I recently attended the LearnVest Live conference in Manhattan. For those who are unfamiliar, LearnVest is a progressive financial planning company focused on encouraging people to "make progress on their money" (that’s actually their tagline). I’ve followed them online for years now, leveraging their online tools and keeping up with personal finance related articles, so I was excited to attend an event in person.
As I strolled into the Chelsea event center on a cold and rainy New York night, I was greeted with wine and snacks and a swarm of about two-thousand other attendees. The event, in its entirety, was essentially part celebration and part kick-starter boot camp for those who were looking to financially shape up. All things considered, it was a refreshing and reassuring atmosphere.
I enjoyed the perks of sipping on wine and getting a professional headshot taken, but I found the keynote speakers and, more importantly, their platforms, to be most intriguing.
The first speaker was Soul Cycle Guru Stacey Griffith. Griffith shared her inspiring rags-to-riches story and then briefly touched upon the idea that controlling one’s finances is actually a whole lot similar to exercise and diet. The gist of it was this: we know that in order to lose weight we need to take in less calories than we put out (i.e. eat less, exercise more.) Fair enough, but guess what? This applies to finances, too. In order to save money, we need to spend less and make more.
If it were as easy as it sounds, though, we’d all be rich. So, what does it come down to? Motivation.
Unfortunately, due to some delays in the LV Live schedule, we didn’t get to hear Griffith expound very much on this comparison. Not to fear, though, I’ve been mulling it over and I think I can sum up the theory in a few tips:
1. Plan a budget and stick to it. When taking a health regime seriously, we plan. We tell ourselves “I’m going to make healthy lunches for work and exercise 3x a week.” We then grocery shop for what’s needed, pack our gym bags the night before work, etc. It is no different when it comes to personal finances.
- Organize. Sum up your essential expenses (ex. rent, utilities, transportation and groceries) and any other financial priority payments (credit card debt minimums, loans, etc.).
- Save. Ask yourself, "can I afford to save a little?" Many 20-somethings don't have a single dollar in an emergency fund - don't be one of them! Even $50-$100 a month adds up!
- Spend wisely. After taking care of your financial essentials and priorities, divvy up the rest of your paycheck into the lifestyle categories you prefer spending your money on (i.e. eating out, social events, shopping).
- Tip: Where you can set up automatic bill payments, do it!
2. Be Realistic: If you’ve been a fast-food loving, soda-imbibing couch-potato your entire life, it’s probably not wise to make an immediate 180-switch and go on a juice-cleanse while attending boot camp classes. It will feel unattainable and you’ll most likely burn out. Same with finances – saving and getting your spending under control takes time and persistence! If you know you’re subject to impulsive spending (and who isn’t?), you need to be realistic about avoiding them.
- Identify your weaknesses. A huge problem for many younger people is that they don't even really know where their money is going. If this sounds like you, a good course of action is to take a month to track where all of your money goes.
- Plan to avoid them. For instance, if you're an online shopaholic, immediately remove yourself from all of those daily list-serves. The less temptation, the better.
- Give yourself a little wiggle room in your budget for it. Carve out a “shopping fund” (even if it's just an envelope under your mattress) and throw a few bucks in every paycheck. Before you know it, you’ll be able to splurge and it’ll feel as if it’s free!
3. Think Long Term: A lot of people love the quick weight loss associated with the protein-heavy Atkins diet. To be frank, though, when kidney failure comes knocking 20 years from now, you may wish you stuck to a more balanced diet of whole grains, vegetables and meat-in-moderation. Just saying. The parallel here is saving for short and midterm goals, in addition to retirement. While you may not receive the immediate gratification, you'll be better off down the line.
- Know your short and longterm goals. After cushioning your emergency fund, what else can you save for? Is it taking a vacation in 5-6 months or buying a house in 5-6 years?
- Create separate accounts for each. Keeping that $1000 you are saving up for Spain in the same account as your checking just isn't going to work. You & and I both know it! Keep it in a separate account and cheer yourself on each time you make progress!
- Invest in your 401k. A 401k is something generation Y doesn’t consider very important because we’re so far from retirement age and many are still living paycheck-to-paycheck. It certainly hasn't been easy. However, by putting a mere 4% of your pre-tax paycheck away in your 20s, you’ll be exponentially ahead of the game 10-20-30 years from now and feel much more secure. If your employer has a 401k match (ask HR), this is a no-brainer.
The next person we heard speak was Harvard Professor and author, Michael Norton, who challenged the assumption that "money can't buy happiness." Norton disagrees, and so do I. Stay tuned for the next post where I'll sum his theory up!