Monthly Archives: August 2016

Financial Milestones To Hit

Just like Jennifer Garner’s character in Thirteen Going On Thirty, I thought I’d have all my sh*t together by the time I reached the big 3-0. I’d be an adult. Let’s be honest, this is just a grown-up version of the thought that plagued all of us in middle school: “When I’m sixteen, I’m going to be incredible!” And as we got older, that number just got higher. I’m fully convinced that I’ll be 55 one day, thinking, “Oh I’ll probably have my life together by the time I’m 60.”

Truth be told, we probably won’t ever feel satisfied with certain aspects of our lives. And I guess part of the fun of being alive is never really feeling “done.” We always have to improve, and we always have to grow. That said, it’s kind of humorous (or, at the very least, pathetic) to look back on some of the milestones I thought I’d hit by the time I reached my third decade as a human on this planet. Some of them are sheer wishful thinking, and some make me cringe with embarrassment.

I may be “thirty, flirty, and thriving,” but I definitely didn’t meet these goals – and you know what? That’s okay.

1. Expectation: I’ll definitely own a house by age 30.

Reality: I still rent.

My husband and I live in the Boston area, which is basically the same as any housing market in any big city: ridiculously expensive. Even the suburbs of Boston are very financially challenging, with houses of decent size and quality rarely dipping below $350K. Buying a house is often perceived to be the ultimate “adult” milestone, but in my opinion, there are a lot of perks that go along with renting that I’m not entirely sure I’m ready to give up (aka the beauty of not having to shell out thousands of dollars when an ice dam causes major flooding, which is what happened to us last year).

2. Expectation: I’ll have a relatively fancy car, or at least a new one.

Reality: I still drive the first car I’ve ever owned.

While a new (read: new to me, but probably still used) car is possibly on the horizon for me in the near future, it definitely won’t be fancy by any standards. I currently drive an ‘05 Jeep Liberty Sport, and while it’s cute and practical for those Boston winters, it’s not shiny or glamorous by any means. No joke: my car sometimes makes farting noises, so that definitely wasn’t a part of my “vision” for the big 3-0.

3. Expectation: I’ll invest in a solid collection of high-end beauty creams.

Reality: If I’m dropping $$ at Sephora, it’s probably on NARS Orgasm.

There’s a little voice in the back of my head that often whispers to me, “Shouldn’t you be buying eye cream or something?” (Idk, isn’t that what we’re supposed to do when we leave our 20s?) The truth is though, I can’t bring myself to spend money on stuff like that. I’m sure it’s beneficial, and I’m sure there’s probably some beauty consequences that are headed my way in four or five years, but I’d just rather spend money on #LipKitByKylie, or something.

4. Expectation: I’ll earn a tremendous amount of frequent flyer miles.

Reality: I’ve spent a lot of time in coach.

While I do love to travel, I very rarely do it in style. I’m all about those flight/hotel/car bundle websites, like Expedia, which is great when you find a hot deal, but not as great when your flight gets canceled and you have to spend your entire trip arguing with customer service or waiting to fly standby. Anyone know how to get a private jet? A free private jet?

5. Expectation: I’ll have a closet full of shoes, à la Carrie Bradshaw.

Reality: I’ll wear my favorite pair of flats until they have holes in the bottoms.

Even now, when I watch reruns of Sex and the City, and even though I know it’s a TV show, I get so irrationally angry. HOW DOES SHE HAVE THAT MANY SHOES?! SHE IS A WRITER! I AM A WRITER! It’s just so unfair. Then again, Carrie Bradshaw didn’t have any money in her checking account because she spent it all on shoes, so there’s that.

6. Expectation: I will have a crystal clear understanding of various retirement plans.

Reality: I still need to google “What’s the difference between a 403(b) and an IRA?” on a semi-regular basis.

Nothing makes me feel dumber than meeting with financial planners. Hats off to those who work in finance, because I think you have a different brain than I do. I make it my mission to know as much as I need to know in order to maintain my retirement plan healthily, but when it comes to the details, I’m just as fuzzy as when someone tries to explain how football works. (What’s a “first down” again?)

