I’ve been a little late to the game with travel reward hacking.
One would think it’d be top priority for someone who already has free flights, but for some reason, my employee perks almost had the opposite effect. I was all, “My airfare is free, I don’t care about paying for a hotel!”
To some extent, this is still valid—but I realized I was leaving a lot of money on the table within the credit card game.
Everyone who regularly hangs out around here knows my favorite starter card is the Discover It card. This is ideal for someone who has no credit history. Another great option is the Chase Freedom card. (Classic no-annual fee cards with decent cash back perks.)
This article is for those of you who already use a credit card regularly and have a pretty good credit score (upper 600s or higher), but want to cash in on better rewards and get some free travel out of your regular spending (no brainer).
I’ve done a lot of research (both anecdotally and online) about the best travel cards. The Points Guy is the ultimate resource for this stuff; his blog-turned-media site has breakdowns of all the really complicated situations you can throw together with multiple cards to get thousands of dollars in free travel.
In the travel rewards world, credit card churn is the name of the game: signing up for the fat bonuses, using the bonuses, canceling the cards, and starting over. Not great for your credit score and requires a lot of planning and attention to detail, but excellent in terms of freebies if you're really good at it and space everything out appropriately.
That’s a wee bit advanced, though, and if you’re reading this article, I’m going to assume you’re a beginner, too.
Despite the allure of the American Express Platinum card during my research, its $550 annual fee was a little tough to choke down. I also looked into the Capital One Venture Card, but kept coming back to the Chase Sapphire products.
Regardless of where I looked, it seemed as though everyone held the Sapphire cards in high esteem—my wealthier, more-successful-than-me friends, the most basic blogs, and, of course, the Travel Rewards Czar himself, The Points Guy.
I even read through tons of comments on his site to see what die-hard AmEx people had to say, and still walked away feeling like the Sapphire products were probably my best bet.
Chase has recently changed the rules of the game with their Sapphire products. While you used to be able to hold both cards simultaneously (i.e., signing up for both and getting both sign-up bonuses of 50,000 points for a total of 100,000 points, or about $1,500 in travel), now you can only have one at a time. *tiny violin plays softly from my wallet*
This is a little bit of a bummer for those of us who are late to the game—it seems as though Chase caught on to the fact that savvy credit card users were hacking their system and getting a shit ton of value out of the cards, then closing them after cashing in.
While the bonuses aren’t as stellar, there’s still a lot of value to be derived from one or the other. Just note before you apply that Chase has this thing called the 5/24 rule—if you’ve applied for 5 new lines of credit in the past 24 months, it’s very unlikely you’ll be approved.
(Unless you’re opening new credit cards every couple months, this probably won’t affect you, but it crucial knowledge for people who are planning a credit card churn for travel rewards.)
After I settled on a Sapphire card, I had to pick which one.
There are two: the Sapphire Preferred and the Sapphire Reserve.
While the sign-up bonus is the same, there are a lot of additional perks with the Reserve—a $300 travel credit, access to Priority Pass airport lounges, a $100 TSA Precheck/Global Entry credit, and more.
Here’s the kicker: The Reserve card has an annual fee of $450, whereas the Preferred card has an annual fee of $95 that’s waived for the first year (no such courtesy exists for the Reserve).
Here’s the official breakdown.
I really wavered on this one and took a few weeks to think about the difference in value. While I was hard-pressed to justify the Reserve’s $450 annual fee, I knew the $300 travel credit effectively dropped it to $150—only $55 more than the Preferred card.
I also knew I’d probably use the airport lounges, which usually have free food and drinks inside—I easily spend $55 on dinner at an airport when I’m stranded, especially when we buy a bottle of wine (shout-out to the Atlanta Hartsfield-Jackson bar crawl).
At that point, it just came down to the remaining $95. How do you justify that part upfront? Well, it’s pretty easy—50,000 points is worth either $625 with the Preferred card or $750 with the Reserve card in the Chase Ultimate Rewards portal, where you can book airfare, hotels, or buy products (not the best value, though—your money goes furthest with travel).
So there I was, effectively deciding between a card that would cost me nothing upfront for a year but be worth $625 in travel credit, or one that would cost me $450 upfront and be worth $750 upfront with a $300 travel credit and numerous other shiny premium perks (suffice it to say, I had visions of myself in a fluffy white hotel robe downing free margaritas in airport lounges).
The "travel perks" rabbit hole is an easy one to hurl yourself into—cards like the aforementioned AmEx Platinum (that competes with the Reserve card and carries a $550 annual fee) feature automatic upgrades at hotels. In other words, you book a hotel room, show up, and get a fancier one (if available).
All that to say: it's really easy to get tangled in a web of presumed luxury when trying to decide which card will give you the most value.
I knew my vacillating was wasting precious time. After all, I wanted these points for my early 2019 trips (anyone else keep a laundry list of hypothetical vacations and dates at all times? No?).
Decidedly, I smashed that Apply button on the Sapphire Preferred Card.
You may be surprised by this—I was even a little surprised myself, after becoming nearly convinced that the Reserve was the way to go.
Here's why I chose the Preferred and my plan for moving forward:
But let's say six months into 2019 I realize I should've gone with the Reserve...
The back-up plan
Although upgrading the Preferred card to a Reserve card is possible (if you change your mind), you're no longer eligible for the Reserve's sign-up bonus (i.e., 50,000 MORE points) after getting it on the Preferred. Upgrades aside, you also aren't eligible for a second Sapphire sign-up bonus within 24 months of opening your first Sapphire card.
In this way, they're limiting you to one 50,000-point bonus every two years.
Keep in mind you can't have two Sapphire products at once. So, you can't keep the Preferred and open the Reserve for the sign-up bonus, too (although you used to be able to). The audacity!
So here's the work-around and my plan moving forward if I decide the Reserve is for me:
The bottom line
I know there are a lot of perks being left on the table with the Reserve and that it's effectively only a $55 difference when you factor in the travel credit, so we can all point and laugh as I reason with emotion over math.
(The math is actually that you'd need to spend at least $3,660 on travel & dining per year to make up for that $55 difference in annual fee, if you're just looking at the purchases > points earnings.)
But for me, a travel rewards noob with a unique situation (free airfare), starting "small" made sense to me—especially since I have a plan to churn the cards if I decide to level up later (a couple 'stuck in the airport in need of wine' experiences would be enough to do it, most likely).
Think the Preferred card may be right for you? It's still a 50,000 point bonus right now!
Before I launch into this, I want to acknowledge three things:
First, it’s an incredibly privileged thing to be able to discuss turning an expensive hobby into a moneymaker. It assumes a few things: that you have enough free time to engage in hobbies, and that you have the means to pay for expensive ones.
Second, I realize my example is very niche to my life, but I hope the process, principles, and mindset it illustrates sparks something that works for you.
Third, I’m going to use real figures in this post for both the sake of transparency (again, I wish money weren’t taboo) and because it lends weight to the topic that I think would be lost without the tactical ~facts & figures~.
Anyone who prioritizes fitness knows that it can be just as consuming financially as it is of your time—especially if you’re someone who tires easily of running around outside or working out by yourself.
Although I had access to a free apartment gym down the hall from my room, it’s a lot sexier (metaphorically speaking) to go to (expensive) group exercise classes at studios crawling with other lululemon-clad fit people. There’s an element of positive social pressure that can provide self-sustaining motivation to continue going.
