Q&A: ‘Generation Earn’ Author Kimberly Palmer

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To today’s young professionals, debilitating credit card and student loan debt and unemployment rates of 10% are common parts of their economic landscape, while ideas like job security and real estate investments that always rise in value seem like concepts of the distant past. How do people in their 20s and 30s differ from previous generations in their approach to careers, credit cards, investing, banking, and shopping, and what are the smartest ways to cope with the brave new unsteady economy?

Kimberly Palmer, who writes the U.S. News’ Alpha Consumer blog and has a new book out called Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, addresses these and other topics in today’s Q&A.

In terms of being consumers, what sets today’s young professionals apart from other generations? What blind spots, weaknesses, and strengths do they have, and how would you advise them to be smarter consumers?
Kimberly Palmer: We’ve had a really rough start to our careers. We’ve experienced two recessions in the last ten years, one of the tightest job markets, and a dismal stock market. But there’s an upside to all that bad luck, which is that it’s made us savvier. We’ve been forced to educate ourselves about the economy and money, for starters. We don’t just trust banks or “experts” to manage our money for us; we want to do our own research and know where our money is. We also care more about financial security and being relatively frugal. In the long-run, those lessons could make us better off.

Likewise, what sets today’s young professionals apart from other generations in their approaches to banking and investing? And, generally speaking, how do you advise folks in their 20s and 30s to change how they invest and use credit cards and banks?
KP: We don’t trust anyone with our money the same way our parents’ generation didn’t trust anyone over 30. I’ve even had people tell me they don’t believe in 401(k)s or the stock market anymore. In fact, my husband has said that to me. We have to get past some of that fear, though, because our money isn’t going to grow at all if we keep it in our bank accounts.

My main advice is to embrace the role of being your own financial advisor. It’s fine to not trust someone else with your money, but it means you have to do more work yourself. That work can be fun, though – experiment and play around with the stock market. Some of the most successful young investors I interviewed for Generation Earn lost a lot of money at first. As painful as it was for them, those mistakes helped turn them into the smart investors they are today.

With credit cards, you have to make sure you’re taking advantage of the banks, and not vice versa. That means making use of the free identify-theft protection and rewards that come with cards without paying for them by paying off your balance in full each month. Avoiding credit card debt is one of the smartest financial moves you can make.

In the book, you mention that because job security is basically a goner, it’s wise to always do a little freelance work on the side — in case you really do wind up needing a Plan B, and just for the sake of some extra money in the bank to help cope with the unknown. What do you see as the easiest, most practical, and least time-consuming side gigs? The idea of designing T-shirts, for example, is suggested in the book, but is that really practical? Can you make decent money with something like that?
KP: Some of the most fun side-pursuits, such as T-shirt design or blogging, are not a practical way to replace your income unless you are really, really good. But they can give you a cushion if your main income suddenly stops. If you can find something you like that could actually earn you a decent salary, that’s even better. The best example here is probably teaching. People will pay a lot for you to teach them certain skills, from web design to woodworking to writing to a second language. That’s something you could ramp up quickly if you had to because you lost your job, too.

A while back, I asked lots of hard-nosed personal finance bloggers to tell me what products and services they were willing to spend good money on, and also which ones they purchased solely based on the cheapest price. Would you care to weigh in with a few examples of things you think are worth the money, and also some things you buy strictly based on lowest price?
KP: I am willing to spend money on almost anything related to health and safety, especially when it comes to my baby. That means I spend more than I need to on childcare, groceries (especially organic produce), and all kinds of baby-proofing devices. My husband thinks I go overboard and that I’d like to cover everything in our house with foam, which is only partially true. “Safety comes first” can be a very expensive rule to live by.

I also splurge on things that save me time. That means paying for my groceries to be delivered each week and for someone to clean my house.

But I’m a total cheapskate in other areas, especially clothing. I rarely buy new clothes and when I do, I always, almost without exception, use coupons. I also bring my lunch to work almost every day. That saves me time, too.

As a new mom, you surely have been exposed to all sorts of baby products, and I’m sure that you realize there are some completely useless baby products out there. Now that you’ve got some experience as a parent, what products would you advise an expectant mom to purchase, and which ones would you recommend skipping?
KP: For me, the most useful splurge was a relatively pricey baby carrier with good back support because my baby refused to be put down, even for sleeping. But every baby is different, and that’s why it makes so much sense to wait until after you have the baby to buy things. I could have skipped all the cute baby clothes because it’s so much easier to wash and change simple outfits.

I’m actually finding it harder to reign in my budget now that my baby is a little older (she’s one) and so interactive. I want to buy her every educational toy out there! I’m trying to learn to restrain myself.

Read more:
Q&A: Author of ‘Consumed: Rethinking Business in the Era of Mindful Spending’
Q&A: Trent Hamm, Author of ‘The Simple Dollar’
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