Money at 40: Let’s Get Real, People

At 40 you might expect that I have my shit together. In most ways, I do. But like everyone, I have a last frontier: mine is money.

It’s not that I don’t know how much to save or that I haven’t saved. Or that I don’t know how to invest or haven’t invested. Or that I don’t know how to save for a house, or develop passive income. I’m a former banker and regulator with a master’s degree in economics. I’m married to someone who also has a master’s in economics, a professional investor. My dad is a CFO/CPA. I literally collated mortgage documents at my dad’s office as a high school job. I have done all the things people tell you to do.

So what’s my problem? I hate that it feels impossible to ‘do’ our money together. I hate that the tools require we go at it alone.

Doing money alone in my 20’s made sense. My first job was selling newspapers at 12, and I had worked ever since. I understood cash flow and how to balance my checkbook. Despite student loan debt and a shoe habit, I understood how to live within my means (even as a public servant in not-cheap New York City). Lots of tools exist to support this phase of life, Mint is one of the more popular. I also like Even and Level.

But then I decided to move in with my boyfriend, who eventually became my husband. We started out with similar incomes, and had lived with roommates. So we shared expenses, similar to how we would with roommates, each maintaining our independent accounts.

Our wedding was our first big shared expense, one that required we talk about our backgrounds and values around money (there’s a reason the Catholic church includes it in their pre-marital counseling!), as well as the perspectives and means of our families. The long and the short of it is that we ended up doing something that felt true to us but fancy for one half of the room and rustic to the other. We stretched to pay for about a third ourselves and our families each covered about the same. This is the nice way to talk about it, but I should note that I have two sets of parents and my husband has one, and that I covered ‘our’ expenses myself, and his mom (I suspect) helped with his. I paid for my own wedding dress.

It was a busy time, one where we were more focused on the details of the event than the financial strategy (I was working for the heads of Citi’s Global Consumer Group at the time!). It was also our first shared experience with budgets and benchmarks. Still, we treated wedding expenses as anomalous.

A few months later we moved cross country for a new job. A year later we had our first child. Three years later we bought our first house and had our second child. We each changed careers once or twice. The takeaway: it keeps getting more complicated.

The technologies that people use to manage money, products like Mint and Quickbooks, are built for individual users. This is a fundamental design problem for folks like us. In making the assumption that people make financial decisions alone, the companies who build these tools manage to make themselves obsolete for users who don’t.

Sure, you could create a shared Mint account or treat managing money as one partner’s responsibility. The first is problematic because your you lose your identity (and identity matters!) and the second because it keeps one person in the dark. Both are good enough workarounds but terrible long term solutions.

Our story feels worth noting, to articulate a totally pedestrian life experience. I’m about to take the examination to become a Certified Financial Planner. I’ve also been credentialed in Financial Social Work and teach economics at California College of the Arts, to a group of mostly-single adults on the precipice of it all.

Not a week goes by that someone doesn’t write or call asking for financial advice. I actually call it relationship-advice-masquerading-as-financial-advice. Life happens, family happens, and money is necessary to make a lot happen. But money is merely a means to an end. The real goal is to manage your financial situation in a way that allows you to be happy with your life.

Here’s the entry-level advice I give pretty much everyone, including my students. It accommodates all income levels and models of living (single or family) and life stages.

1- Know yourself and treat yourself well. So hard but just own it. I grew up pretty poor with little supervision but in a fancy school district. I like nice things but I hate waste. Nothing drives me more crazy than getting rid of clothing I never wore. I love KonMari for this reason. OK, waiting in line drives me more crazy. My home really matters because it grounds me and makes me feel safe. My husband loves to entertain. I love travel because it opens my eyes and gives us amazing family experiences. I don’t love to exercise but I do it for my mind and to keep myself strong. I know I only have one rodeo and I want to be as present as I can possibly be for it. I spent a lot of years taking on other people’s stuff but have gotten a lot better about that. I love treating my friends well and introducing them to one another. I need a good night’s sleep every night.