(And if you don’t believe me, the fitness industry is valued at $30 billion.) (Forbes, Sept. 2018)
While I had a free alternative to my Corepower Yoga Sculpt classes, I was willing to pay $140 per month for a cute, peppy stranger to yell at me to keep shoulder-pressing while I stared at myself struggling in the floor-to-ceiling mirrors, surrounded by other cute, peppy strangers. Sue me!
It was a hobby I really loved and devoted a lot of time to, but Lord, it was expensive.
I was going 6x/week to the hour-long classes (in other words, around 24 hours per month).
When my Aunt SueEllen offered to pay for me to become a yoga teacher for Christmas, it just made sense.
I thought, I’m already devoting a ridiculous amount of time and energy to this place and enjoying it—getting paid to be here would be insane.
So, 100 hours of training and over $1,000 in training investment later (tax-deductible, though), I auditioned to become a certified Yoga Sculpt teacher and employee of Corepower Yoga. A pretty substantial upfront investment, but you’ll see how it turns out…
I’ve talked about what the process meant to me mentally and emotionally before, but that’s not what this post is about—this post is about the impact it’s had on my time and resources.
Here’s how the math breaks down:
I teach three classes per week, a two-hour time commitment each time (or six hours per week).
6 hours per week * 4 weeks per month = 24 hours per month (or about +$300 in additional income)
Plus: an expense of $140 that no longer exists (+$140)
In essence, each month I’ve got $140 that I would’ve spent, plus $300 more.
Annual net difference: $5,280 (five times my original investment to undergo training in the first year—everything beyond that initial training is profit)
I’ll be honest, when I first went through teacher training, it really didn’t have anything to do with money (that was pre-Fiscally Woke KG®). It was much more about my self-worth and mental strength, and my desire to bring the same peace and confidence to others.
But now that I’m aware of the difference it’s going to make in my annual balance sheets, I’m exponentially more grateful I decided to do it.
I mean, $5,280 is almost six months’ rent. My side hustle income that comes from a mere 6 hours of effort per week doing something I actually enjoy can pay my rent for almost half a year? You can’t beat that.
And as someone who really loves sitting on her ass watching The Office, I’ll be real with you—I was nervous about becoming that “busy.” Was I someone who really wanted two jobs? Did I have time for that? Was I going to feel overcommitted?
Unsurprisingly, I had time. It shocked me how much time resided in little pockets of my week that I was subconsciously hoarding for the prospect of socializing.
I don’t LOVE waking up at 5 a.m. on Tuesdays to teach a 6 a.m. class, but I do feel incredible for the rest of that day and inspired by the people who showed up.
I don’t LOVE getting ready in the Corepower bathroom in the morning twice a week or having to lug around a gym bag every day (although it has saved me money on shower products), but you get used to it pretty quickly. And for $5k additional income a year, I’ll lug around just about anything.
These are small, negligible obstacles in the grand scheme of things.
There were even monetary benefits I didn’t know about going into it, like studio reciprocity—I discovered other workout classes I can do for free as a Corepower employee that would’ve cost me $35 a pop before (I think I’ve taken nearly $700 in classes already for free).
As someone who loves fitness, this is a major value-add to my life that I wouldn’t have paid for before because it was cost-prohibitive.
That’s how I gamed my OWN hobby to be something that made—rather than cost—me money, and I can’t even take credit for how well it worked out considering I essentially stumbled into it thanks to a generous gift.
But I hope you’ve taken away a few things:
There’s probably something in your life that you spend a lot of time doing (and are good at) that could make you money somehow. Even if YOUR hobby is fitness too but you don’t want to be a trainer, most studios have front desk and SET employees who are given membership compensation in addition to payment.
Maybe you’re really good at cooking and cook ALL the time. Why not start a small catering or meal prepping side job? Meal prep is so trendy right now but a lot of people don’t know how or what to do. That’s a little more effort logistically to work through your margins, but again, it’s about finding things you’re already good at and already investing time in and monetizing it.
Or think more digitally—maybe it’s a food blog or IG that could lead to sponsored posts. There are no upstart costs there.
If you’re concerned about the time, ease your way into it—but know that there’s probably time in your week that you could use. I’ve been consistently impressed by the time management of some of the other teachers. One of my favorites works full-time, has a child, and teaches twice as many classes as I do AND leads the teacher training program.
Another few teachers work for big consulting or accounting firms and work 80-hour weeks. I was with one the other day who was taking a conference call in the locker room at 7 a.m. These women work WAY more than I do and still somehow ‘have the time.’
I bet you’d be surprised by allocating time just a little differently—waking up just an hour earlier or watching just two fewer episodes of TV. The attitude amongst the workaholics is that Sculpt is their ‘fun job’ that provides an outlet from the jobs that drain them.
Sometimes it’s just about looking at your life a little differently. Even if none of your friends or coworkers have a second job, don’t feel like it’s weird or that you shouldn’t.
Sometimes it just takes one person with the side hustle savvy to inspire and encourage you to look at the way you’re spending your time and money and optimize it. I have a coworker who literally BABYSITS after work in an upper-class neighborhood nearby (i.e., getting paid to sit on someone ELSE’S couch after work) and probably doubles her take-home pay from the small shift in how she spends some of her free time. It doesn’t have to be a fancy or innovative idea to be lucrative.
And one last crucial little piece here…
I’m not spending this side hustle income.
I know I used an example about paying rent earlier, but that was just meant to illustrate the substantiality of the difference and put it in perspective.
The final piece to REALLY hacking your hobby is investing that income either back into your business or into the market.
I use Betterment (robo-managed investing with a fee rate of 0.25%/year) to house most of my Corepower money, primarily because I know I’d fall victim to lifestyle inflation if I were given the option to spend that extra money every month. I removed the temptation and set up automatic transfers into my Betterment account on the 1st and the 15th of the month.
This is definitely, like, step three of the side hustle game, but it’s critical because it’ll make the difference between accidentally squandering your extra funds or letting compound interest work in your favor for years.
Let me know what your genius side income stream is. I want to hear about it!
My borderline obsession with personal finance, the road to financial independence, and overall money savviness has led to some pretty interesting conversations with acquaintances and close friends alike.
One stuck out to me in particular, because it was so illustrative of how pervasive lifestyle creep is. *record scratch* What’s “lifestyle creep”?
Lifestyle creep, also known as lifestyle inflation, is the all-too-familiar phenomenon of spending more as you make more. Sound familiar?
I remember when I first learned my salary. My jaw dropped to the ground when I saw my first paycheck. It was such a drastic jump from the $100 I’d get every two weeks from my parents in college. I’ll be able to save at least half of this, I thought.
Do you ever look at your credit card statement or checking account balance at the end of the month and think, “Surely there’s been a mistake! How could I have spent this much? What the hell am I even buying?” I remember going line by line in my Discover bill once because I was convinced I was frauded--"There’s no way I spent $2,100 this month."
Of course, I had.
Put simply, no matter how much you make, you’ll find a way to spend it.
This individual and I were talking about saving & getting off the consumerism hamster wheel—and they told me their parents, who were both making six-figure incomes at the time, had declared bankruptcy.
This is why cognizant spending is crucial to building wealth. We are conditioned by consumer culture to believe that acquiring new things (little “opioid bumps” throughout our day) will give us a frictionless life.