7. Expectation: I’ll finally stop giving into impulse purchases.

Reality: Ooh, are those chocolate-covered gummy bears?

You know how some checkout lines put certain items on shelves that are perfect eye-level for children? I feel like most checkout lines appeal to me in the same ways. As much as I try, I cannot resist that chapstick that smells like pomegranate, or that ridiculously cute tiny notebook. I definitely try to cut back whenever possible, but I have no regrets about the occasional luxury gummy bear purchase.

8. Expectation: I’ll embrace the minimalist lifestyle.

Reality: I probably “spring clean” every month.

I don’t know how those self-declared minimalists do it. I would kill for a mostly-bare apartment with clean, Instagram-worthy countertops. But no matter how much I try to clean and purge, I still feel like I constantly have so much stuff. Part of my problem is the fact that I’m way too nostalgic and ask myself, “What if I want to keep this?” far too often. But it’s hard to part with things that have such sentimentality, and when you’re an overly-sentimental person, that can mean literally everything.

Money on progeress

I’ve never gotten more push-back on a post than I have for my 30 Financial Milestones You Need to Reach by Age 30. It’s still Money After Graduation’s most popular post of all time, and since making the checklist the download that you receive when you sign up for my email newsletter, more protests are coming in.

In the time I’ve been doling out personal finance advice online, I’ve been called everything from privileged and out of touch, to colorful names I will not repeat. I know I don’t have the soft touch many other personal finance gurus have. But I have to be harsh with you because you need to know the truth:

If you do not get your financial shit together, you will not be okay.

If you do not aggressively save for retirement, you will not have enough money saved to leave the workforce on your own terms and live comfortably. If you do not pay off all your debt as fast as possible, you will not have the flexibility and security of keeping every dollar you earn. If you do not set aside money for emergencies, you will not be ready to deal with what life throws at you (and it will throw many things at you, and a handful of them will be horrendous).

But the painful truth is I cannot make any of the above easy for you. I can tell you how to do it and I can give you motivation and inspiration, but I cannot lighten the load. I cannot reduce your debts, earn you more money, or increase your investments. You have to do that part.

I also cannot (or at least, will not) lie about it. Which is why my advice sometimes comes across as “harsh” or “mean”.

It’s not easy.

Getting your finances under control is not easy at all. That’s actually why most people don’t do it. It is far, far easier to buy a house you cannot really afford, finance a car with a 7-year loan, make the minimum payments on your student loans, and use credit cards to fill in the gaps.

That’s what most people do. Don’t be most people.

You can save $25,000 for retirement in less than 5 years.

When you look at that number, you might think $25,000 over 5 years means you have to save $5,000 per year or about $417 per month.

Wrong.

If you invest that money in the stock market and earn an average rate of return of 5%, you only need to save $368 per month. This saves you just shy of $50 per month, or nearly $3,000 over the 5 years. Yes, you read that right. $3,000 of your $25,000 retirement savings is going to save itself. So you don’t have to save $25,000 — you have to save $22,000.

Don’t think you can earn a consistent 5% return? Fine. Find 3% and you only have to save $387 per month. It’s still $30 less per month than you thought.

You can save up a 3-month emergency fund in less than 1 year.

Some people think you need to save 3-6 months of your gross income as an emergency fund. This is a wonderful idea, but largely impractical in your 20’s and 30’s. You should, however, have at least 3 months of essential expenses on hand. Make a list of all the things you spend money on over the course of a month. Now, cross out anything that isn’t a necessity.

If you were without income, you would still need to pay for housing, utilities, food, and your cellphone, as well as make the minimum payments on your debts. But that’s it. You do not need to put money into savings when you don’t have a job. You can apply for forbearance on your student loan payments. You will not go out with friends.  You literally will live on the bare minimum.

Is it your entire income? Probably not.

