Where Everyone Should Start With Personal Finance — Even If You’re “Bad” at Money
There once was a city slicker driving through the countryside in a fancy car. Lost, he pulled up beside an old farmer who was plowing his field with a mule.
City Slicker: My good man, do you know the way to Charleston?
Old Farmer: Charleston, ya say?
City Slicker: Yes sir, Charleston.
The Old Farmer pulled his mule to a stop, lifted the brim of his hat and wiped his sweating forehead with the back of his hand. Looking back down at the city slicker, he said, “Weeeeeeeeelllllll, if I was a-goin’ to Charleston, ah shore wouldn’t start hee-yah!”
Samsies with personal finance.
If you were trying to get on track toward a far-off destination, you wouldn’t choose to start in a random cotton field. You’ve made it a bit harder on yourself. Smellier, too. But here’s the reality: You’re in the cotton field.
You can’t change that now.
If you are trying to get on the road toward financial independence, or, Lord willing, optional retirement, you wouldn’t CHOOSE to start with student loans, car payments or credit card balances, now would ye?*
Of course not. But that’s where you are.
So for goodness’ sake, start here.
*I can say “ye;” I’ve talked to farmers and I’ve been to Scotland. The farmers and the Scots had a meeting — an important meeting that they probably don’t remember on account of all the moonshine and Scotch that was shared, so there’s no point in confirming my claims. Anyway, they decided I was worthy of this word, so there.
Personal finance can be intimidating.
Hell, I found it so intimidating that I started an entire blog dedicated to de-timidating it.**
Trying to navigate the world of personal finance can feel like you’re in one of those horrible dreams where everyone isn’t making sense and as hard as you try, no sound comes out when you talk. Or scream.
(I am an undocumented expert on dreams. I spend a lot of time dreaming. And screaming. I also spend a lot of time waking my husband up with nightmares. Honestly, I’m a true delight to be married to.)
It can feel like the personal finance barrier to entry is so great, so high, that only the most mathematically #blessed of us and those with family money have any chance at getting their financial life together.
I mean, tell me this doesn’t feel familiar:
Me: “Hello, I would like to put money into a place where I can save it!”
Personal Finance Blog World: “Rawrrrrr rawrrrr APY! ETF! EAR! FIRE! FIOR! You should’ve invested 20 years ago!”
Me: “Just need to start with a simple sav—
Bank: “FEES ARE NORMAL HERE’S A STATEMENT YOU’LL NEVER READ PLEASE SIGN ON THE DOTTED LINE.”
Me: * screams internally *
But it doesn’t need to be that way.
Banks and blogs can be wonderful, amazing tools to get you where you need to be. But don’t let the noise overwhelm and derail you before you can even really start.
Here’s the thing about intimidation:
Intimidation leads to inertia.
Inertia = delay = blink and you are 55 and you’re gonna look into that 401(k) thing anyyyy day now.
Don’t be paralyzed by intimidation.
Just take it one little step at a time.
We start with first position, not the entire corps movement in Act III of Swan Lake.
We start with 1 + 1, not quantum physics. (LOL — jk, I don’t even know what quantum physics are beyond being useful metaphorically).
Why would try to skip ahead to instant money mastermind without learning the basics?
Baby steps. Building blocks. Walk before you run. Insert additional cliches here.
**literally just now noticed the word ‘timid’ in intimidating.’ Mind = blown.
Here’s what FIRE means, and why you should forget about it.
If you’ve spent 0.02948 seconds in the money blogging world, you’ve come across the word “FIRE” or “FIOR.”
What is Financial Independence?
People define this differently. In some contexts, it means being able to pay your own bills without a man/husband/parents/etc. In others, it means having enough money to quit your job and have the ability to survive for awhile, though maybe not indefinitely.
For today and the purpose of this blog, financial independence equals owing no debt to anyone and having enough money that, if you lost your job, you’d be OK for a few years without having to live exclusively on beans and rice.
What is Retire Early/Retire Optional
This is pretty self explanatory: It’s the financial state where you could comfortably live off of your investments/passive income streams without working anymore. Or, have enough where you had the option to retire earlier than the assumed retirement age of 65.
There’s a whole entire host of arguments on how much one should have before retiring, what percentage you should live off of, and how to attain this — and even if you should retire early. If you’d like to learn more about these terms, here’s a helpful roundup of working definitions by my internet friend John at ESI Money.
But first things first.
You don’t get to FIRE, or even get to think about FIRE, until you know where you are.
What should you do when you don’t know where to even start with money?
Now, a lot of my regular readers are well aware of what FIRE is. A lot of my regular readers are also already financially independent and don’t need my money advice at all, but stick around for the cheesy queso puns. And I love my readers dearly for that <3
Today’s post is a rallying call to all my fellow millennials, student debtors and all-around trying-to-get-it-togetherers out there — all those people who feel that they are trying their best at the adulting thing but damn, nobody taught us this in school.
I’m here to tell you one thing:
You don’t have to have it all figured out.
You just have to start.
Dave Ramsey calls them Baby Steps, but MissFunctional Money calls them common sense.
Just start where you are.
Capital gains? Tremendously important … after you get a handle on where you are RIGHT NOW in terms of debt.
ROI and ETF and SWR? Fabulous acronyms to master, but not all at once. (I had to Google that last one?)
You can get a grip on dollar cost averaging … just as soon as your credit card debt stops eating your lunch.
You can master asset allocation … just as soon as you consolidate your student loans.
And you can learn to time the stock market by day trading … actually no, don’t do that one.
RELATED READ (speaking of confusing acronyms):
Worry about your Financial Master’s degree later.
Right now, you are in financial Kindergarten.
And that’s OK.
When you don’t know where to start.
When you don’t even know what you don’t know.
When it feels like everyone is miles ahead of you.
Just start where you are.
This is what you MUST know, right now, before you can plan or do anything else with your money:
- To whom do you owe money? How much?
- How much money do you have? How much is in that IRA your dad made you start?
- What’s coming in every month? What’s going out?
Not ETFs. Not ratios. Not fatFIRE or leanFIRE. Not the 4% rule.
Building blocks, remember?
Take out a piece of notebook paper. Or open a Google doc. Or print my free Beautiful Budget Planner. Now consider these questions:
Where am I?
Where do I want to be?
What’s the best way to get there?
As overwhelming as that last step can be, I have the answer for you:
That’s how you get there.
That’s the only New Year’s resolution you need to make this year.
And hey, it doesn’t have to be all manure and bonus road trip hours.
The view driving away from the cotton field can be pretty darn beautiful.
Get the MFM Beautiful Budget Planner — it’s fo’ free!
Just tell me where to send it:
Thanks for reading, gang. And a special shout-out to my most trusted financial soundboard and one of my favorite people of all time, “D Money.” He is responsible for this post — I mostly just fleshed out the ideas and added pretty pictures. Thanks, D Money!
Do you ever feel intimidated by money? By terms you’re low-key Googling under the table during a meeting? Same. Drop me a comment below and let me know what you’re most scared to tackle when it comes to money. It’s a safe space ;)
DON’T STOP THE PARTY NOW! KEEP READING: