The most memorable financial advice, I find, is the one that is taken up. How can I know? It comes back to me all the time.
Here are a few:
• Stop wasting money on rent. If I had a dollar for every time I heard someone tell me that, just those who were looking to buy a house when they had credit card and student loan debt and didn’t have a dime in their name, I could buy a Tesla.
• Go buy a car. Interest rates are zero. You know what else is zero? Your car paid for without car payment.
• Sign for a student loan; everyone has them. Last week a man mistakenly attended a session on student loans. He was a father who wanted to help his son get student loans, but the session was for people who had student loans to find out how to repay them. He stuck with the session and said that was all he needed to hear. Complicated repayment schedules, high interest rates, and just the anxiety and stress levels of young people on the phone trying to pay off their loans were all he needed to hear. He would never wish that on his son or his wife and himself. They go with the affordable local college and pay in cash.
• Get a credit card with the best cash back or travel rewards. Ah, my favorite. Free vacations. All you have to do is spend a lot of money on a credit card and hope you’re in the lucky group that isn’t in trouble. Four of the next 10 people you pass on the sidewalk have month-to-month credit card balances and pay $ 1,100 a year in interest. How much does a vacation cost again?
Honestly, the list goes on.
Here is the good news. The advice works, even if it is not good advice. These casual ping-pong “truths” around the recipient’s brain, especially since they are relayed by relatives.
So folks, here’s the plan. See you tonight at 6 p.m. and in one sitting let’s change the future of financial advice. Let’s create some new tips, then dig deep to share financial goal setting with those people you care about.
Let’s start with the reflex advice:
• Save 10% in your workplace pension plan. And if you don’t have a plan, save 10% in your own Roth IRA.
• Pay off your credit card in full each month. Never carry a month-to-month balance.
• Calculate what three to six months of spending would be and keep it in a savings account at all times.
• When buying a home, make sure the payment is no more than 14% of your gross monthly salary. Always reduce 20% to avoid private mortgage insurance, or PMI, and make sure it will be paid off when you plan to retire.
• When you have a baby, when the social security card arrives in the mail, set up a 529 education savings plan.
Now who should give this advice? Obviously, the family, to begin with. Parents and grandparents are obvious choices, but let me expand this list to see if that might spark an idea in you.
How about a doctor with a passion for finances. He and his wife manage their finances. They have educated their children about finances and are happy that they are all financially independent. But when he described his staff as part of his financial world, I was blown away. He was ready to be a source of reliable financial advice and encourage them to save. He was also willing to challenge them to think differently when they were about to make financial decisions that might call into question their ability to save.
But how strange is that, right? When do people openly talk about buying their cars with their bosses, getting rid of credit card debt, or saving for a retirement plan? Almost never? In this case, he crossed that taboo line that our society has drawn and started the conversation. And it never stopped. He has established a safe zone where financial discussions are fair.
Another doctor, by chance, found himself answering questions from his staff in an informal manner. He was so pleased with the experience that he hosted a dinner and chat with about 10 of them after work one day where they could have a long, distraction-free chat on many financial topics. Top of the list? Save 10% on their retirement plan, of course. Many acted immediately. The conversation only continued from there.
Or places of worship? I was running a retirement booth this week, and a woman came to tell me about the retirement plan. After explaining our goal for employees to achieve a 10% savings rate, she shrugged and said that she had saved 10% since she started working. She asked, “Doesn’t everyone know the 10-10-80 rule? Save 10%. Give 10%. Spend 80%.”
How about an aunt for two young women by marriage? The aunt was starting her career and saw the power to proactively manage her finances. What if she had started this even earlier in her career? The answer was obviously to provide his nieces with whatever might have been of use to him. So, even though they had a relatively new relationship, the aunt suggested that they meet once a week by Zoom and read a financial book together. They had a modest job to read 10 pages a week, but they met long after reading the book. Thanks to him, they all developed and shared financial goals and opened up to financial anxieties.
One of the nieces decided that a major financial goal was to eliminate financial worries, and she already got a taste of it. She described the feeling of buying a guilt-free shirt for the first time in her life. How? ‘Or’ What? Well, in her financial plan, she allocated a small amount each month to a savings account for clothes. When she made the purchase, she knew it was within her means. The other niece? Well, his car died last week. Was it stressful? Not as stressful as it could have been. She had a ready-made auto savings account.
Marriage conversations are probably the most important to me, and sadly still not an obvious place for healthy conversations to take place. I find that most of the couples I meet have a spouse who manages the money, and they rarely discuss it. Heck, even in my own marriage, I can see how life in general can keep us from having deep control over our financial plan. That’s why once a year we get together and review everything, distraction-free, and change or reaffirm our savings and investments. Wouldn’t it be great if couples saw the value and engaged in an annual “business” meeting?
Tonight, I hope to spark this conversation in many other trusted relationships in the Arkansas Democrat-Gazette All Access discussion. If you are someone who wants to create a tribe of family or friends that you can have an ongoing conversation with, bring them along. If you’re someone who wants to start a conversation to help bring a spouse, child, or mentee into a financial discussion, get them involved. During this conversation, I’ll offer specific new tips to use right away, the basics for setting group financial goals, and then the starting point for an ongoing, rewarding and meaningful conversation between you and your money tribe.
There is still time to register, and this particular event is open to the public in case your friends and / or family are not subscribed. You can register at the link here: www.arkansasonline.com/all-access-2/.
Sarah Catherine Gutierrez is Founder, Partner and CEO of Aptus Financial in Little Rock. She is also the author of the book “But First, Save 10: The One Simple Money Move That Will Change Your Life”, published by Et Alia Press. Contact her at [email protected]