I want to encourage an attitude of conscious consumption—pay attention to the mood you’re in when you tend to buy things you didn’t plan to. Are you hungry? Bored? Sad?
While I’m actively trying to practice this myself, I never want to sound like I’m preaching as though I’m holier than thou. Obviously, I’m no expert, and as recently as last month I was impulse-buying my way through a shitty Monday to make the day pass faster.
Sharing actionable advice and philosophy with you (as I learn it myself) is my way of paying it forward (pun intended), as I’m already noticing the positive effects in my bank account AND my mindset.
Impulse buys represent the most dangerous of financial decisions because they are—by definition—unplanned for and oftentimes not carefully considered. In fact, stores are literally laid out by design to encourage purchases of this kind because retailers know how powerful that instinct can be.
They range from the $4 muffin to the $25 shirt in the Target casuals section (gets me at least 50% of the time).
There’s an inherent promise of excitement and a quick shot of dopamine with each—this is something you didn’t have 10 minutes ago, but for the low, low price of [insert any number under about $50 here] and a quick swipe of your card, it’s yours.
But that’s where it ends. Muffin or shirt acquired. Dopamine shot over.
Impulse buys are typically easy to justify because their absolute dollar amount is relatively low.
But consider how often you fall victim to impulse buys. (Cue my obsession with compound interest—and how small things add up over time.)
Here’s my challenge to you: next time you want to buy something, write it down (and its price) in a spreadsheet. Keep track. Make yourself wait two full weeks before purchasing it.
I bet it’ll save you from buying at least half of what you write down.
This means no more thinking of something in the morning and purchasing it in the afternoon (or worse, seeing something in the store and throwing it in the cart).
Log these items over the course of a month or two, and mark which ones you purchase and which ones you don’t after the two-week waiting period.
And—here’s the most important part—add up the total of how much you would’ve spent on all of it, had you purchased the day desire struck you.
Even IF the number isn’t astronomical (say it’s only $100 after the month is over), the philosophical underpinnings of eliminating impulse buys are far more profound:
What do you have to show for that hypothetical $100? A collection of artisan muffins that you forgot about 10 minutes after you ate them, a light-up phone charger, and a few articles of clothing that got shoved in the back of your closet with everything else?
Psychologically, an impulse buy is a pick-me-up. It causes your brain to release a chemical that makes you feel happy.
But what if, with a small amount of planning, you could regain control over your spending and loosen consumer culture’s grip on your life—the constant wanting, needing, buying more?
This isn't about deprivation or sacrifice--it's about becoming aware of the way we tend to lean on impulse buys to improve our mood, and recalibrating ourselves to find that same satisfaction in the digits in our bank account (and the stuff we already have).
The financial results will probably astound you, but I think the psychological benefits are infinitely greater—imagine waking up every day knowing you already have everything you need.
See a cute top? Who cares. You have 50 of them. You don’t need that top and that top isn’t going to make your boyfriend like you more or impress your friends for longer than a second or get you a promotion.
(If there’s something that tempts you frequently and you KNOW you buy a lot of it, literally count how many you already have. That number can bring awareness to your habit of binging on it. I counted the other day—I have 12 pairs of black lululemon leggings. No más!)
My own experimentation with this has led to some pretty surprising, creative outcomes.
The last two times I've wanted to run out and buy something to make my life easier, I made myself wait. Within two days, that item (or something that functioned similarly) appeared in my life for free or from someone offering to let me borrow it. Can you believe that? It almost felt like magic.
I ended up spending nothing on either of those things and but having or using both of them because I asked around and waited a few days.
Spending money is the least creative way to solve a problem.
Luckily, everyone else in upper middle class America is also swimming in a sea of material goods they've purchased but don't need, so often times, you can benefit from others' excess.
I challenge you to implement the spreadsheet rule for at least a month and practice monitoring your "impulse buy" mood. Mine's boredom. Share your results with me when you're done—I want to feature someone! Like an inverse Money Diary: "These are all the things I wanted to buy but didn't."
Disclaimer: This post features financial transparency on my own part and a pinch of bitchy judgment (toward myself, and probably toward you) since most of us are irresponsible spenders. Read on at your own risk.
I feel like I’m looking at my own consumption habits with fresh eyes ever since I started reading Money Diaries and listening to the ChooseFI podcast.
While it’s not worth it to regretfully shame yourself for shitty money decisions in the past, I’m leaning into the self-loathing a little. I invite you to do the same, you dumb spender!!!!
Money Diaries features (mostly) traditional financial advice. Stuff you’d hear from your friendly neighborhood personal finance guy—the guidelines that are considered normal in United States personal finance culture. Save 20% of your take-home pay, contribute to your 401k up to the match… we’ve all heard this stuff before (hopefully).
ChooseFI, however, is on the far more radical side of the spectrum. If personal finance content were right-wing news outlets, Money Diaries would be NPR and ChooseFI would be Breitbart. (Great comparison, no?)
FI, or financial independence, is a school of thought that encourages people to save as aggressively as possible so they can retire early—like, “35 years old” early.
Yeah. It’s a little intense.
In a very, very simplified nutshell, it all basically hinges on the 4% rule.
If you can determine how much money you spend every year (I did mine earlier this week—if I’m perfectly “on budget,” I spend $30,600 per year), you can do this math equation to figure out how much money you’d need invested for your money to auto-replenish itself with interest for the rest of your life AS LONG AS you’re only spending 4% of it annually (assuming it’s growing at 8%).
30,600 * 25 = $765,000
(your annual spend) * 25 = (how much you need saved to retire)
This means as soon as I can save $765,000 in a portfolio growing at an average of 8% annually, I can stop working and maintain my same spending habits annually. No problem, right?! BRB.
So obviously this is really, really extreme. Especially because I want to spend way more than $30,600 per year!
Let’s do this again. Say I want to pay myself $100,000 in spending money every year for the rest of my life.
100,000 * 25 = $2,500,000
Once I hit $2.5M, I can pay myself $100,000 per year without working.
It’s called “financial independence” because your money is setting you free, playas. No more work for you. Your money is making money.
While I don’t aspire to this (because TBH, I like working), I like to water down their advice to help me save without being single-mindedly obsessed with this goal of retiring in my thirties. A hybrid of ChooseFI and Money Diaries presents a moderately aggressive approach to personal finance.
Here are a few high points (consider this approximately 10 hours of reading and listening distilled into three bullets—you’re welcome):
One ChooseFI cohost’s wife is from Zimbabwe and she told an eye-opening story about coming to America. To paraphrase:
“When I first came to America, I thought everyone owned these $60,000 and $70,000 cars because in Africa we don’t have credit to finance things. If you were driving a car, you owned it outright. There was no such thing as a lease or car payment. The only way to have a $60,000 car was to have $60,000. In America, people finance everything from couches to appliances.”
In the Money Diaries book (the more realistic and traditional approach to money), the author mentions your car shouldn’t cost more than 33% of your income. So if you make $50,000 per year, you can technically afford a car that costs $16,500.
How many people do you know who make less than that and drive a car that costs twice as much? The sad thing is, it's considered normal.
So that’s the “standard” advice about money on the topic.
FI’s take is that cars are such a horrific waste of money that (a) if you can bike to work, you should, and (b) buying a 5-year-old used car like a Honda or a Toyota is pretty much the only way to be even remotely sensible about car ownership.
Which, like, I can get onboard with conceptually—but when I think about giving up my 2017 Acura RDX it makes me want to cry.
