Your Money
I’ve been helping several friends with their finances lately. These requests usually come with some trepidation. There is a concern about being embarrassed or a fear of being judged harshly for the state of their finances. My response is always, “Please, please, please ask for help.” This is too important to ignore.
The general level of ignorance about money is epidemic, and it even extends to people who do a decent job of saving. Just because you are not broke or in debt, doesn’t mean you have a clue about personal financial management. Ask a trusted friend for advice and stay away from “professional” financial planners. If your investment account balance does not have multiple seven figures in it, you’re better off spending $12 on a Dave Ramsey book than paying someone else to assist (“The Total Money Makeover” is a classic.) Do the hard work of learning for yourself.
The most common problems I encounter are all very basic:
Overspending: It all starts with sticking to a monthly budget that is sized comfortably within your means. It doesn’t matter what you think you “deserve,” only what can you afford.
Personal Debt: The only acceptable debt is mortgage debt, and sometimes that doesn’t even make sense. Pay off credit cards, car loans, student loans, and all other debts.
Comparison: Looking at how your peers spend and manage their money is almost always a bad idea. Many of them are worse off than you and have even less of a clue about money.
Lack of Savings: If you reject using credit cards to cover unexpected expenses, then you need a hefty emergency fund. Modern life calls for a minimum of $10,000 in the bank.
No Long-term Plan: This usually shows up as anemic retirement savings, no plan for housing, inadequate insurance, and a lack of understanding of potential healthcare costs. Tomorrow comes fast.
Exotic Investments: Very rich people understand that the way to wealth is disciplined long-term investing in a boring, diverse portfolio of financial assets. No crypto, hot stocks, or emu.
Solid personal financial management is a leadership characteristic. It is hard to ask other people to respect and follow you if it is apparent that you do not have your shit together. Don’t wait until tomorrow to address this issue. There is no shame in asking for help and it just gets harder and harder the longer you wait. Everyone is capable of learning the basics. Remember, money is a wonderful slave and a horrible master. Either manage it, or eventually it will manage you.
