Thinking about money is scary, where should I start? đ±
Itâs a global pandemic. Thinking about money probably feels pretty scary right now. But thatâs not a reason not to do it â in fact, weâre in a time where there is an even heightened call to âget your financial house in order,â as they say (do they say that??). Letâs talk about getting your financial house in order!
#1 is always to figure out your damn spending. Have I said it enough times?! Itâs really hard to think about anything else if you canât get past this step. Youâve gotta stare down your spending just like Bob tells Will to stare down the Mind Flayer in Season 2 of Stranger Things. I promise you, your spending wonât be nearly as scary as the Mind Flayer.
#2 Get rid of your high-interest debt. If itâs high-interest (10% or more) it should be high-priority. Credit cards and loans that charge you high interest are straight up robbers. With debt, the less you pay back, the more youâll owe in interest because debt compounds (the same thing that helps you in investing hurts you with debt). Itâs gonna suck, but if youâre spending hundreds of dollars a month on drinks with friends instead of putting it towards your debt, youâve gotta reprioritize (no shame if this is you!!! Youâre a human and credit card and loan companies can be manipulative AF, but that debtâs really gotta go).
#3 Build up your emergency fund, sometimes referred to as the âFuck Off Fundâ. Ideally, this fund should have 3â6 months of take home pay in your (high-yield) savings account that you can use in case of emergency (like losing your job and not having access to any consistent income for a set period of time). Warren Buffet said, âdo not save what is left after spending, but spend what is left after saving.â This is called paying yourself FIRST. Before you spend, put money into your savings every month. Pay yourself (aka your savings) before you pay anybody else. If you automate it, you remove the possibility of your impulsive and very human brain creeping in and trying to convince you that youâd rather spend $200 on drinks than put it into your savings. Automation allows you to sneakily build up some savings without even thinking about it.
#4 Contribute to your retirement account. Yes, even before you think about major life purchases like buying a home, you should be thinking about your retirement account. Not fully funding it but starting to put the structure in place and contributing regularly. The younger you start, the longer the timeline you have to let your little bitty retirement money grow and grow until youâre an old-ass person thanking yourself for putting that little bit in each month. Not sexy, but super important. If you retire at 65 and are lucky enough to live to 100, youâd theoretically be unemployed for almost a third of your life! And youâre gonna want to be safe and comfortable and also hopefully have some fun during that time. To start, just open the account and slowly build the habit of contributing. Many âtraditionalâ workplaces have an automation option in place where they withdraw a certain amount from your paycheck each month so you never even see or miss that money. Sometimes theyâll even match (equally contribute) some of what youâre putting in there â if this is the case, take the free money and run!
#5 After youâve made it to a spot where youâre regularly contributing to retirement, you might want to think about doing a bit of investing on your own. The money that goes into your retirement account canât be taken out before youâre a certain age (unless you want to pay fees and face the repercussions which you should really avoid at all costs). If youâre already maxing out on your retirement account (go you!!!) and want to invest more, you can open up a different type of retirement account (like an IRA) or you can do your own investing, ideally using a service like Ellevest or Betterment to do it for you. The difference between investing with a robo-advisor like one of these is that you donât have to wait until youâre old to access the money (though you might want to wait as long as possible, at the very least 3â5 years, so your money has time to grow in the stock market).
We are ALL feeling some degree of financial fear and uncertainty right now. True. And yet, whatâs going on in the world does NOT impact us all proportionately. I am writing this from my comfortable Brooklyn apartment. I have a salary and am able to work from home. While there is humanness in this collective feeling of fear and uncertainty, the impact and lived experience of that fear and uncertainty is not equally distributed. Groups that were most vulnerable before this pandemic remain most vulnerable throughout it: people of color, LGBTQ people, undocumented folks, homeless people, incarcerated people, sex workers, hourly wage workers, etc.
If youâre in a comfortable spot right now and have your âfinancial houseâ more or less in order, your next step #6 should be thinking about how you can share some of that financial stability. Iâm not telling you to stop taking care of yourself or to stop saving for retirement or to stop investing. Keep doing all of it! But if youâre reading this from your comfortable home right now and have access to a salary that allows you to work safely from there, Iâd ask you to return to step one and consider your spending. For me, Iâve spent significantly less money during this time (and I know because I stare down my spending every single month!!! #nerdypleasures). Beyond my âbottom-line life expensesâ like rent and utilities, Iâm basically only paying for groceries, which means that even though I could be investing more (and Iâm still putting money into my investment accounts every month, on the first, automated, like clockwork), Iâm choosing to give some of that money away because there are a lot of people who donât have emergency funds right now but are in real life emergency situations. If this resonates with you, I want to gently nudge you to do some of your own giving during this time (if youâre in NYC and want a recommendation, the North Star Fund is doing incredible work as always to support groups that are disproportionally impacted).
Will these steps work perfectly in a one-size-fits-all way for everybody? Definitely not. But are they a good place to start? You bet!