These are your essential expenses. I would guess they’re somewhere around $2,000 or $3,000 per month. Multiply it by 3, then divide by 12. That’s the amount you have to set aside each month to accumulate a 3-month emergency fund in less than a year. If you cannot save up a 3-month emergency fund in one year then your home is too expensive and/or you cannot afford your car and/or you can’t differentiate between “needs” and “wants”. Explore each category ruthlessly, then cut out whatever is holding you back.

Tips for Hit Your Money Goals

So you save some of your paycheck, contribute enough to get your company’s 401(k) match and wouldn’t dare miss a payment on your student loans.

Nice. You’re on your way. But your journey might be longer—or harder—than it has to be. Because while smart steps like these will help you eventually reach your goals, there’s a good chance it’ll take longer than if you applied a little more strategy.

Want to travel a less painful path toward wealth? Make sure you’re not committing these common (and well-intentioned) mistakes.

You’re nickel-and-diming yourself.

You calculate how much you’re spending on happy hours and Shake Shack, then ban them for the sake of your budget. Your head’s in the right place, but your strategy is misguided if you’re striving to save $15 a week by cutting something you enjoy, but still paying $100 more than you need to for cable or $200 a month on a gym membership you haven’t used since January.

Related: Start saving $100/month on Live TV

“Not only will little budget tweaks not get you very far in terms of your overall savings, but they may bum you out, which will cause you to burn out,” says Dominique Broadway, a financial planner in Washington, D.C., making it tough to stick to your budget.

Instead of looking for small-ticket items to skip, start with the big stuff. Can you renegotiate your gym membership? It can’t hurt to ask. Are you paying too much for your phone plan? You may save hundreds over the long run by downgrading your data plan, asking about specials or switching to a competitor.

You’re putting money in a savings account, but not investing.

It seems like a smart move to transfer money from checking into your savings account each month—and it is. But it’s not enough to ensure a comfortable future.

Banks are paying an average of 0.5 percent interest annually on a savings account now, but the inflation rate is above 1 percent (and, over the long term, it’s averaged more than 3 percent annually). “So by simply putting money in a standard savings account, it’s almost like you’re losingmoney,” says Broadway.

An easier way to grow your money and take advantage of compound interest? Once you have at least three months’ worth of expenses in an emergency savings account, start investing leftover cash, says Mary Beth Storjohann, a San Diego-based Certified Financial Planner and founder ofWorkable Wealth.

Aside from retirement accounts, you can open a traditional brokerage account or keep it simple with an app like Acorns or another automated investment service.

You’re only contributing enough to get your company’s 401(k) match.

It’s easy to think you’ve got your long-term savings covered if you’re contributing a few percent of your salary each year and taking advantage of your company’s free match.

“But the amount that your employer will match should be the minimum you contribute. It’s important to remember that it’s not tied to how much you’ll actually need to save in order to be comfortable in retirement,” says Certified Financial Planner Cheryl Sherrard, director of financial planning at Clearview Wealth Management in Charlotte, N.C.

The average match is capped at around 4.5 percent to 6 percent of employees’ salaries—and not all matches are dollar for dollar. Advisors typically recommend contributing 10 to 15 percent of your salary (including match money). One relatively painless way to get there is to increase your contribution each time you get a raise.

You diligently pay the minimum on your debt each month.

When you’re in debt, it can seem tough to tack on any more than what you need to pay each month. Yet paying no more than the minimum required may mean you’re not actually making a dent in your balance because of interest accruals. “Depending on how much debt you’re in and the interest rate on the loan, you could make minimum payments for a year or more, and your debt won’t change at all,” says Storjohann.

Wipe out your debt—and start building positive net worth—faster by taking a hard look at your outstanding balance, interest rates and other habits. “Maybe you’re over-saving and could be putting some of that money toward your debt,” Storjohann says.

Even throwing an extra $10 a week against your debt can make a big dent in how long and how much you end up paying on it.