It’s something I’ve been grappling with lately.
And here’s why:
So I was like, All right, KG, when your lease is up, it’s time to walk this big responsible talk. You don’t need a $40,000 SUV. You’re barely 5 feet tall. How about a nice 5-year-old Honda Accord Coupe?
Those are cute cars. Reliable! Affordable! Sensible!
But my internal tiny Dallasite consumer goblin is like… But the BMW X1 is only $XX more…
Y’all, I cannot extricate myself from this concept of cars and status! It is so ingrained in me that a car represents wealth and success that the idea of downsizing to a “lesser” vehicle makes me feel weird—and I’m ashamed to admit that. Especially because I have neither status nor wealth, so it’s an outright lie.
(But most everyone ELSE is lying too!)
A car is a money pit, no doubt, but ultimately its job is to transport you from point A to point B (reliably). Sometimes I think about the upsides of having a car you’re not attached to—park it on the street, get a door ding, spill coffee? Not that big of a deal. It’s just a car, and you’re not sacrificing nearly $4,000/year on a financed plan with accruing interest just to have it.
Aside from rent/mortgage, most people’s second biggest regular expense is their car (and car-related expenses—gas, insurance, maintenance). And for what? To impress the strangers in traffic who don’t give a shit about you?
It’s a little silly when you think about it, and I can admit that despite being someone who used to tape literal pictures of Cadillac Escalades to her electric scooter in 3rd grade (I was doomed to consumerism from day one, people).
Shifting to the "more stuff" mindset in general…
This idea that you become accustomed to the luxuries you acquire in life is an interesting one because I’ve experienced it firsthand in the last year. Starbucks really DID used to be a treat for me. Then it morphed into something I felt I deserved.
You know why? Because “I can afford it.” And it was so normalized! All the other women in my office got Starbucks every day (never to mind the fact they make at least twice as much as I do and are married to equally successful men). Me? I’m just out here in the mean streets of Uptown riding solo with my freeloading cat, S’Neiman Marcus (S’Nemo’s new fancy boi nickname).
The big lesson I’m taking away from both Money Diaries and FI is that just because you can afford something doesn’t mean you should buy it.
I’m trying (and with some success) to embrace minimalism and the idea that less is more, most of the time. The consumerism hamster wheel promises a lot of things, chief amongst them that acquiring new things will make you a more desirable person (that’s the subtext, at least).
I’m trying to remember that (to quote sweet Thomas) every dollar I spend today is a dollar that won’t be compounded.
In a really weird way, it’s kinda fun. I’m re-teaching myself to appreciate and second-guess purchases. It’s turning into a game of sorts—I saw a sports bra at Soulcycle I really wanted this morning for $55. I’m currently selling lululemon on Poshmark and essentially told myself until I’ve sold enough to have $110 in profit, I’m not buying something worth $55.
You know you’re a greedy Millennial when you’ve found a way to gamify saving.
I don’t know if this resonated with you—maybe you’re not as indoctrinated with materialism as I am. I do hope, though, that it’s stirred up something for you, even if it’s just the notion that you could be inadvertently deprogramming your own ability to appreciate simple pleasures by raising your consumer expectation bar with each pay raise.
There’s joy to be found in a little light deprivation (and also, in not having a $400 car payment).
Now let us all get this bread. Y'all made those net worth tracking spreadsheets yet? What're you waiting for?
Extra credit reading for greedy peeps
If I've plugged it once, I've plugged it a thousand times:
Money Diaries from Refinery29. This is, in some ways, what lit my personal finance fire (or at least fanned it dramatically). This is Money Management 101 with some juicy shit thrown in.
I know a lot of people are probably wondering why my blog has essentially derailed into a personal finance fiesta—how does one go from posts about hydration and feelings to compound interest and index funds in one fell swoop?
Plain and simple, I firmly believe the money decisions young people my age are making right now are literally going to affect the rest of their lives. I cannot overstate the importance of having your financial shit together, and that has come more clearly into focus over the first year of my adult, working life.
After delving into this financial world of books, podcasts, and blogs galore, I’m learning so much information that I feel morally compelled to share with all of you. Maybe you’ve got $100,000 in student loan debt. Maybe you’ve got $100,000 in the bank. I don’t know your situation, and I’m not a guru—I’m not trying to prescribe you a one-size-fits-all solution.
I merely feel strongly (very strongly) that money apathy or ignorance in your early twenties is an alarmingly avoidable way to make your life 20 years from now much harder.
I want all of us to learn (together) about investing, saving, workarounds, hacks, and other money savviness that’ll help ALL of us get rich someday, so we aren’t working for paychecks in our seventies because we didn’t think to contribute to our 401k or open a robo-investing account.
The personal finance community is an interesting one. My latest exploratory obsession can be attributed to my friend Landon, who's gotten me into the "Financial Independence" craze: extremely frugality for about 10-12 years and retirement in your early to mid-30s. Yes, it's possible, and people are actually achieving it.
These are the types of things I want to share with you—from the most basic to the most radical.
Because after all, your money in your savings account(s) is losing at least 2% a year to inflation. I don’t want to scare you (maybe I do a little bit), but in order to build true wealth, you have to start right now. Like, yesterday. Time is money.
If you don’t know how much money you’re taking in vs. spending (i.e., your cash flow), you may be in for a rude awakening. (Check out my OG budgeting post or download the free tool in the sidebar to determine your proper saving and spending ratios.)
If you're like, "But KG, I don't even know where to start," fear not! I want everyone to get on the same page with this very easy first step. Devoting an hour to setting up this system and then 15 minutes once a month to maintaining it could mean the difference in hundreds of thousands of dollars (literally) in 40 years from now.
Creating a system
I’m talking, of course, about tracking your net worth. Maybe it’s the control freak in me, but I’m obsessed with full transparency and knowledge of my #assets. I want to know how much I’ve got, where it lives, and how fast it’s growing.
The system that has worked well for me (again, control freak) is a Google Sheet.
We’ll get into the accounts in a moment, but let’s talk for a second about setting up your system.
Pick a consistent day to check all accounts.
Since my budgets reset on the first of the month, I do my full assessment on the first of every month. I pay rent on the first too, though, so the money usually hasn’t cleared out of my account when I take down all the numbers (which is kind of cheating since it makes it look like I have more than I do, but hey, it’s MY system!).
Total the entire column of accounts once you’ve noted down the balances.
Make sure to total all your accounts so you can ensure your net worth is, in fact, going up every month. If your value is going down over time, that means you have a negative cash flow.* In other words, you’re spending more than you’re making, and/or living paycheck to paycheck (maybe without even realizing it). This is, in essence, why this exercise is so important.
*If you have a lot of investments and the market's really down one month, that could also account for a dip.
You could be consistently dipping into your savings without even realizing it if you’re spending on a credit card, or at the very least, you may be spending money you had intended to save.
If you track your accounts/net worth over a few months and notice your net worth is getting lower over time, you need to make some serious adjustments to your spending.
May I suggest this blog post about the joy of when less is enough and how to essentially convince yourself that your life will be better if you don’t reward yourself constantly and mindlessly with restaurant food and shopping sprees (to the point of dulling your pleasure centers). If there’s anything that can make saving sound sexy, it’s this.