All of these things inform what you do for a living and what you need to be happy. The sooner you figure them out, the better off you’ll be. You also need to understand for your partner, and still want to support them after you do.

2- Spend less than you make. This is easier to understand if you are single than if you are a part of a couple. at the beginning of my research, I printed out a year’s worth of activity from each of my husband and my accounts. He earns much more than I do at this point in our lives, but spends a lot less. I handle the tuition checks, the food, the vacations, the house. It adds up. It’s so important that you understand where it goes. I recommend a target 20% savings rate, post-tax, if you can afford it. Tools like Acorns and Digit are great for this.

3- Toss your budget. I think only a certain personality type loves budgets. Most people do not. Gone are the days when you have to manage to the dollar in a bunch of categories that are super blurry — was that night out with my friends food or entertainment?

I like to recommend that you separate your expenses into only two categories — normal and special. Normal should capture your cost of living, transportation expenses, all the normal stuff you do and need. (Include your gym membership here! Taking care of yourself should be normal not special.) Normal expenses should be less than 60% of your post-tax earnings, if you can swing it. The other 20% gets allocated to special, which includes fancy dinners, fancy clothes, vacations, etc. We even organize our accounts to reflect our percentage goals, and we just spend from the appropriate account.

My company, Good Money, will be releasing an app that will allow you (and a partner!) to do this (together! a first). Sign up here if you want to try it.

4- Be flexible and cover your ass. Plan for your most conservative scenarios. Not sure whether you’ll want to send your kids to public or private school? Don’t buy a house that boxes you out of being able to afford private. Not sure how you’ll react to becoming a parent, in terms of how much you’ll want to work? Make sure your partner is on board with that and that your standard of living can accommodate flexibility.

It’s good to have insurance for anything that would hurt to have to replace. Look for deductibles that are affordable (they fall within 60% threshold for normal expenses). If one partner works and one does not, make sure the family is covered through your employer or life insurance for a period of time, in case anything happens (stuff happens! the last thing you want to have to do when it does is run out and find a job). Once you have a partner and/or a family, see an estate lawyer to draft documents explaining what you would want to have happen in case anything happened. Covering the hypotheticals is immensely stress-relieving.

5- Start spending money on what you love. This is obviously the best one. I LOVE the freedom that comes with the ‘special’ category of budget to treat myself and my family. Once you think about it this way, instead of as ‘travel’ or ‘entertainment’ you are free to react to how satisfying experiences (and stuff) can be. You start to enjoy them more. Spoiler: you learn that experiences are nearly always better than more stuff.

I love this list. It’s worth doing on your own and then looking at it and talking about it with your partner. It won’t make you feel like a failure and may actually leave you feeling empowered (I have a Part 2 of this exercise I’ll share another time).

You might be thinking this isn’t financial advice at all, or that you’ve heard all this before. Could be/lucky you/that’s awesome. I have goals beyond these too.

Here’s my wish list. I’d love to hear yours. I’d like:

• the ability to look at money (all of our accounts, including retirement and custodial) together — one interface, each of us with a role
• to know how much house we can afford, how to think about that, along with renovation and schools. Similarly, follow me through my life moments and help me figure them out financially.
• to assume we live to be 100. I want the ability to know we are living within our means, and can continue to do so until we die, without major changes (the kids’ tuition may go away, or may be replaced by medical expenses, but otherwise i don’t want to start living less fully because I’m getting old).
• my kids hardly ever see money, but that doesn’t give them a pass on understanding it. I want to open the door to them in developmentally appropriate and real ways.
• a tool that connects me to my/our parents in a way that is real and removes a lot of the friction associated with end of life care. Our parents are getting older, and are slowly helping us understand their wishes for when they can no longer manage their own affairs.
• ability to hook our wills and other important documents into our financial records.

Next Up: How one bank identified the need to take a relationship-based approach 40 years ago and my take on why it didn’t happen.

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