Why Don’t We Talk About Money?
When I was 4 years old, I asked my Grandpa if I could borrow 50 cents until I got my allowance to get an ice cream treat in the shape of Spider-Man’s face from the ice cream man.
He grabbed two quarters out of his glass coin jar and said I could have them as long as when I paid him back I gave him two quarters and a nickel. In response to my confused look, he explained the concept of interest and said that I should never lend anyone money without getting more money back in return.
I know what you’re thinking — my Grandpa was more than a little intense to say that to a 4 year old just trying to get 50 cents to get those bubble gum eyes out of that Spider-Man treat. I don’t disagree with you, but this piece of advice taught me more than my entire high school personal finance class (though I can write a check if needed — assuming I still remember how to write in cursive).
My family didn’t talk much about money, and frankly, we didn’t have a lot of it, so investing wasn’t even a potential topic of conversation.
Although my experience may be specific to my situation, I often find from talking to friends and family that many people struggle talking about personal finance and investing. Many people are afraid to ask questions for fear of sounding uneducated or making others uncomfortable.
I’ve made a lot of mistakes over the years when it comes to personal finance, but I’ve also learned a lot and I enjoy sharing that knowledge. While there are few absolutes in personal finance and there is rarely one answer that works for everyone, everyone benefits from a community that can have open discussion about financial hardships and successes and share strategies and approaches for building wealth, both financially and in life.
I’ll be writing, at least weekly, maybe more, about my personal financial journey, opinions on investing strategies, leveraging credit effectively, paying down debt, etc. Please follow if you’re interested and share your opinions (positive or otherwise) in the comments!
I’ll keep this first post short and sweet with three rules I’ve learned over the past several years that I always try to live by when it comes to personal finance.
- Debt isn’t inherently bad
- It’s in your interest to make interest work for you, not against you
- Abundance > Scarcity
Debt isn’t inherently bad
So many people have a knee jerk negative reaction to being in debt. While I do agree that debt can be a problem (never carry a balance on credit cards from month to month unless taking advantage of a 0% offer), when used effectively, debt can be a great tool. For example, I recently made a large ~$1500 purchase on Amazon that I could have made in cash, but I chose to go with a payment plan offered by Amazon with 0% financing and no credit check/credit reporting because I could invest those funds and make a return during the payment plan period.
It’s in your interest to make interest work for you, not against you
While there is value to the snowball method if your debt is a heavy burden psychologically and you need quick wins to keep you going, I personally would not choose this approach. Whenever I am evaluating options on what to do with extra cash, I try to evaluate options purely based on the numbers. For example, even though I have a massive amount of debt from my MBA and it would be nice to pay it off more quickly and I have the cash flow to do so, I’ve refinanced my student loans to a rate that is currently around 2% and am making the minimum payment because I can make a far greater return if I invest those funds than the 2% in interest I’d be saving by paying the loans down more quickly.
Abundance > Scarcity
Money isn’t everything. Although you’ll see plenty of people in the personal finance world telling you to skip your daily latte, I’m not one of them (though you could do what I did and buy an espresso machine and coffee grinder to make better ones at home :)). I’m a firm believer that abundance thinking is far more powerful than thinking grounded in scarcity.
Abundance thinking is indulging in things that are important to you and make you happy while finding ways to boost both your current income and future earning potential.
What does this mean? In short, it means buy your latte if you value it and it makes you happy. What I really mean though is that scarcity thinking is trying to pinch every penny and live to such a rigid budget that you remove all joys from your life and make yourself miserable. While abundance thinking is indulging in things that are important to you and make you happy while finding ways to boost both your current income and future earning potential in order to love the life you live (and for some people, that life includes daily $5 lattes, while for others like me, a 24 day Harry Potter Advent Calendar with adorable character figurines is a must have).