Best Tool For Getting Out of Debt

In case you don’t really know my story, here’s the sequence of events:

  • Graduated from college, had $18,000 of student loan debt
  • Got married (yay!)
  • Together, we paid off the $18,000 and built up an actual net worth
  • Got divorced (booo…), kept the house, and therefore was thrown back into debt because I owed my ex $22,000 of our equity
  • Paid off the $22,000 in 6 months (whew!)
  • Paid off the remaining $54,500 on the home mortgage in just 12 months!

In other words, I’ve been in debt, got out of debt, was thrown back into it, and then came out of it faster and stronger than ever. I quickly became a get-out-of-debt machine.

How did this happen? It certainly wasn’t by accident. Through the unfortunate life events listed above, I discovered the absolute best tool for getting out of debt.

Getting Out of Debt – Discovering the Tool

No, I’m not trying to sell you something. The purpose of this post is not to jack up your spirits and then tell you that it’ll cost you $49.99 to experience euphoric bliss. First of all, I’m not that cruel. Second of all, this tool for getting out of debt shouldn’t really cost you anything. Just a few moments of your own time and thoughts.

So what the heck am I talking about? What is this tool for getting out of debt?

Discovering My Tool: The 1st Time

When my ex and I were first married, I distinctly remember the day that my general nervousness turned to panic.

Our student loans came due, and that fateful bill came into the mail. The bill that we couldn’t afford.

It was in that moment that I put my foot down and shouted, “NO MORE!!”

No longer was I going to lie back and relax while my bank account was obviously plummeting toward the negative! It was either we fight this evil giant called “Debt” or we were going to let it rule us for the rest of our lives.

From that date when we said, “No more!”, we paid off $18,000 and cash flowed a $6,000 car in just 14 months.

Discovering My Tool: The 2nd Time

“I don’t love you anymore,” She said matter of factly. “I want a divorce.”

I crumpled to the floor and looked up in disbelief. I didn’t understood non-physical pain until that moment.But once I felt it, all I wanted in life was for it to go away. The only chance I had was to cut all the strings – to pay off my debt to my ex.

From that moment, it only took me just 6 months to pay her the $22,000 she “deserved”.

All ties were cut and I could breathe again. Finally, I could get on with my life.

Discovering My Tool: The 3rd Time

My ex was paid off, but something still didn’t feel quite right. I still felt owned. Something was still holding me back in life. This time, it was the bank.

I owned a house, sure. But was it really mine? If I lost my job tomorrow and could no longer afford the mortgage payments, what would happen? The bank would send me a letter, let me know that they were taking possession of “my” house, and then strong arm me out. As long as there was a mortgage on that house, it most certainly was not mine.

I was single, I had a decent income and had no other debt – it was time for me to truly own my house…completely.

After that decision day, it took me less than one year to pay off my entire mortgage.

Getting Out of Debt: With Motivation

In all of my situations above, there was one common theme that propelled me out of debt. No, I didn’t find the secret to have my student loans forgiven, I didn’t invest in some magical stock that took care of all my debts, and I also didn’t get rich by blindly allowing a piece of software to save money for me (Achhhmmmm, Digit…I’m still not a fan).

My debt vanished because of one simple tool: motivation.

On every occasion, when I was pissed off about my debt, I simply figured out a way to get rid of it.

When people today say that they just can’t seem to get out of debt, it just frustrates the heck out of me.

  • Don’t you have a wife that works her butt off at corporate, but really wants to be at home raising your children?
  • Don’t you love your kids and want to provide them with the best education possible? Isn’t that more important than that shiny Land Rover you’re driving?
  • Have you ever thought about your retirement years? If you have nothing saved, don’t you realize that you’ll be trying to live on cheap pasta and tuna every day? Does that sound like fun to you?

For heaven’s sake, put a charge into yourself! Doesn’t anything motivate you? If you go through life in a “ho-hum” manner and never pull yourself out of debt, then there’s something seriously wrong with you.

Do you want to know the secret to getting out of debt? Get mad! Tell your debt that you’ve had enough! Look in your mirror TODAY and tell yourself that your spouse deserves to be at home loving on the children, your kids deserve to get a proper education, and your future self can absolutely retire with dignity! But you must start getting out of debt today!