And if you haven’t read my post about the beauty of compound interest and how this little exercise may convince you to give up Starbucks and monthly mani/pedis, I highly, highly suggest you read it. You may just end up with an extra $10,000 because of it.
A few key accounts you should track (and if you don’t have them yet, no time like the present)
High-yield checking or savings account(s)
401k and/or Roth IRA
The three above accounts are no-brainers. If your company doesn’t offer a 401k, open a Roth IRA account instead. (IRA = Individual Retirement Account.)
If your company DOES offer one and offers a match, do whatever you have to do to contribute up to the match. This is legitimately free money. You have no excuse! It’s almost like an automatic raise you’re giving yourself by contributing.
I’m going to toot my own horn here for a second to try to encourage you to contribute to yours—I contribute 10% of every paycheck to my 401k and since it’s been gone from every paycheck since day one, I’ve never missed the money. This balance climbs faster than just about anything. Don’t lose out. Don’t know how? Ask your Benefits department or HR.
When it comes to high yield savings accounts, this is a pretty basic suggestion for where to store your emergency fund (that "$2,000 minimum, ideally 3-6 months expenses" emergency fund). Our Southwest Airlines Credit Union offers a checking account with a 4% interest rate which is actually bananas, so I have mine in there (instead of a traditional "savings" account).
But recently, I heard on a Financial Independence podcast that a Roth IRA is actually the best place to put your emergency fund because it'll grow way more quickly than a lousy savings account, but you can access the principal (your initial investment) without being penalized. You can't touch the interest until retirement, but you wouldn't have that interest anyway had it not been in the IRA.
So, just sock away your $10,000 in savings in a moderately risky IRA, and call it a day. (See? Not painting myself into a corner here—as I learn more from increasingly savvy finance experts, I'll share it with you here.)
Go one step further (c'mon, everyone's doing it!)
Robo-investment account (like Betterment)
[Use that link during sign-up to get three free managed months! It's a 0.25% monthly fee on your investment otherwise, which is still very reasonable.]
Robinhood account for individual stocks & ETFs
[Use that link during sign-up to get one stock free!]
Assuming you have a fully funded emergency nest egg in the bank (at least $2,000 that you never touch unless you absolutely need it for an emergency) and are contributing to your 401k and/or Roth IRA, you really should look into external investing.
I’m going to plug the two services I use here since I can speak to them more intelligibly. Essentially, though, the extra mile exercise I'm suggesting is setting up investment accounts (and hey, right now’s a GREAT time to buy since the market is in the toilet—buy low, sell high).
You can work with a financial adviser or set up an account with Fidelity to buy individual stocks and ETFs, but a ~cool~ Millennial way to achieve both of these things, with ease (all in apps with killer UIs) is to use the sites designed for quick and low-fee investing.
Here’s the difference between the robo-investors & apps like Robinhood:
Robinhood is for buying individual stocks, index funds, ETFs, etc. This is so you can pick and buy your own (like the S&P 500 ETF from Vanguard, my favorite) shares.
Robo-investing apps like Betterment (and Ellevest, about which I’ve heard good things) are different in that they automatically invest and diversify your portfolio FOR you, which is great if you don’t want to think about it. I’ve set up an automatic deposit every month of my #SideHustle money from teaching at Corepower.
So, you fill out your information (age, income, etc.) and risk tolerance, and it allocates your investments properly. It can also project where your money will go over time and how it’ll change if you invest more, based on different market outcomes.
My current mix is 90% stocks and 10% bonds since I don’t anticipate needing to access this money for a very long time (so I’m OK with it fluctuating).
So, if I’m putting in my extra $250 of yoga income per month, in 2054 this account will (based on past market performance) do the following. (And, for the record, I don’t necessarily think I’m going to instruct Sculpt until 2054—but I do intend to continue putting at least $250/month (or, hopefully, a lot more) into this account.)
Ok, you guys ready?
Average outcome is $453,431. And that’s from contributing SIDE HUSTLE money, or $107,750 over 36 years.
Do we think I’d miss that $250 every month? No—that’s not even money I had coming in two months ago. And if I just throw it in Betterment—set it and forget it—in 30 years from now when I’m retiring, I’ll have an average of $450,000 in an external account.
This is minor, easy stuff, and a pretty tame example. I'm using $250 to show how little you really need to get started. Maybe you've got that emergency fund fully locked & loaded but you're still accruing hundreds of dollars in savings per month and letting them pile up in your savings account (there are worse problems to have, right?)—here's another (much smarter) option for that money.
All right, all right, I get it—so what does this spreadsheet look like?
Well, depending on your situation a la investments & debt, it could look a lot of different ways. But for the sake of example (because I'm a visual learner, and I bet you probably are to some extent, too), here's mine with FAKE (emphasis on fake) numbers plugged in.
The accounts, however, are real, to give you an idea of the ~spread~.
Again, numbers are fake to prove a point (but I tried to make them move in a desirable way MoM), but notice how the total net worth is climbing over time (and climbing at a graduated rate, no less!).
Also note how I added my credit card bill too, so I'd know how much money I should consider 'debt' in that total. If you have student loan or credit card debt payments, add those underneath to show money that will be siphoned out.
And voilá—I hope this paints a pretty reasonable picture of how you can get a handle on your finances and how you can make your savings accounts work harder for you. You'll notice in this example majority of that money is in the aforementioned high-yield checking account—probably too much of it, to be honest—and could stand to be moved somewhere with a better return, like the Betterment portfolio.
Extra credit reading for greedy peeps
If I've plugged it once, I've plugged it a thousand times:
Money Diaries from Refinery29. This is, in some ways, what lit my personal finance fire (or at least fanned it dramatically). This is Money Management 101 with some juicy shit thrown in.
A Random Walk Down Wall Street. This is the best investment book out there. If Money Diaries is a little too remedial for you, this is like Money Management 303. This is your second-semester, junior year money class.*
*Also great for when you need some dense reading before bed.
This isn’t an article for people making $150,000/year and casually going about their lives with an inexplicable six-figure income—it’s for the people who will get there one day, but hope to make better decisions now so their savings in 10 or 15 years look more like that of someone bringing home $150,000 now.
Ever since I went to the Money Diaries book tour, I've become even more obsessed with saving, investing, and general money shrewdness—catch me on my lunch break chatting online with my phone company asking for discounts. Pick up a copy of the book here.
There are two major changes I’ve made recently that have made a pretty minor impact on my daily life and enjoyment but (I anticipate) will majorly affect my long-term wealth.
This is what I call the Sweet Spot for Savvy Savers (SSSS—had to throw in that extra S to avoid any callbacks to Nazi-era Germany): that intersection where a seemingly small change actually has a huge financial impact.
We’re going to talk about two types of money drains—frequent, tiny purchases, and infrequent, larger purchases.
I honestly hate the “stop buying lattes” approach to fiscal responsibility because I’ve been #ThatBitch in the drive-through line at Starbucks every day for two years. I understand wanting nice coffee that makes you feel warm, fuzzy & motivated in the mornings.
In fact, I always justified my daily purchase by saying, “The productivity and ideas this coffee enables within my job is an investment.” Drug addiction, anyone? Anyone?
Here’s the thing: you don’t have to suck all the joy and splurging and fun out of your life to make better financial decisions.
I’m an advocate of merely understanding how much those decisions actually cost you, and weighing if that reality is worth the cost to you.
