How to manage your money yourself, like a fucking grownup: Part 1
Your all-in-one, 5 step guide
IMPORTANT UPDATE:
Oh hey, guys, I wrote a book! It’s called Manage Your Money Like a Fucking Grownup (surprise) and you can buy it in actual shops. Weird, right? Find out more on my snazzy website.
Why you want to be your own money manager
I’ve had bad experiences with financial advisors. It’s always felt very clear that, primarily, they’re trying to sell you things, and that they’re trying to sell you things that are good for them (i.e. high commissions, high fees), not necessarily good for you. Read this if you want to understand more about what’s happening there.
Not all financial advisors are scumbags. Some of them (especially the fee-based ones) are wonderful and helpful. But unless you understand some basic shit about money and have some thoughts of your own about what you should be doing with it, you’ll have no way to tell the difference.
So, about two years ago, I went on a mission to figure out how the hell money actually works (I started out clueless and, honestly, disinterested) so that I could manage my money myself and avoid those scumbags as much as possible. I still mess up a lot, but I’ve mostly Gotten My Shit Together and now get to feel like a Smug Grownup most of the time. So, I thought I’d share what I’ve learned with you.
This is going to be a series of 5 posts that will take you through:
- Getting all your money information together in a good money management tool
- Figuring out what your most important money goals are
- Finding and opening the right accounts
- Budgeting and finding more money to spend on your money goals
- Enjoying yourself along the way
I now work for a company (called 22seven) that makes a tool to help people manage their own money better, and I’ll be referring to this tool throughout this blog series. But I’m not writing on their behalf, and I’m not a financial expert, and what follows is only my own dumb opinions, so follow this guide at your own risk.
But first, here are three fundamental things I learned about being the boss of your money:
- Being in control of your money means you are more in control of your life.
- You gain control by being more conscious of your choices.
- The actual money part is easy.
1. Being in control of your money means being more in control of your life.
When you look back over the list of every transaction you’ve made, you’re seeing, in a sense, a journal of your life. That lunch you had two years ago with your mum — there’s the receipt for it. There’s the receipt for the backpackers on last year’s roadtrip that had bed bugs so you and your best friend ended up sleeping on the floor in your sleeping bags, staying up late to tell each other secrets. And the ones that make you feel guilty or sad: there’s the receipt for that pair of running shoes you bought but never used. There’s the vet bill for your dog. There’s the plumber’s bill that you really couldn’t afford because you’d bought the running shoes the previous weekend, so you had to take a personal loan that you still haven’t quite paid back.
Our money should feel emotional. The good part of this, is that when you’re more in control of your money, it means that you’re directing more of it into things that really matter to you. This means that, to start being a Badass Grownup with your money, you need to start off by figuring out what really matters to you. No big deal :)
You don’t have infinite money, unless you have a genie or something. That means that you have to be more honest with yourself about what you want your life to look like. Sure, maybe you imagine yourself as a long-distance runner who’s also an amazing chef and wears fabulous vintage clothing all the time and travels six times a year and eats dinner with friends every night and also lives in a fabulous house and runs her own business and makes delicate miniature portraits of cats for fun, but realistically, you’ve got to pick just a few of these things.
This isn’t just about asking where you should spend your money, it’s about asking where you should spend your time, too. Time is an even more valuable resource, and you also have a limited amount of it. You can do anything, but not everything.
So, try this now. It’ll feel cheesy. But go read something like this, or this, and then use a paired comparison tool to help you whittle down your real values, your deep life objectives, down to just the top few.
The exciting part of this is that when you see both your time and your money as limited, you’re forced to be more deliberate. You are the only person who can design your life. And you’re actually free to design it any way you like, which brings us to:
2. You gain control by being more conscious of your choices.
The next big thing you need to realise is that most of the world is actively working against you designing the life you really want.
Think about it. Every business in the world wants you to buy the things they’re selling. They spend billions and billions of dollars each year on marketing and advertising; industries whose sole aim is to make you think you want a bunch of crap you didn’t want before they told you that you want it. Advertising is everywhere, and becoming more and more insidious every day. Half of the time it doesn’t even look like advertising.
These people are alarmingly good at their jobs. They shape culture, they make you believe concepts like “cars mean freedom” and “no-one will love you unless you are a very specific type of beautiful” and “expensive means quality” and “if you don’t have this kind of insurance terrible things will happen to you and your family”. But these ideas are not your own ideas. They have been carefully implanted in your brain by businesses who are trying to sell you things. They distract you from the things you really do care about.
Then there are other people, people who care about you but also try to impose their own values on you. Your parents, who in their well-meaning way, want you to have the better version of the life they wanted for themselves rather than the life you want for yourself. They imagine a good life for you involving a big family home in the suburbs and a reliable job and lots of money. But their values come from a world that doesn’t exist any more (reliable jobs, ha). And they’re not necessarily your values.
Friends can be even less helpful. We all imitate our friends. We’re jealous of their holidays, their Facebook feeds, the stuff they buy. But we don’t really know how they’re financing all of this, what trade-offs they’ve made. And anyway, although we like our friends (generally), their values are also not necessarily our values.
This man decided that the thing that matters most to him is travelling the world, and that this matters more than anything else. So he owns exactly 111 items, and he has spent the last 5 years roaming the world with these things on his back. That’s probably not what everyone wants to do with their life. But the point is, you have more choices than you realise. For people privileged enough to be in the middle class, it’s a choice to work in an office job in a city. It’s a choice to have a car. It’s a choice every time you buy something.
Being in control of your money is about making those choices more deliberately, because if you don’t, you’ll end up spending it all on the advertisers’ ideas about what makes a good life.
3. The actual money part is pretty simple.
The emotional side of managing your money is difficult. You’ve got to be strong. You’ve got to put on your big girl panties and confront your own choices. It’s big stuff. You know what’s not actually that hard, though? Understanding the actual money stuff.
The financial services industry wants you to think it’s hard. They want you to think it’s very, very complicated, and you need to talk to experts who will tell you what to do so that they can read the arcane secrets of the market and optimise for convoluted tax laws and run statistical models invented by quants in dark basements.
What they’re really doing is rent-seeking. They’re hiding fees from you by making sure you have no idea what they are. They’re baffling you with bullshit to keep you away from your own money so that they can cut out as many slices of it for themselves as possible.
Actually, there are only two steps to making your money work harder for you:
- Keep as much of it as you can (by controlling your spending and improving your income). We’ll talk about this in part 5.
- Make it grow (by buying assets that have low fees and low taxes, and the right amount of risk for the time frame you’re growing it for). We’ll talk about this in part 4.
The single most important concept for you to understand is compound interest. My friend Georgina wrote a great piece about this. Read this piece (Go! Now! I’ll wait.), because you really, really want to understand this concept. Basically, it’s about how money snowballs, and sadly, it rolls faster downhill (into debt) than uphill (into wealth). If you want to have more money, this is really the only money concept you need to understand.
Sure, if you want to be uber-super wealthy, you want to learn more about different types of assets and you might want to pay attention to the market and make more active choices about buying specific stocks. But most of us can put ourselves in a much, much stronger position just by buying one very simple type of asset. We’ll get to that in part three.
Are you ready to show your money who’s boss? Let’s get started.
