Dear past Kate,
Congratulations on venturing into a new world of personal finance and learning to articulate your financial goals and personal values! It’s going to be challenging, but it will change your life.
As you begin this journey, I want to tell you four things that you need to know.
Now listen carefully:
1. Personal finance can be complicated and difficult to understand, BUT you absolutely can learn what you need to know to be a good manager of your own finances.
I know you feel completely lost and are convinced that everyone knows more than you and you will never understand finances (which is why you haven’t really tried to learn about it before). You’ve always been “smart,” but you’ll feel decidedly NOT smart as you begin to learn about personal finance.
Here’s the thing, though. You can do it. You are ABSOLUTELY not too clueless to learn about personal finance. No one is. Just stick with it.
Personal finance is just like any other new skill or task you’ve learned in your life. It has a complete vocabulary of its own that you will have to figure out. You learned to “saute the garlic” and “julienne the carrots” and “make a three-point turn” and “knit one, purl two.” You’ve learned new things before, so when you are faced with personal finance jargon (like 401K, Roth IRA, compound interest, and return on investment) just take a deep breath. It’s okay to not know what these words mean and to take some time to get comfortable with the new vocab.
Also, while personal finance in general is quite straightforward, the deeper you go the more complex it gets. Unfortunately, most personal finance voices you’ll hear prefer to hang out in the deep end of personal finance. That’s great because we need people who can cut through the crap and point us in the right direction about things. However, it will be ridiculously frustrating to get a simple and straight answer to questions like “how much should I save for retirement?” or “how do I start investing?” They just want to talk about exceptions and complicated models and it will be crazy overwhelming for a while. (Hint: You’ll be shocked to find out that opening an investment account is just like opening a bank account. You can stop being intimidated now.)
So be patient with the professional personal finance voices you run across as you are learning and researching. They don’t know that they are being confusing and opaque, they just get excited sometimes. Keep asking questions. You can do this!
Finally, personal finance is in a weird purgatory area of knowledge you are “supposed” to already know as an adult but not really ever taught. Remember how you learned to write a check in middle school? Yeah...that’s not going to help you understand how to manage your first 401K. Understanding personal finance won’t be obvious or intuitive for you. But don’t let anyone make you feel dumb for not know something about personal finance. Just keep asking questions.
2. You have the power to make good financial decisions and work toward the lifestyle you want.
This will sound obvious but pay attention - how you spend and save money is your OWN decision. It will be hard to make good decisions when you see people modeling poor financial choices around you. You’ll have to find ways to trick yourself out of old spending habits. It won’t be a breeze, but you can absolutely make good financial choices and it will definitely positively impact your life (take my word for it).
It will also be easy to be tricked by the narratives of our society into thinking that this or that financial dream is unattainable for your economic bracket. But that is a load of hogwash. Find your goal, set up your financial strategies, and go for it. Irrespective of how much money you make, you can make decisions that help you reach your financial goals. In fact, you’ll soon learn about the concept of financial independence and discover how achievable it is if you start saving more deliberately (just that realization alone will change your life).
You’ll eventually realize the best thing about personal finance - you do not have to have any special skills to be good at it. It’s great to tell people to follow their dreams, but I’ve never liked the vagueness of that statement. I mean, if you are the wrong body shape, then it will be really hard to be a ballerina/football player/jockey. When building a career, looking for a job, or getting an education there are often a lot of other factors at play in your success. But with your spending and saving decisions, it’s just you.
You have the power to change your finances and your lifestyle. Go for it.
3. Developing responsible financial habits may make you feel counter-cultural.
As I mentioned earlier, financial literacy is something you are expected to have without having actually learning it. So you will assume that everyone has a secret cache of financial literacy that you don’t. But when you start to gain more financial knowledge, you will discover that many people don’t know as much as you expected. Suddenly, you’ll be thinking about financial decisions in this whole new way and you will feel like you are the only one.
Learning about personal finance will lead you to personal discoveries about yourself and your spending. Just so you know, as excited as you may be about your new financial changes, others will not necessarily want to jump on your bandwagon of frugality, or not buying books, or saving a high percentage of your income, or buying secondhand. Making decisions to save money and forego common expenses will make you feel more counter-cultural than you ever expected. Especially in the church. You’ll find out that despite the Bible’s radical conceptions of money and possessions, finances will remain glaringly absent from religious discussions. But that’s okay - you aren’t alone! (In fact, you’ll start a blog about this very topic.)
4. Learning about personal finance will make you question everything.
You will discover that the greatest misconception about personal finance is that it is about money. Personal finance is actually about how you want to live your life. Your lifestyle defines your spending choices, so they go hand in hand. And when you start to question your spending and saving and investing decisions you will start to question many other parts of your life. In fact, financial literacy should come with a warning label - WARNING: May result in epic changes.
Bringing your lunch to work every day will be a great financial decision, but it will also force you to think more deliberately about your groceries. You’ll have to plan out your food purchases so they fit in a lunch bag. When you decide to bike to work more and limit your eating-out budget, you’ll have to plan your life completely differently. You’ll also find that it’s impossible to think about spending your values and not think about how you are spending your money AND time.
When you begin making informed financial decisions you will also start strengthening your thoughtful decision-making muscles. And the more you make deliberate decisions about money, the more you will wield those deliberate decision-making skills in other parts of your life. Nothing is safe. You’ll reassess your reading, your eating, your exercise, your sleeping, your time, your transportation options, and where you live. It will feel weird and a little scary at first, but then it will feel so awesome and so empowering!
This is exciting, self! I wish you all the best!
For more fun links throughout the week and instant blog post updates, follow us on Facebook!