Job-hop your way to higher pay

If you’re looking for a personal finance book to give a young adult this holiday season, my best suggestion is Money The Way You Like It: Personal Finance Tactics for the Real World, by Erica Alini. Ms. Alini, national online money reporter at Global News, wrote a book that feels connected to what’s going on in the economy right now. For example, she offers some great ideas on how to tap into a job market that has given workers unusual leverage to negotiate wages and benefits. Of course, it also covers expensive housing costs. Here is an exchange I had with Ms. Alini recently by email:

Q: The caption of your new book jumped out at me: Personal Finance Tactics for the Real World. Would it be correct to say that you have discovered that some traditional personal finances do not work in today’s world, at least for young adults?

A: Yes, that’s exactly what I was going with. Personal finances are becoming more and more complex. I will give you some examples. So many financial innovations aim to make us buy or borrow more: we now have not only credit cards, but also mobile payments and BNPL (buy now, pay later) apps, which can be a psychologically slippery slope. towards overspending. You can buy stocks with an app, but it also means you can make some really expensive investing mistakes with just a few nudges. Even purchasing home insurance is no longer easy. If your home is at risk of flooding (and more of us face this risk), you’ll need to purchase optional and additional coverage, and that’s up to you. Everywhere you turn, there are more choices, more financial products, and more things you need to know to be able to make good decisions. We all need to level up. But the challenge is greater for millennials and Gen Z who also face staggering housing costs and are often mired in student debt when they are expected to take off in life.

Q: One of your chapters is called, It All Starts With Housing. What do you mean?

A: How much you’re going to spend on keeping a roof over your head is one of those critical decisions that can define your long-term financial path. If you spend too much on housing – whether you have a mortgage or a homeowner – then you’ll have a hard time paying for the rest of your life. And balancing the cost of housing with the cost of everything else has become the biggest financial challenge for my generation.

Q: How do we get Millennials and Gen Z to think strategically about retirement when housing is so expensive and many in these groups are skeptical that they will ever be able to retire?

A: The sooner you start saving and investing for retirement, the more time it takes for compound interest to take effect. While you may only be able to save a tiny fraction of your paycheck for retirement, it’s important to set up these automatic transfers. Then, as your income increases or your debt repayments decrease, increase yourself and your contribution. That said, don’t panic if you haven’t started yet: you haven’t missed the boat. You will have to save more aggressively, but hopefully if you are older you will also have a higher and more stable income.

Q: One of the things I love about your book is how you fit the job market into personal finance. What advice would you give to young adults who want to take advantage of a job market that, thanks to the pandemic, offers a real opportunity to find better wages, benefits and a better work-life balance?

A: This is your chance to get a higher salary, but make sure you know your worth. To gather intelligence in the field, talk to colleagues and people in your industry. Career coach Allison Venditti suggests playing the ‘game too below’. Often times, people won’t tell you how much they earn, but are more than willing to say if they earn more or less than a certain amount. This information is a good way to make sure you don’t go wrong in salary negotiations. Remember, too: there is so much more to discuss than your salary. For example, you can negotiate working arrangements (like working from home), flexible hours, vacations, a professional title, and the waiver of the waiting period for health and pension benefits. You can even claim a retirement payment if the retirement benefits from your new job are less generous than those you received from your old job.

Q: Millennials and Gen Z have seen real success as investors in the pandemic because almost everything has gone up in price. How do you suggest that they are successful in investing for the long term?

A: A lot of people have developed a taste for buying and selling individual stocks in the gravity-defying bull market that we’ve had since the spring of 2020. I think there’s a feeling that investing (that be it stocks or crypto) is the only way to move forward and accumulate wealth if you cannot enter the real estate market. I fully understand that feeling, and it’s great to see so many people investing. But the evidence is clear: It is extremely difficult to beat market returns over decades. If you want to grow your savings for the long term, index investing – buying and holding investments that follow broad financial index movements – is a great way to do it. Robot advisors, all-in-one ETFs, and index mutual funds are three low-cost, low-effort index investing options that I discuss in the book.

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