Nov. 25, 2017
I had a meltdown about my finances and it was a wake up call. I could either keep pretending everything was fine, or buckle down and get serious.
In the first part of this two part series, I explained why traditional retirement savings advice for millennials is useless. Rather than give you a bunch of advice as potentially useless and shaming as the advice part one began with, here are the things I did to overcome my financial baggage on a very modest salary.
- I decided this was important and worthy of my attention. I vowed to stop ignoring my credit card bills (even if I did pay them off every month) and to stop YOLOing my way into purchases with money I didn’t really need to be spending. I spent a lot of time wanting to get my finances under control, but what that really translated to was this: me being frustrated with my lack of income and the fact that I couldn’t find a better paying job, because if I could just earn more, money wouldn’t be such a problem for me. I had to decide I wasn’t helpless.
- I got familiar with my money baggage. Your relationship with money has huge psychological underpinnings and it can have a huge effect on your life. Are you obsessed with money because you don’t have any? Are you afraid to part with every penny? Do you treat yo self more often than you should? Do you use your credit card like there’s no tomorrow and carry a balance month to month? Are you paying all of your bills and student loans, but not putting a penny toward retirement? Are you saving for retirement but have no emergency savings? Do you splurge on coffee or lunches out a few times a week without thinking about it? Do you make impulsive purchases without doing research? There are endless ways to be bogged down with money baggage and the sooner you come to terms with your own unique brand of luggage, the better. Again, this is not easy work but it’s so worth it in the long run.
- I found my number. This is Personal Finance 101, but it’s completely and utterly necessary to find your number: the absolute maximum that can go out of your bank account every month. I couldn’t bury my head in the sand anymore, so I took an honest look at where my money went. My spending tended to be impulsive- a lot of little, seemingly innocent purchases that added up to a chunk of money every month. I wouldn’t dare spend a lot of money on one purchase, but I would buy lunch out once or twice a month, buy coffee to sit in a coffee shop and use their wifi, tickets to a concert, books on an unplanned trip to the bookstore, new shoes, an unplanned mall shopping trip (hello, new sandals I didn’t need), random Uber trips, magazine subscriptions… Alone, these purchases were innocuous, but together, they made a mess of my bank account. Once I had my number, I had to scrutinize every potential purchase, and with honesty.
- I made my own personalized plan. Don’t accept anything you read or hear about as gospel. Your financial situation is unique; there are so many factors at play it would be impossible to find a panacea. The reason there are so many programs, ideas, and systems out there is because one size does not fit all when it comes to finances. Do research, learn about as many different things as you can, and implement what works for you. If you’ve really got retirement on the brain, this extensive online retirement calculator from T. Rowe Price is free to use and lets you see how adjusting your savings now will affect how much money you’re projected to have when you retire. If you’re looking for a book to read, I highly recommend Broke Millennial by Erin Lowry.
- I initiated a spending freeze. I hate to say it, but you can’t have your avocado toast and eat it too - if you truly want to get your money in order and your spending is totally screwing up your budget, you might have to give up the small pleasures in life that cost money for a period of time. I’m willing to bet you can think of creative ways to get the essence of the things you ordinarily spend on without spending extra money. Like to buy books and read magazines? Go to the library. Like to have fun, new experiences? Try making your own fun. Host a board game night! Do a science experiment in your kitchen! Play truth or dare! Like tasty food at restaurants? Cook schmancy meals at home more often. Like to travel? Head to a neighborhood in your city you don’t frequent and wander. Like to buy coffee on the go? Make a plan and brew it at home. I’m not saying these purchases are ruining your life and are the reason you’ll never get ahead- I’m saying you need a spending reset and a freeze is the best way to do it.
- I set aside a little money every week. If you’re fortunate enough to have even a little bit of disposable income, put some aside each week. It doesn’t have to be exorbitant- the sooner you can start setting aside money, the better. Even $20 a week will add up to over a grand after a year and you have to start somewhere. I upped my retirement savings to the maximum matched by my employer and I started putting all extra income into my emergency savings account (three months of living expenses at minimum) so I couldn’t easily spend it. It was a bit of a power trip because I had to log into my bank account and move money over to my checking account when I wanted to buy something, but it made me think twice.
- I got a second source of income. If your income isn’t going to cut it and you’re looking to have more set aside for emergency savings, retirement, or paying down debt, start to think creatively about how you can cut back and/or earn more. I hate the idea of the side hustle as necessary because it isn’t a big ask to get paid enough at one full-time job to live and save comfortably, but this may be the temporary season in your life where you work two jobs to stay afloat. Can you drive for Lyft? Sell some clothes online? Get a seasonal retail position? Do some freelance work? Find a roommate to split the rent? Ask for a raise? Start looking for a new job? None of these options are easy or fun, but if saving for your future is your priority, you’ll find ways to make it work. And like I said, temporary.
- I accepted that this will take time. It took me almost two years after getting a full-time job with a living wage before I figured out how to handle my money better. It took a lot of conscious effort to undo my scarcity mindset and acknowledge that I had some disposable income. Like I mentioned earlier, I started putting the maximum matched by my employer into my retirement savings, set an emergency savings goal, and kept a very close eye on my spending each month. As soon as I decided to get serious about money, it was easier to decide what was worth spending money on and what I could do without.
Thinking about money is usually topic-non-grata, and I get it- especially if you don’t have much. Math, calculations, realizing all of those trips to [Target, Starbucks, HomeGoods, Chipotle, etc.] are adding up fast and going into an absolute panic about how you will never be able to retire and will die at your desk are normal parts of the money management process .
The steps I took above weren’t easy (I use my lunch hour to “work” my other job most days, and I say no to things I want to buy or do) but the legitimate peace that comes with knowing I’m not just burying my head in the sand is ultimately worth it. Like I said earlier, this is all temporary and you can figure it out.