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;As long as I’ve been writing this column, I’ve focused on untangling my financial mistakes and working toward my goals. But it’s tough to grow in isolation. Although I’ve learned a lot on my own, I needed a little help from my friends.
During the time I’ve known these financially savvy women, money woes (and wins) have often come up in our conversations. But we never really dug into our financial philosophies. While we’re more candid than the majority of Americans—who say money is the most challenging conversation topic there is—I decided to go deeper. I needed the financial wisdom, strategies, and lessons they’ve learned in recent years. Reassuringly, their beliefs are not so different from the ones I’m cultivating now.
Like me, Brianna, a preschool teaching assistant and barista, found T. Harv Eker’s Secrets of the Millionaire Mind to be transformative. His money blueprint theory resonated with her and helped her better understand where her beliefs and habits around money came from. Christina, a freelance writer and editor, and I share similar goals. We both want to stop—as she put it—“associating money with worry, shame, lack, greed, or any of those other icky emotions that tend to come up for people when they think about their finances,” and instead recognize that money is a tool that can help us create the lives we want.
As alike as our goals were, I also learned a lot from these discussions. For example, I could still improve on discerning needs from wants. This became apparent to me while talking with Darin, a real estate agent with the best financial boundaries of anyone I know. I asked her what money lessons her parents had imparted when she was growing up.
“They said ‘Don’t spend money you don’t have;’ and ‘Just because you have it doesn’t mean you have to spend it,’” Darin shared. “My mom was always like, ‘Do you want it or do you need it?’ and she’d really quiz me.”
This led me to reflect on how I define wants and needs. Beyond the obvious distinctions of food, clothing, and shelter (and Wi-Fi), I often blur the lines when evaluating purchases. For instance, I decided I “needed” a new pair of earrings for a friend’s wedding because they went better with my dress than the pairs I already owned. When my parents visited my partner and me for the first time, I spent close to $50 purchasing picture frames and printing photos to decorate with because I “needed” our living space to look more “complete.”
Of course, extreme thriftiness has its downside. Brianna and Darin both used to be so frugal with their money, they would deny themselves fun experiences with friends and occasional indulgences. Now, they acknowledge the importance of allowing for quality of life expenses while still being mindful of their long-term financial goals.
“I’m realizing now how important treating myself well is in terms of my overall happiness,” Brianna said. “I used to feel bad every time I went out to eat because it would have been so much cheaper to cook at home. But now I realize, what kind of life is that? There has to be a balance.”
Darin describes herself now as “financially responsible” even as she’s more inclined to spend money on “wants” that enhance her overall happiness and peace of mind. If she were to give her younger self advice, it would be: “Don’t miss out on something because you feel too cheap,” she said.
I’ve never had a problem indulging in quality-of-life purchases for myself, but my friends’ experiences provided context for how I can look at spending in the future. Instead of cutting out every want, I’ll leave room in the budget for unexpected splurges, while staying conscientious about whether they’re worth the money.
Expenses that aren’t necessarily “needs” can extend beyond entertainment and creature comforts, too. When it comes to charitable giving, Darin assigns 10 percent of her income to specific charities each year, rather than giving as campaigns come up. I’ve always been the opposite, prone to making donations whenever requests appeared, even if I wasn’t in a financial position to do so. I’m a sucker for compelling stories, and there are so many worthwhile organizations that need financial support. However, I often felt stressed after making those contributions because I hadn’t budgeted for them and needed that money for other expenses.
This year, I’m going to take Darin’s approach. I’ll choose one or two organizations to support and give what I can. Even if it’s not 10 percent of my income; I plan to set aside a certain amount each month to draw from when those big giving campaigns roll around.
One reason I found these conversations so productive is that all of us have been self-employed at one point or another. Being your own boss forces you to confront certain financial realities. As a real estate agent, Darin’s income can vary dramatically month to month. Early on, she prioritized budgeting so she could meet her expenses even during slower seasons. For Brianna, working as a freelance web designer prior to her current job motivated her to learn about handling money.
“I felt like I had to be interested in personal finance and especially managing my money when I worked for myself because there was no one else to do it for me,” Brianna said. “When you work for yourself, you have to be aware of everything money-related. You set your wages, you send invoices and collect, you do your own bookkeeping and taxes. I never went to an accountant for help. I managed it all.”
Both Christina and I have run into the trap of not accounting for quarterly self-employment taxes. Which is a harsh reality check when you realize how much money you owe on the following year’s tax return. She now funnels a percentage of her earnings into a tax savings account immediately. A practice I recently adopted as well. I’m still at the point where it pains me to take hundreds of dollars off the top of my invoices; but there is some peace of mind in knowing I’m saving for those inevitable visits from the tax man.
Christina drew inspiration from Dave Ramsey’s book The Total Money Makeover and the personal finance community on Reddit when first getting a handle on her debt two years ago. She’s since paid off all her debt (except a student loan); and is now pursuing an aggressive saving and retirement strategy.
“Once you pay something off, and then another, and another; it creates this incredible momentum, and that’s all the motivation I need in order to keep going,” she said. This inspired me to redouble my efforts toward paying down my own debts so I could create the same momentum for myself.
One area that remains murky for all of us is investing, particularly for retirement. Without an employer plan, getting started can feel overwhelming. However, Darin has an IRA she fully funds every year; which is the next step on my to-do list for creating financial stability.
“Sometimes I feel envious of 25-year-olds who have been maxing out their 401(k) matches and Roth IRAs for years. But I try to remind myself that I can only start from where I am; and late is better than never,” Christina said.
That’s comforting advice, since I’m in a similar position. I had a 401(k) at a former job but cashed it out when I moved overseas; deciding I would “deal with retirement later.” Now I’m in my early 30s and finally realizing that “later” never comes unless you make it happen. After 30-plus years of short-term thinking, I’m starting to feel a little panicked about retirement savings. But like Christina said, better late than never, and the important thing is that I’m mindful of it now.
Ultimately, delving into personal finance with my friends made me realize; that financial goals are not only works-in-progress for all four of us; but that we are all using our financial priorities to inform decisions about our careers and leisure time. As Christina nicely summed it up; “When you start looking at your finances with a greater context in mind—living the life you want to live; it helps you examine whether every other aspect of your life fits into that picture as well.”
Published by Debt.com, LLC Mobile users may also access the AMP Version: The Benefits of Talking to Your Friends About Money - AMP.