Broke Millennial — Book Review

Broke Millennial a good read. Erin Lowry, a millennial and founder of teaches her peers how to take control of their finances. Her manual is both comprehensive and occasionally quite funny. Although some might argue that it’s excellent albeit quite basic financial counsel.


As per the above info-graphic suggest, the lessons are quite useful. Here’s a list of them, which we’ll discuss in detail later on.

  • Most important take away for everybody. Take control of your finances by examining your feelings toward money, saving and making a budget.
  • Put money aside in an emergency fund equal to three to six months of living expenses. Six to nine months if you’re self-employed.
  • If you’re carrying debt, your debt-to-income ratio should not exceed 43% of your gross monthly income. If it’s currently higher than that, work hard to cut those gearing ratio down.
  • “Pay yourself first” by automatically routing a fixed amount or percentage out of your paycheck into your savings account.
  • Pay the full balance on your credit card every month. Alternatively, make sure to never spend money you don’t have.
  • Know your credit score and understand your credit report.
  • You can use the “debt avalanche” or “debt snowball” strategy for paying your debts. I used debt snowball for quite some time to get rid of my own debts.
  • Save money for your retirement. Take advantage of employer contributions and matches.
  • If you switch jobs, don’t cash out your 401(k). Roll it over into your new employer’s plan or into an Individual Retirement Account.

We must take a few crucial steps to take control of our finances. That is to make a budget, create an emergency fund, work with the right bank, know and nurture our credit score, use our credit card wisely, and buying or renting a home.

Oh yes, prepare for your retirement.

Making a budget

I believe I’ve written quite a lot on budgeting. But this book approaches this at a different angle. A much more systemic one. Which I find to be very interesting.

  1. The cash diet – Pay in cash. Emotionally it offers different ‘pains’ when you see your cash depleting compared to swiping your credit cards. Lowry suggests that we withdraw a set amount each month/week and don’t spend more than that sum. And add $100 per month for unexpected expenses.
  2. Track every penny – She suggests writing down every cent you spend. Which by then you would detect purchasing pattern and how much you spent on everything. Personally, I’m using ‘Money Manager’ app to track my spending.
  3. The envelope system – I never used this method. But I’ve seen enough of it to be certain that it works. Separate your money into different envelopes for each category – rent or mortgage, utilities, transportation, food, and more. Use either physical or digital envelopes. Don’t spend more on anything than you allocate for it.
  4. Percentage budgeting – Set 3 categories: Fixed cost (50%), financial goals (20%) and flexible spending (wants)(30%).
  5. Zero-sum budgeting – Know your income, and list your fixed costs and lifestyle expenses to find discretionary money. 

Create an Emergency Fund

Create an emergency fund that is equal to three to six months of living expenses. Self-employed people should save the equivalent of six to nine months.

Debt-to-income ratio (DTI)

Figure out “the percentage of the debt you owe relative to the amount you’re earning.” Divide your monthly debt payments by your gross monthly income. Monthly debt payments (include student or car loans, rent or mortgage, credit card payments, utilities and other monthly bills) and gross monthly income are what you earn before deductions.

You don’t want DTI to exceed 43% of your gross monthly income. Anything over 43% makes you less likely to qualify for loans and more likely to default on existing debt. Build up your savings account by earning more and/or spending less. “Pay yourself first” by automatically routing a fixed amount or percentage from your paycheck to your savings account.

Dave Ramsey would suggest to drastically increase our income.

Monitor Your Credit

Five factors determine your credit score. Your payment history makes up 35% of your credit score, while the amounts you owe constitute 30%. The length of your credit history counts for 15%, your credit mix for 10% and any new credit you’ve applied for is 10%. Your credit score does not consider your race, age, sex, religion, salary, employer or occupation.


Beware of Credit Cards

The primary rule is to pay your full balance each month on time. Interest rates on credit cards can be 20% or higher. Some of them also have a penalty clause, which means if you’re late or miss a payment, your interest rate soars even higher. The “minimum due” line on your credit card bill is usually in boldface type or is highlighted, as a way to lure you into paying the lowest amount possible and thus paying more in interest. You should always pay off your balance on time and in full.


Dealing with Debt

Apply the “debt avalanche” or the “debt snowball.

To use the debt avalanche, write down all of your debts in order based on the interest rate, from the highest to the lowest. 

To use the debt snowball strategy, list your debts, from the smallest to the largest balance, and ignore the APR. Pay the minimums due on all debt and put extra money toward the smallest balance first. After you pay that off, move to the next smallest balance, and so on.

Avoid future debt by putting money away now. List your monthly expenses. Subtract them from your monthly net pay. Is the number positive? If not, curb your spending by cooking meals and making coffee at home, cancelling gym memberships, and the like. Some even called this kind of ‘unnecessary’ expenses as the ‘latte factor’ which the credited reason why most people are broke.


Buying / Renting a House

Renting gets a bad rap as “throwing away your money,” but in some situations, you should rent instead of buying. Consider renting if you can’t afford to purchase a house where you live now if you plan to move soon, if you have career opportunities in a high-priced housing market or if your career requires you to move quickly.

Meanwhile, owning a home can help you build equity. Figure out how much house you can afford to buy. You shouldn’t pay more than 28% of your gross income on housing, including principal, interest, taxes and insurance. Typically, purchasers put 10-20% down.

So, that’s that. It’s all the noteworthy materials in the book from my perspective. It’s not all-inclusive but then again, buy the book. I would the book at 8/10 ⭐ .

Read Broke Millennial yourself. Click Here. Don’t forget to check out “An Honest Look into The Personal Finance Crisis” and “MoneyMakingMom“.

Read Broke Millennial



Author: Muhamad Aarif

A notorious book addict by night and an oil and gas executive by day. As Mark Twain said, "The man who doesn't read good books has no advantage over the man who can't read them." So, read, read, and read some more.

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