Lowry about why millennials find investing so scary and why it's worth overcoming those fears.
This interview has been condensed and edited.
Who is this book for?
The book is designed to be the true beginners guide to investing. The inspiration really came from the fact that after my first book, there was a small investing chapter toward the end of it. I recommended a couple of other books for people to check out if they wanted to keep learning more about investing. I began getting messages and tweets and emails from folks who said something along the lines of, "The books you recommended are a little bit too complicated, do you have anything easier?" And frankly there wasn't anything easier on the market.
A lot of that has to do with the fact that the language of the stock market is pretty complicated. A lot of times people who are further along in their investing career will just use words like index fund, time horizon, risk tolerance. There's an assumption that everyone understands what that means and they don't. It's like learning a foreign language. People can read other investing books and feel overwhelmed or worse, just feel stupid. It's really not encouraging for you to keep continuing on and taking control of your investing life. So I wanted to create a space where people felt motivated, in control and not intimidated.
You mentioned the first book. Should people read that first? Is this a series like Harry Potter?
I wouldn't liken it to Harry Potter although I wish I was at J.K. Rowling's level. But yes, it is a series. You should probably read book number one unless you're quite far along in your financial life. Book number one still has a lot to offer someone who has all of the basics down. At the beginning of book number two the first thing you go through is a checklist of whether you are ready to even start investing, and in there I have a line where I talk about — at the risk of sounding too self serving — if you haven't checked all the boxes on this checklist, you should probably go back to book number one.
What makes millennials particularly averse to investing?
Every generation has their own issues when it comes to having to start investing. It's not necessarily an intuitive process and we don't necessarily get taught how to do it. I think what's unique for millennials is that we were reared essentially in the Great Recession. A lot of people saw parents, grandparents, friends' parents lose lots of money. A lot of people had problems finding jobs. And really the finger gets pointed at the stock market. I think what's interesting is a lot of it was related to the housing crisis, but homes and real estate still often are seen as "safe" investments as opposed to the stock market.
The other big thing is we're battling a lot of financial obligations. You're talking about a phase of life where people are trying to figure out how to pay down student loans, they're trying to figure out how to get out of a paycheck-to-paycheck cycle, start saving, start focusing on short- or medium-term goals, whether that's something like getting married or starting a family. Even something that kind of sounds silly: The cost of attending other people's weddings dominates your late 20s to early 30s. It feels like every time you turn around you're getting smacked with some other expense and you think well, I just can't afford it.
What do people miss when they don't invest?
The number one thing they miss out on is time, which is the first thing I address in the book. When you're young, time is your biggest asset when it comes to investing because compound interest is going to be working for you. A lot of people experience the negative side of compound interest when you're paying off debt. So with student loans, credit card debt, what have you, that feeling of, "I pay so much money toward this and the balance never seems to go down, how is it possible this thing keep growing?" That's compound interesting working against you when it comes to debt. But if you reverse it and harness its powers for good and you're able to invest and have it grow your wealth, then time is your number one asset. But if you wait 10, 15, 20 years to get started, it's a lot harder to play catch up.
Why is insurance in the 'scam' chapter?
Unfortunately, oftentimes insurance is a product that gets sold to you with little consideration of what's actually best for you. A lot of people who are selling insurance products are not working as fiduciaries, which means they can sell you whatever product they want as long as it's not harmful to you, which ultimately might not be the best thing for your bottom line. That's why it's important when you're evaluating any insurance product that you make sure it is the best possible option for you.
I'm a big believer in insurance in general because not having the right amount of coverage can completely bankrupt an individual. It is really important that you have the proper insurance coverage, but you need to be very careful about what that coverage is and from whom you are purchasing it.
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What makes this different from all the other personal finance books?
What makes this different is it is for true beginners. There really are not a lot of options for investing books where you don't need to have any knowledge. You don't need to know any of the terminology. You don't even have to be in a hugely secure financial situation to read this book and start getting the knowledge.
I have a letter in the beginning of the book that says, "Is this right for you?" And I say if you're an experienced investor, this probably isn't the book for you. But if you're feeling really overwhelmed and you're just trying to figure out how to start building your wealth, whatever stage of life you're in, when it comes to being an investor in the beginning, this book really is for you.
There are a lot of wonderful classic investing books. What mine focuses specifically on is how things have changed, as well as the technology that we now have. So I get into robo-advisers, micro-investing, often looking through the lens of things that feel a little more millennial-specific, like how to invest in a way that aligns with your religious, ethical or moral beliefs. Those aren't things you tend to see in other investing books.
Why should we listen to you?
I'm not an investing expert. And I like to keep reiterating that to people. But it's not really me you're listening to. It's a lot of very experienced, very well established people with long track records. I like to think of myself as a translator when it comes to this book because I went out and did a lot of interviews with a lot of people and distilled it in a way that I think is easy to understand and digestible for a basic beginner who is ready to start investing.
This book costs $15. You can buy used pink and white rollerskates on Poshmark for the same price. Why would we buy your book when we can buy roller skates?
You don't have to buy it. You should look at your local library. I like to keep plugging libraries. It's important for people to have free access to financial education. If your library doesn't have it, please request it and book number one because it is really important that people have access. As much as I would love a book sale, I would rather you have this information, so whatever way you can get your hands on it legally, go for it. And you can still go roller-skating.
"Broke Millennial Takes On Investing" is available wherever books are sold.
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Image: Philip Blackowl