Minki: Hello WINers! Welcome to Episode 2 of WINii's Money Bites -  money, mindfulness and everything that comes in between. We'll continuing our conversation with Kristen Euretig, the founder of Brooklyn Plans and financial advisor extraordinaire for millennials. We left off our last conversation on the importance of being kind to yourself.

Be kind to ourselves. But once we are ready to make some financial progress, what would you say is a list of priorities in terms of what you should address first when you're trying to build a solid financial foundation?

Kristen: It would depend a bit but in general, I think credit card debt is really toxic and more than in and of itself being expensive, it is usually a symptom of an underlying problem which has more to do with budgeting and living outside your means. And I say credit card debt because so many of my clients have it. I work with low income clients that were on a fixed social security income that had thousands of dollars in credit card debt, which by the way you can get discharged basically or you can kind of get out of because they can't sue you for it if all you have is a government income but your credit gets shot. But anyways if that applies to anybody I just wanted to get that quick tip out there.

So I've seen people on low income that have it and I've worked with a couple that had jointly $500,000 in income and instead of a few thousand in credit card debt, they had $45,000. So it's really an issue that when you pop the hood so many people have it. So it's very common and people across the income spectrums wanting more than they actually can afford and putting it on credit. So that to me would be a really big priority. The first step to dealing with credit card debt is to stop getting into it. You've got to stop using the credit card and that alone is an adjustment because you've got to learn to live on your actual pay and not outside of that which credit cards allow you to do.

Next would be to come up with a plan to pay off your credit card. That can be like paying the highest interest rate first or sometimes balance transfers can make sense to get a lower rate. But coming up with some sort of strategy on how you're going to pay that off and save at the same time. If that means you can only pay 10 extra bucks a month towards your credit card, that's all you can pay. But you gotta start saving something.

And if you find that that's impossible, then bankruptcy is an option for people that have gotten in over their heads. And it's not a bad option. I know people hate to hear that but if you're really in over your head it's available to people and there are a lot of who can give free consultations so you can just get more information about it.

If credit cards aren't an issue, student loans. You'd want to get on the most appropriate payment plan and that can a whole journey in and of itself, but you could do some research on income driven repayments and see if one of those makes sense for you.

Saving for an emergency is always part of any plan. That number can be, just for a starting point if you don't have one, one month's rent. Ideally it would be three to six months of your expenses but you gotta start somewhere. So that should be a part of your monthly plan to start saving for that.

And outside of that would be like freedom funds, saving for the fun things you want to do, saving for long term goals and saving for retirement would be some of the first pieces of the puzzle. But I say that with a caveat that everybody's situation is different. In general that would be an order of priority but it depends. If you have a complete match on your 401K then I'd hate to see that one get left on the table. You might bump that up in the order of priority, things like that. There could be endless variations and nuances to finances but speaking in broad strokes that's how I would go about it.

Minki: Right. I'm going to latch on to you mentioning emergency funds. I know you call it by a different name, which I find fascinating, which is ...

Kristen: Stability fund.

Minki: One question that we get asked often is what is an emergency fund, like what kind of events would constitute enough of an emergency for me to actually tap into it, and you said it should be about three to six months of spendings?

Kristen: Three to six months of your expenses would be ideal but I would tell people start where you are. If you have one month's rent, that's a really good starting point and if you don't had that, $500 would be a great place start. Break up your bigger goal into smaller steps because if you hear six months of your expenses, a lot of people are like "well, I can't do that. Forget it." And they don't save anything.

So the reason why I like to call an emergency fund a stability fund is because saving for an emergency is just not fun. Nobody's excited about having an emergency fund. But if you think about saving for your own stability that might be more enticing. And it's really what you are saving for in the end. You're not saving for if an emergency happens, you're saving so that you're stable in the event something unexpected comes up. So I like to re-brand it in that way and you're saving for your own stability. How important is your stability to you?

Most of my clients in our first conversation mention security or stability or both of those words because they're so fundamental to our sense of finances. And I think taking it kind of back, finances are very related to our survival, right? In our primitive brain we thought about hunting and killing and eating, and that's what money is in a way. It's a currency that allows us to have shelter and the currency that allows us to eat. So there's all this fear that comes up because money is linked to our survival in this modern age. So that's what you're really saving for, your own comfort, stability. So that if anything were to happen it doesn't threaten your very existence and your base sense of stability, which is for many people having a home, having electricity and beyond that, having certain comforts.

I think when you re-brand an emergency fund as a stability fund, you can better access what is a qualifying event to then withdraw from your stability fund. That's going to be up to the individual. If you can ask yourself "will taking out of this fund for this purpose, make me more or less stable?" The answer is going to be different for everyone but that'll help you to understand if it's a good reason to tap into your stability fund.

Emergency fund is a bit more vague and the story I always share is that I used to have an emergency fund. I didn't have another type of fund and I had savings there. Then my brother told me that my niece was getting baptized and he wanted me to be the godmother. I was going to go to Nevada where they lived for their baptism and I was like, "okay, I have to buy a ticket and obviously I want to be there. But all I have is this emergency fund. It's not really an emergency baptism... " And it just was confusing in my brain. I was like, can I pay that with my emergency fund? Well I'm going to do it because I'm going to go and I have money saved so I'm going to use it... And that's when I decided to separate my emergency and freedom funds. But the stability fund is easier to think about what would make you more or less stable when you have funds dedicated for that purpose.

Minki: That's really helpful. So we touched on a broad range of topics and obviously money plays such an integral part in so many aspects of our lives. And I'm wondering as a closing question, money, life, all of that combined, when you think of winning in life, what does that mean to you?

Kristen: Winning in life? I love that question. For me, it means being happy. I don't think that he who dies with the most money wins. What does that mean to you in the end? To me, winning in life is figuring out what you want to do and how to do it. And money is an amazing tool. It's an amazing tool to help you because so much of what we do in life costs money. So when you strain your relationship with money that way... "I'm going use this money in this way and it's going to help me get what I want out of life," it's super empowering and exciting. Instead of the reverse which is, "oh, I can't do this, because I don't have the money," where money is always coming up and standing in your way.

And I don't think that process happens by the way without sacrifices. For example, I live generally a lifestyle that I want to live. I don't have cable, I have a very affordable apartment and I spend a lot of time Airbnb-ing so that I can get a bit of extra income which is a lot of work. You have to decide what's important to you because you can't do it all. There's not enough money to do it all, there's not enough time and energy to do it all. So I think winning in life is like figuring out what's most important to you and figuring out how to use money to help you get there but "the there" is being content and satisfied and happy. It's not having an investments with an annualized 7% performance, right?

That in and of itself doesn't make me happy. It only makes me happy because it's funding a goal that will allow me to pursue something out there I want to do. So I think the way we look at money is a bit, backwards. Like that's the goal? And for me, that's never the goal. The goal is to use it to do something way more awesome than look at your annualized returns.

Minki: Yeah, totally. I totally agree that money isn't the goal but rather a path in, like you said, finding freedom, finding happiness and finding a balance.

Kristen: Exactly.

Minki: Well thank you for your time, I appreciate it as always.

Kristen: Thank you, thank you. It's always a pleasure to consider your thought provoking questions!

Minki: Winning in life! 

And that's a wrap for our second episode. I hope this series was an interesting conversation starter with yourself. To be bit more curious about you and your relationship with money. You can find us at wewinii.com, Kristen at brooklynplans.org and our theme music was played and produced by Luna Lee.

We'll continue in Episode 3 with student loans. Hope to see you soon!

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