First, if you’re living paycheck to paycheck and worrying how to address your loan payments, we are so glad you’re here. This is the first step to never feeling this out of control again. Celebrate that.
Google is a fabulous tool that allows users to access information, but it requires context to make those answers useful. Right now, there’s a fundamental gap between googling about getting out of debt, and making moves to pay off that debt. Check it out.
One quick trip to Google and we can find out how to change oil in our cars, build a computer part by part, or argue for that hefty raise at work. So with nothing but an internet connection, we can become experts in anything, right?
But what about when it comes to money? Can Google really tell how to get out of debt? Whether we should max out our 401k contributions instead of paying off our student loans early? Can it tell us exactly how much money for us to keep in a savings account over investments?
Many people are one car accident away from being unable to support themselves,
and those numbers are worse for women and people of color who experience systemic inequalities in access to good jobs and a social safety net as those good jobs become fewer.
And the picture doesn’t necessarily improve when income goes up. High earners often find themselves drowning in credit card debt while other lower-income individuals might have a sizeable nest egg ready for emergencies. There is only one difference between them: the way they spend the money they earn.
We wanted to see how many people came to the great Google hoping to find a foolproof loan plan, savings plan, or retirement plan. What we found didn’t surprise us:
A whopping 110,000 people search, “how to get out of debt,” on Google every month, yet 40% of people with student loans aren’t able to pay down on them. Something isn’t adding up.
At a certain point, these Google searches begin to read more like therapy sessions, and we feel for the 40 people who search, “help I am drowning in debt,” every month. Y’all, it does not have to be like this.
Here’s the issue: If you start and stop your search for financial help at the search engine, you’ll end up following advice that doesn’t make sense for you.
Access to information does not make that information applicable to your goals. And spending habits cannot be transformed in the time it takes to read an article, but they can point you in the right direction if you find an authoritative information source that you come back to again and again. (We like to think that’s us, so let us know how you feel.)
Here are some of the reasons you may be struggling to get control of your money, and a few strategies to try instead:
Instead of: Only paying attention to your money when you’re in trouble
Try: Making time to reflect on your spending habits a couple times a month
We know. You’re thinking, “Oh. My god. They want me to look at my bank account regularly? Hell. No.” Listen, it will feel unnatural at first to interrogate why you’re spending money when you do. But over time you’ll notice something:. you’ll find yourself identifying ways to cut spending because you know those purchases aren’t improving your quality of life. You’ll have a plan to pay off debt and begin saving. And you’ll actually do it.
If you only pay attention to your house when it’s on fire, it’s going to catch fire again and again. If you only address the effect of your spending and don’t address the spending itself, you’ll get really good at living your life in chaos mode.
Imagine being in your late fifties or early sixties and realizing that you won’t be able to work much longer but you don’t have any money to support yourself, so you’ll just have to continue working. God forbid you have children to support or an expensive chronic illness.
Focus on saving now so that your money can begin doing something magical: making more money for you.
Instead of: only using Google to learn about your money situation
Try: learning from a knowledgeable, authoritative source that you trust and come back to again and again
The financial services industry spends millions of dollars to influence your financial decision-making. They’re betting that once you understand the fundamentals of personal finance and begin planning for your future with investments, HSA’s, employer-matched 401(k)’s, you’ll come to them to manage your new nest egg. Unfortunately, this often results in great payouts for them and mediocre payouts for you.
Or, you’re getting your information from forums and chat rooms where every commenter becomes an expert. Forums are perfect for sharing information and resources with others but shouldn’t provide your only expert opinion. You’ll be missing out on the most important perspective, someone who has used principles that you can easily follow to build wealth on their own terms.
Begin by familiarizing yourself with the fundamentals of personal finance. As it becomes second nature, apply those principles to any existing debt. From there, dive deeper and learn about growing your net worth and managing your money from trusted sources that encourage discussion, foster community, and aren’t trying to take a percentage of your return.
Instead of: Forcing financial advice that doesn’t fit your goals
Try: Figuring out what your goal life looks like, and moving backwards to create it
If, like a number of millennials, you’re hoping to live off the grid, start your own venture, or retire early, a ‘typical’ retirement strategy won’t work for you. And neither will a simple search. Instead, focus on learning guiding principles that will provide insight no matter your situation, and then double down with strategies geared towards the future you want.
Begin at the end. Spend time figuring out what you want your life to look like in 30-40 years. Determine what your cost of living (how much it costs for you to live) will be at that time. Then, determine what it will take to get there. It’s not difficult when it’s broken down into steps, and applied using a set of principles you don’t deviate from. Life is uncertain, but with proper financial management your money doesn’t need to be.
Instead of: Spending money trying to look like you have a lot of money
Try: Spending money intentionally on things that matter to you
Lifestyle creep is a real thing. Another word for this is lifestyle inflation. You see your coworkers getting raises and buying bigger TV’s, taking loans out for new cars, and spending all of their savings on lavish vacations so you do the same. You hope it makes you happier, but it doesn’t.
Imagine that instead of spending hundreds each month on clothes, you save it. (Unless you find, after some intentional soul searching, that clothes are what you want. Get it with intentionality, ya’ll.)
Eventually, after implementing this change and a number of others, you have enough saved to support yourself for six months if something were to happen. Now, when a riskier job with a start-up you’re passionate about comes your way, you say yes! But only because you have months of living expenses in your savings account and can handle the risk.
Here’s the thing. Money doesn’t buy happiness, money buys freedom. The more money you spend trying to make yourself appear a certain way to other people, the less freedom you’ll have to make a risky but rewarding decision or change your situation if you’re stuck.
Instead of: Looking to Google for concrete, one-fits-all answers to questions that don’t have them
Try: Learning which questions Google is good at answering, and using a trusted resource to determine the rest
Here’s your situation: you have an aging but working vehicle and would like to buy another eventually, student loans and credit card debt to pay off, a tiny emergency fund you’d like to grow, and the opportunity for a 401(k)-employer match. You do not make enough money each month to address all of these goals at once.
So why then, are you asking, “What’s the best investment strategy?” or, “How much should I budget for transportation?” That’s a bit like googling, “How many 2×4’s will I need to build a garage?”
Well, how big is the garage? What’s your timeline to project completion? Without taking a detailed look at your personal obstacles, opportunities, and goal criteria, you’re going to end up with one wonky plan that will prepare you for exactly the wrong set of circumstances.
Search engines are perfect for asking things like: “How much can I deposit into a Roth IRA per year?” “What age does social security kick in?” “Individual tax rates this year”. These are indisputable, fact-based answers that don’t need to be critically examined or interrogated.
Here’s the solution:
Before you bring yourself to the search engine or the chat forum, familiarize yourself with the basic principles of personal finance. Only these principles will give you the foundation you need to interpret information found online in ways that will benefit you and your individual dreams.
Learn what the difference between a depreciating and appreciating asset and its importance to your future self, which order you should pay off different types of debt depending on individual interest rates, and how you’re actually more likely than not to become a millionaire if you begin saving in your 20’s.
Your future self depends on how you spend your hard-earned cash right now, and the day-to-day actions that will carry you forward into your 30’s, 40’s, 50’s and beyond. Begin with a solid understanding of the simple steps it takes to become financially independent. Then apply them by reflecting on your finances and using trusted resources to figure out a plan that works for your future self. Planning for your best life is exciting.