My therapist laughed at me the other day when I told her how happy I was to help a friend talk through his retirement plan. “You really like that kind of stuff?” she asked with some doubt, a little taken aback. “I really do,” I replied, still smiling and warm from the conversation. “It’s good that you can talk about money, I bet that’s helpful to them,” she said. I could tell that the idea of talking about money wasn’t something she would volunteer to do. No one likes to talk about money, not even my therapist, and she likes to talk about everything.
I think it’s important that we talk about money. Too many people are afraid to. This is because money brings up a wealth of feelings like shame, fear, confusion, doubt, overwhelm, and so much more. This is fair and understandable. Our understanding of money is developed at an early age. Most people don’t grow up in families that talk about money- rich ones because it’s considered gauche, and poor ones because they are too proud. This is unhelpful in helping prepare people to go out on their own into the world.
When I started working in hospitality, I was 19 years old. I quickly realized most people in our industry don’t have the tools to learn about money. There’s no HR department hosting personal finance classes for the team at the local beer bar. In hospitality it's live-hard-and-ride-hard. Savings are for tomorrow, and we don’t tend to care about tomorrow.
Most people don’t anticipate a career in hospitality, but before they know it’s been a decade and they have gone from bar-back to bar manager. As I’ve watched my friends and colleagues through the years, I’ve seen the disservice their lack of money awareness has done for them.
I guess I am a bit of an anomaly. When most twenty two years olds were cashing their first paychecks for shoes or weekend drinks, I was devoutly putting half my earned money into my savings account, and just getting by off the rest. From job to job, promotions and bonuses, all my extra money went into savings. I lived well by choosing a life in hospitality and enjoying the perks of knowing chefs and bartenders all over town. I shopped second hand and went to “donation based” classes. My family was supportive about my saving, and I was proud to report my progress. I got a full time job, and then another one that paid even better. When I was 25 I opened a money market account I named “House” and at 33 I bought a condo in Brooklyn.
I was lucky. I grew up talking about money more than most people. As an educator I’ve learned how to share what I know. I’m not a financial expert and I can’t give investment advice, but I can make suggestions for how to consider your money mindset.
First, ask yourself: why are you saving? Goals are key to saving, they will keep you on track and fuel your motivation. As you start to make your financial map, set short, medium, and long terms goals for yourself and enjoy chipping away at them over time. Emergencies happen, large purchases take time to save up for, and there will come a day (we hope) that you will not want to work any more and your employment-based income will cease. This is called retirement. You want to be ready for it. I want you to be ready for it. The days of the company pension are basically over, and who knows what will happen to social security?
Plus, humans are living longer than ever. You have to rely on yourself to prepare for your older years so you get to spend them in style. You need time to work towards those goals.
Time being the operative word here. Money is slow. Money takes time. Long slow incremental growth is the game, and you’ll be playing it for the next few decades in order to reap the rewards.
Fast money is gambling, which can be fun, but it’s always a risk and rarely more rewarding than slow and steady growth. Long term saving takes advantage of compound interest. It works like this: let’s pretend Abe and Sally both have $1000 to save. Abe puts his in a savings account with zero interest. Sally invests her money in a low risk fund averaging 7% a year (the generally accepted average). After 10 years, Abe will still have $1000. Sally will have $1967.15. Without touching her money for 10 years Sally just about doubled it. You can find a compound interest calculator here.
Here are a few tips for planning out your finances, so you can prepare for whatever life brings you: a house, a family, retirement, whatever!
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Spend less than you make. Simple enough but harder to do in reality. Budgeting can help with this. “Budgeting” is just looking at your money every month. It’s not necessarily limiting or restricting yourself. It needn’t be tedious or time consuming. It requires 30 minutes a month of looking at what came in and what went out. Did more go out than come in? Time to make some changes. Did more come in than go out? Great! Time to start saving.
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Pay yourself first. This is a phrase you’ll hear a lot in financial advice and it’s correct. Pay your future self immediately before you can even think about it. In fact, set it up on autopay so you don’t even have to think about it.
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Leverage tax advantaged accounts. The government incentivizes long term savings and using vehicles like the Roth IRA, 401K, etc will save you tens of thousands, if not more, in taxes in the long term. It takes some research, many of the key terms are in this guide, and hopefully it helps you set yourself up for success. .
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Remember that money is a fact, not a feeling. Feelings about money can be intense, but remember that they aren’t facts and don’t let feelings drive your decision making process. It can be hard. The common advice is buy low and sell high, which sounds easy enough but can be hard in practice and many people do just the opposite.
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Lastly, start where you are. Comparison is the enemy of happiness and the deflator of dreams. Sure, talk to other people about money, but don’t fall into the trap of comparing yourself to them. Your goals, your money, and your plan will be different from anyone else’s and that’s okay. Start with what you have without shame or apology. Wherever you begin is amazing, because everyone starts somewhere.
Good luck!
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