In some instances, the convenience or pleasure a purchase may grant you IS worth the money, especially if you can afford it with ease. Paying for convenience is a very real thing and if something will make your day substantially easier or more enjoyable, it may be worth it.
Other times, the payoff may not be that significant.
The main message I want to get across in this post is that little things add up, and that’s both good and bad.
I’ll use an anecdotal example that’s TOTALLY not reflective of my actual habits: spending $2.44/day on Starbucks at least 5 days a week.
Every swipe of the credit card became so habitual that I almost didn’t even notice or care anymore. It’s only, like, 2 bucks, right? Who cares?
That’s $634.40 per year, not including fancy weekend coffees.
But you know how bad it was? Even that number didn’t really dissuade me from my habit. To be frank, I didn’t really care about how much it cost, because it felt like a non-negotiable expense—like productivity rent.
But while little purchases can add up, so can little savings. Although a small daily purchase may feel like pocket change that won’t make a difference whether you save it or spend it, let me introduce you to my little friend compound interest.
This is a very cliché and predictable exercise for a post about saving, but it’s become so commonplace because it’s powerful and real.
Let’s revisit that $634.40 figure, which is, candidly, conservative for my coffee costs considering I usually buy it 7x/week (not 5) and sometimes spend up to $3.70 at specialty shops—but we’ll keep the figure, because let’s say we’re allowing some splurge coffee purchases on the weekends.
Now let’s say I invest that $634.40 (stick with me) into an index fund that averages an 8% annual return, and I invest that same amount every year. By the time I’m 30, that’ll be $7,200.73.
By simply not buying a $2.44 coffee every day and drinking the free coffee in my apartment lobby or at work instead (a relatively small tweak) I’ll be $7,200 richer in 7 years!
See? Little things add up.
When I think about my daily coffee in that way, I think I’d much rather have 7 G than wait in a line at Starbucks.
Ok, and just for shits, let’s do this same exercise for 40-year-old Katie (ugh, middle age *compulsively reaches for SPF 50*).
Same thing—8% annual return index fund, $634 of saved coffee money annually, and ultimately a $2.44 foregone daily weekday purchase.
Ok, you ready?
By the time I’m 40, that’s $25,471.33.
That’s a down payment on a damn house!!!!
I’m not saying never buy coffee, this is merely an example that (I hope) illustrates how even a little purchase you make frequently affects your long-term wealth.
For the record, that’s only $12 per week. So maybe my Starbucks crack addict example doesn’t resonate with you, but you easily spend $12 per week on an extra lunch or dinner out when you could eat at home. Maybe you don’t even really find joy or LIKE that meal you’re eating out, but who cares? It’s $12.
I hope we’ve learned by now how much little things matter.
Your $12 sandwich and Coke that you eat while absentmindedly scrolling through your phone, or that fancy martini you drink with a friend you don’t even like that much but feel obligated to say ‘yes’ to drinks with (when annualized) could be $25,000 when you’re 40 if these are habits you engage in weekly.
To be abundantly, excessively, annoyingly clear, I’M NOT TELLING YOU TO SUCK ALL THE FUN OUT OF YOUR LIFE! Just be aware of the sneaky money drains in your daily spending and try to re-prioritize.
Rather than always agreeing to go out for a drink, hopefully you’re close enough with your close friends to suggest buying & splitting a bottle of wine and hanging out at one of your places instead.
(I’m not telling you to never go out for drinks, but maybe that shouldn’t be the default—again, this is for people with normal young adult salaries trying to boost savings, not people who are pushing $200k already. Y’all can do whatever the hell you want.)
So aside from the obvious like daily coffees, there’s one other area of my life that I used to spend a pretty substantial amount of money (when annualized), but infrequently—so it didn’t feel too egregious.
Ladies, you know where I’m headed with this: manicures and pedicures. I’d average one of each per month, which, after tip, was typically around $80.
$80 per month x 12 months per year = $960. Yikes.
At the risk of sounding like a pleb, I’ve started doing my own nails. It’s kinda janky at first and it may look like an elementary-aged boy took a paintbrush to your feet, but I was pleasantly surprised at how long my toenail polish lasted before it started chipping.
There’s a weird side-effect of getting your nails done regularly—once they start to grow out, it almost becomes a source of stress until you can get them redone (especially with dip or gel) because they start to look really grown out and unsightly.
You may not even really care to get them redone (or want to pay for it), but you can’t remove gel or dip powder yourself (without destroying your nails) so it’s tempting to pay a professional to keep them up.
In short, it’s a trap!
I’ve just been doing plain fingernails (trimmed but unpainted) and painting my own toenails every couple weeks. It only takes about 7-8 minutes of sitting on your bathroom floor like a broke bitch and crouching over your toes to get the job done.
To reiterate, I’m not saying never get your nails done. If you’ve got a big event coming up (assuming you don’t have events monthly) or you’re stressed and you think paying a stranger to rub your feet would help, just do it. I’m not saying don’t spend money on things that make you happy, I’m merely emphasizing avoiding habitually expensive practices that you engage in mindlessly without realizing how much it’s actually costing you.
Now that I’ve been foregoing the nail salon for a few months, I realize I prefer just painting my own toes in the comfort of my own apartment and leaving my fingernails blank. It sounds lazy, but it’s honestly easier than driving there, finding parking, waiting for someone to become available, figuring out how much to tip, and waddling out in the flimsy flops trying not to stub your toe on your brake.
Not to mention the amount of time, money, and annoyance it’s saved me to not be a slave to the fickle timing of my gel manicure and bare nail beds.
(I hope by now you’re beginning to identify areas in your own life where you could explore cheaper or free alternatives.)
To drive the point home, let’s do the same exercise above with the nails. Averaging $80 per month on one pedicure and one manicure (double if you go biweekly) is $960 (or $1,920) annually.
If you’re 23 like me and invest that same money in the same 8% index fund each year instead, by the time you’re 30, you’ll have $10,896.43.
Let’s do 40 now, for fun:
And let’s say you’re going for that double monthly mani/pedi, or every two weeks.
That same money in our index fund when you’re 30 would be… (drumroll please.)
Any of you ladies hope to get married when you’re 30? Do you think $21,792 could be helpful at the time? What about those of you who want to buy a home when you turn 30? Start doing your own nails (that’s ONE change) and there’s your down payment at 30.
Ok, and for the scariest figure of all: you “double monthly mani/pedi” peeps at 40 years old (if you drop the habit now) could have:
I didn’t pull these numbers out of my booty. If you want to mess around with your own calculations and spending, you can find the compound interest calculator here.
Little things add up. Say it with me!
The key is finding things you can do yourself. As expensive as my hair is every three months, I simply can't highlight and cut it myself. Being blonde is intrinsic to my personality now (sad but true) so it's an expense I've weighed carefully and accepted. Pedicures? Not so much.
Order a copy of the book and play with the interest calculator and find some ways you can stack that paper, too! (That was lame, I'm sorry.)
Credit is a non-optional, mandatory part of being an adult. My friend Ashley's parents (very savvy, Mark & Darja) knew that credit mattered, so they opened a card in Ashley's name when she was young (early college, I believe—Ashley, keep me honest). She told me I needed to open a credit card and begin paying it off so I could establish good credit early in life.
I didn't really think much of it at the time, since I was a snot-nosed, punk-ass, Budlight-drinking college student who figured I'd buy a house around the same time I bought a minivan and that I'd never see graduation day anyway (just kidding).
Now, I'm a money-obsessed amateur personal finance connoisseur #GREED! I'm reading Money Diaries right now, highlighting and doggy-earring the pages like it's an SAT prep guide. If you're reading this, it's probably safe to assume you care about getting your financial shit in order, so pick up a copy here.
During my first internship (i.e., when I started making money), I opened a credit account with Discover. Before long, I was putting everything on my credit card. Truthfully, I don't know how I ever lived without it.
So let's address some key points here, in case you:
(a) don't have a credit card (apparently this is an issue for Millennials because they're terrified of credit card debt, rightfully so) or
(b) don't know why you need one (I realize this is basic, but there's a lot of confusion surrounding credit within my own personal circles so I know it exists).
In 2016, a Bankrate study found that just 33% of Millennials had credit cards. Yikes. Here's why that's scary:
You need credit to make big purchases, take out loans, and even rent things like apartments, appliances, and sign up for utilities.
It's basically the only way a company or seller knows that you're good for the money you say you're good for. It's also sometimes used in job interview processes (YEAH, apparently they check that sometimes) and in other situations because it's thought to give an indication of your ability to be responsible. For better or worse.
Credit cards are the best, fastest way to establish credit while you're young.
I know a lot of people are apprehensive because of how often we talk about "credit card debt," but how much you spend on the card is up to you (paying it off is up to you as well). As long as you're paying off the statement balance every single month on time, you'll never incur any interest penalties. Plus, the cash back options with some cards are incredible—it's like getting free money. In that way, it's much better than a debit card.
I've gotten to the point where I put almost everything on my credit card, except for things like rent (which I pay directly out of a checking account to avoid fees with the leasing office). I'd only recommend this if you budget closely and have a very good idea of how much money you're spending every month—in other words, your cash flow.
The reason credit cards can become problematic for people is because they enable you to spend with a "I'll figure it out later" mentality, which can be dangerous if you don't know much about your cash flow.
Speaking of cash flow, I think my next post will deal with setting up a "net worth spreadsheet" to show how you can track your net worth every month and get a better idea of your cash flow (and why it's important in the first place).
But back to debit cards—they're less safe than credit cards.
Think you're better off only using debit? Think again. I've gotten to the point where the ONLY place I'll use a debit card is at an ATM. NEVER use a debit card for online shopping. I randomly sat next to a cybersecurity guy on a flight once, and he told me the safest way to pay for things is with Paypal, and the second safest way is credit cards.
He said you should never use debit cards online because if someone scrapes the page for your information they get direct access to your checking account. Anyone who's ever been frauded knows it's a scary feeling, but most credit card companies are fantastic about striking those purchases from your record immediately. Not all banks work the same way. Sometimes once that money's gone, it's gone.
So, let's say you're really, REALLY new to the idea of a credit card. Maybe you're 17 and it never occurred to you before, or maybe you're 25 and always felt a little unsure of the concept.
Here are a few basic "how-to" items, assuming you haven't had an issue with credit in the past (i.e., your credit score does not yet exist):
Find a basic starter card that doesn't require you to have credit already.
As I've mentioned before, my favorite card for starting out is the Discover It card. You earn 5% cash back on different categories every month (one month it was Starbucks and Amazon—I think I got $50 in cash back that month—i.e., free money) and I don't remember having any issues getting approved initially.
You'll just need basic information about yourself, like your social security number and income. Keep in mind the "limit" on the card (how much the credit card company will allow you to spend) will be based on your income and credit history, but as you establish credit over time and make more money, you should keep requesting credit increases.
Rule of thumb: Never utilize more than ~30% of your available credit line. E.g., if my credit limit is $10,000, I shouldn't carry a balance of more than about $3,000 to keep my credit score healthy.
Already a cardholding member of the credit card club? (I hate myself.) Nerdwallet is a great resource for comparing credit cards if you're already established and want to explore options that offer relevant perks (some American Express cards grant you access into airport lounges and other cards (like the Capital One Savor card) are specifically for cash back at restaurants and bars, for example).
Know the difference between your statement closing date and statement due date.
This seems self-explanatory so I apologize if I offend you by addressing the obvious, but I know it confuses people since it works differently than a debit card. Each month, the credit card company will record your charges for a set period of time (mine always ends and begins again on the 26th of the month) so it can charge you your credit card statement (or bill).
So, it accounts for all charges for a full month, but the money for that period of time is due almost a month later (my statement cycle is the 26th-26th, but my billing date is the 21st). That means I wouldn't pay for the charges I rack up between Sept. 26-Oct. 26 until Nov. 21. And so forth: Oct. 26-Nov. 26 gets paid for on Dec. 21.
Make sense? This explains why your statement balance and current balance can look really different sometimes, so make sure you're paying attention to the statement balance and due date.
Most cards offer 0% APR for the first year, which means even if you carry a balance on the card you won't be charged interest. While good-intentioned people are inclined to believe this is about forgiveness, I'm pretty sure they only do this to get people in the habit of carrying a balance from month to month (i.e., not paying off the statements on time and allowing charges to pile up) so once the year is up they can start charging you 25% on the total (yes, it's not unusual for that to be the interest rate!). Don't carry a balance. Just don't do it.
I think that about covers it for the basics. What questions do you have about credit cards? What confuses you or scares you? Let me know so we can tackle in a follow-up post.
All good things must come to an end—welcome to Pt. 4.
Just kidding, though, because we’re just getting this gravy train rolling. While this marks the end of the takeaways from the book tour, I have yet to actually finish reading said book—so prepare for more! (And while you’re at it, pick up your own copy here.)
If you're new here (hello), we've already covered:
Next week, we'll talk a little bit about credit cards, but for now, let's take this book series knowledge home.
There were a few newlyweds in the crowd who asked for Manisha’s advice on ‘splitting the pot,’ so to speak.
She talked about something I had really never thought about before: we’re the first generation to deal with the question of finance within marriage en masse, because we’re getting married later and typically participate in dual earner situations. Depending on your age and career, both members of the marriage could be coming in with sizable assets (or, less sexy, sizable debt).
She suggested “yours, mine, and ours” buckets if you aren’t comfortable combining your assets into one metaphorical pile.
The “ours” bucket pays for your housing, your food, transportation, and other things that you both need to live and benefit from mutually. In situations where one partner significantly out-earns the other, she suggested a pro rata “ours” bucket in which the contribution from each person is proportional to their income.
For example, if I make $100,000 and my husband makes $200,000, I contribute $50,000 to the “ours” bucket and he contributes $100,000. It’s only fair, honey!!!!!
The respective “yours” buckets can be used for things like gifts, personal grooming, shopping, and other shit you don’t think the other person should be on the hook for.
The debt conversation is more tangled, because debt situations vary significantly from person to person. She said that some people view marriage as assuming the other person’s good AND bad, which means assets AND debt.
She made a joke that we always ask ourselves if we’re physically, emotionally, and intellectually attracted to another person, but we never ask (aloud, at least) if we’re financially attracted. She said that’s a perfectly valid question, as money affects marriage more than most anything else.
She also noted that she deals with a lot of people who don’t know how much their partner makes. WHAT THE ACTUAL HELL, PEOPLE? How does that work? Y’all just ignorantly making big life decisions out there? SMH, I can’t.
The only way to decide how you’ll treat your (or your partner’s) debt within your relationship comes down to a conversation. And if your partner isn’t willing to talk about it, well… maybe you should give the ring back.
Switching gears slightly to the gender stratification within conversations about money, she said financial literacy amongst average citizens (both men and women) is about the same: low. The rates vary between 30-35%, on average. I.e., none of us really know what we’re doing. Yay!
But, she said, the main difference is that men have an elevated sense of confidence and assuredness about their money knowledge (LMAO #shocked) whereas women tend to have a more realistic perception of their understanding of money matters.
As a result, men begin talking about money earlier with each other—in college and sometimes even high school. Women, on the other hand, tend to avoid the topic altogether, feeling unequipped to engage in the conversation—so unless they take a genuine interest, they never learn.
That’s heartbreaking to me, because as Manisha noted, money gives women voices and choices. It allows you to have control over your own life.
As I’ve noted before, it really bothered me that all my male friends seemed to care about and partake in investing while my female friends didn’t know and—frankly—didn’t really seem all that interested.
(To be clear, my friends are obviously interested in making and having more money, but weren’t actively investing or trying to do so like my male friends.)
It is precisely because men become comfortable talking about and are confident in their money knowledge that they gain more true understanding over time. And, as we’ve all learned about the compound power of money, that can make a HUGE difference in the long run.
If an 18-year-old guy starts investing in index funds, he’s going to have way more to show for it in the end than a woman who waits until she’s in her late 20s or early 30s to get some skin in the game. Time matters. Unlike a lot of other things in life, when you start matters.
So, ladies, let’s have more candid conversations with each other about money. Ask questions. Find money mentors. Behave as though your income, savings, and investments are all you’ll ever have, and if you do so successfully, they’ll be all you need.
The first step is picking up this book. If you haven't done so yet, don't cheat yourself any further.
Welcome to part 3! We’re almost done—only one part to follow of book tour knowledge, focusing on perhaps the most juicy, controversial, and inexplicably emotional tenet of money: relationships and gender.
First time visitor to the series? Make sure you check out Pts. 1 and 2, dealing with LOANS, DEBT, AND SAVING and FINANCIAL ADVISING respectively. They'll serve as a warm, soft, cuddly foundation for the cold hard truth below.
And of course, my disclaimer regarding the validity of the information below (because I'm sure you don't necessarily want to take investment advice from someone who writes puns about bags flying free for a living):
I'm merely passing on the brilliance of Manisha Thakor, a Harvard MBA, CFA, and CFP® who’s nationally recognized for her expertise on financial wellbeing. Manisha's the VP of Financial Education at the Seattle-based wealth management firm, Brighton Jones.
All right, pleasantries out of the way. Let's get down to business.
When it comes to home buying…
This is a loaded question and one that I’ve grappled with a lot since understanding how expensive rent can be and how it adds up over the years (you may recall my post about what it’s like trying to buy real estate at 23 and my horrifying realization that by the time I’m 30 I’ll have sunk approximately $100,000 in rent).
A little history lesson: home ownership became a true mark of wealth and prosperity during our parents’ parents’ generation (so, our grandparents). These were periods of high inflation—people were getting annual raises of 8-12% every year, and there were only two mortgage options: 15- or 30-year fixed.
So as your income steadily rose over time, your mortgage payments stayed low. By the time your kids were grown, your house was paid off. Not to mention our grandparents didn’t have nearly the amount of investment vehicle options we have today—a house was how you became prosperous.
Fast-forward to now, especially in hot housing markets. Not only are most of us not seeing astronomical raises annually, but there are so many different mortgage options out there that some people become entangled in these variable rate mortgages and secure loans for homes they can’t actually afford (hello, 2008).
All that to say, Manisha said buying is ONLY better if you can comfortably put 20% down AND you can go with a 15- or 30-year fixed rate AND you intend to live in that home for at least 10 years.
I immediately thought back to all the condos I was looking at in the mid- to high-$200s range. 1,000 sq. ft. of modest 2BR-2BA bliss for $250,000 is very much the norm in Dallas, and that's a cool $50,000 down if we're talking about 20%.
I don't know about your situation, but I ain't got $50,000 at my disposal. And if I only put 10% down, I'd be borrowing 90% from the bank—not a great start for my first property—and paying a hefty interest rate since my credit history is only a couple years old.
Which brings me to a segue topic that will apply to all of you, even if home-buying isn't in your near future: credit. Let's get into that next week!
There are so many other investment options out there that don’t require a $50,000 down payment. (And, by the way, your $250,000 house usually ends up costing closer to $500,000 over the course of your mortgage thanks to your interest rate—something to think about.)
Plus, the property taxes in the state of Texas are also very high, a cost you don’t directly incur as a renter. To give some anecdotal insight as to what I mean by “very high,” a home valued at about $2 million in the nice Dallas suburbs sees about $40,000/year in property tax.
If you’re struggling with this decision right now, this is an absolutely incredible free tool: The New York Times ‘Rent or Buy?’ Calculator. This will now be a permanent staple on my blog’s side bar in this section for easy access.
In short, Manisha’s insight made me feel decidedly better about not being able to afford to buy yet. Join me for my last series post later, LOVE AND MONEY, and come back next week to learn all about credit, my favorite credit cards, and the ins and outs of why they're a non-optional staple in your wallet.
You can check out the book here and take this little journey with me. Let's get money-woke, friends!
Welcome to installment #2 of my Money Diaries-inspired series!
If this is the first post you're reading from the series, head back to Pt. 1 and get your baseline established—not a "must" to understand the below but if you're interesting even obliquely in financial advice then you'll probably find Pt. 1 (LOANS, DEBT, AND SAVINGS) even more helpful!
As background, this insight isn’t coming from me—I'm merely passing on the brilliance of Manisha Thakor, a Harvard MBA, CFA, and CFP® who’s nationally recognized for her expertise on financial wellbeing.
Manisha's the VP of Financial Education at the Seattle-based wealth management firm, Brighton Jones. (Little ~fun fact~: most wealth management firms have a minimum net worth value of $1,000,000 before they'll work with you. Cute!!)
This one won’t be as lengthy as the first post, but still hits on some critical points if you ever want to be someone who has enough money to warrant financial advising. If you're craving more in the meantime, go ahead and order the book. I promise, it's a worthwhile investment (coming from the girl who exclusively buys Calvin Klein underwear because they're on-brand...I know, but trust me).
Getting a financial adviser is wise, if you don’t yet have one. But be careful—if you feel a little icky about them, she explained, it’s with good reason, because financial advisers don’t have a universal standard like doctors and lawyers.
I’ve only received informal personal finance advice from my friends Ali and Evans who own a wealth management firm and practice personal finance education in his free time, respectively, but now that I have this information I’ll probably move forward with finding an official adviser.
Side note: we were talking about investments and wealth management along this same vein, and she off-handedly made a comment about how "if you have less than $250,000 in assets, you should work with Ellevest," and I swear you could hear a penny drop in the room. Someone in the back was like, "What if I have no money?" Hilarious.
The questions you should ask your financial adviser, in order of importance:
Alright, folks, thanks for playing. Tomorrow we'll talk about everyone's favorite thing to stress about as young adults: renting vs. buying.
Financial literacy ain't optional, playas—let's talk openly about money, investing, and budgeting so we can reap that sweet financial freedom.
Full-time Brand marketer at Southwest Airlines, part-time Yoga Sculpt teacher, occasional Waffle House Model and reformed materialist.
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