My grandfather was poor. Given that he came of age during the Depression this might not seem particularly surprising, but the Depression had little to do with it. My grandfather was born into a sharecropping family and in low years they had to move from one place to the next, often because they were behind on rent, couldn’t pay, and still had to find a way to work and eat.
Thankfully, through my grandfather and father’s hard work, I didn’t grow up this way. However, I’ve seen the places where my grandfather grew up in Northeast Kentucky, and I’ve heard the stories. The memory of that decades-old poverty was instilled in me from a very young age, and, as a result, I’ve always been scared to death that I might someday become poor. The memory has also kept me honest with my finances and served as a reminder that if I’m not careful, I could reverse all the progress my family has achieved.
According to a 2015 assessment, the US ranked 14th among 148 countries in terms of financial literacy. Most Americans are living precariously in terms of their finances, and if they had to, could not pay an emergency bill of $1,000 (S&P Global Financial Literacy Study). With wages flat for decades, underemployment still rampant, and the cost of living rising every year, it’s not difficult to see why many people have so much difficulty saving. Add to that the lack of personal finance instruction available in schools, and you have a recipe for disaster.
We’ve partnered with Secret Lives of Americans, a series that takes an unflinching look at the secrets we keep – like financial instability. One of the key episodes of the show follows Quincy, once a manager for Bloomingdale’s but now unemployed and saddled with the trappings and expense of a lifestyle she can no longer afford, along with the responsibility of paying for high-priced private school for her daughter. Below we bring you some tips to help you prepare and get ahead with your personal finances.
- Don’t Be Afraid To Work Harder Than Your Friends.
By work, I don’t just mean putting in your forty hours and heading home. That’s fine – it’s great, in fact – but learning to look out for extra opportunities is the way to get ahead.
You never know what’s going to happen. The world moves on without our control and disasters strike unexpectedly. One minute you could be putting in your hours and contributing to the company that employs you, and the next minute you could be laid off through no fault of your own, like in Quincy’s situation. If you have a side hustle – something else you do for money, even if it’s as simple as bartending twice a month – you have another source of income and a cushion against unwelcome surprises.
Pursue several things at once. Give yourself escape hatches in case something goes wrong.
- Don’t Be Too Proud – Ever.
There may come a time when you have to endure financial hardship for the sake of some personal goal. In my case, my significant other wanted to go back to school and get retrained for the medical field. That meant she wouldn’t work as much and I’d be picking up the tab to help her through two years of school. We made this decision as an investment for both of us. Now, two years later, we’ve achieved our goal and she’s landed a job with her new degree.
Those two years before she graduated were hard – I was not able to save and we weren’t able to go out much at all – but they paid off. Plus, I became intimately familiar with my crockpot and the texture of rice and sardines (which are delicious, btw). I basically put my social life on hold. What I tried to remind myself throughout, and sometimes it was hard, is that I am not owed a certain lifestyle.
Don’t ever be too proud, ever. It can be the difference between staying disciplined and losing sight of your goals. And if you’re living above your means then stop. Jettison everything you can’t afford or else you sink under the weight of it.
Don’t be too proud to start from the bottom again if you have to.
- Stay Afraid (At Least A Little).
Remain aware that the worst can happen even when you think things are going better than ever.
There’s a story my grandfather told me from when he was seven or eight years old. His father had managed to save enough money to buy a mule. This was cause for a lot of celebration because it meant that they wouldn’t have to rent a mule from the landowners where they farmed and could take home more money from their work.
Then chance stepped in and the mule injured his foot and the wound got infected. Keep in mind this was before antibiotics were even invented. My grandfather stayed with that mule for nearly a week, day and night, before it finally died. Before he died, my grandfather told me this was the worst event of his entire life. The mule had died and with it any hope of them doing better.
Disaster can always strike. And while too much anxiety can be crippling, a little anxiety keeps you hungry and awake. It can inspire you to put a little more money in your savings account, just enough to keep you from living and spending too casually.
Quincy’s experience on Secret Lives is every parent’s nightmare, but fear of losing it all could help to push her efforts to new levels and create flexibility on how to get where she wants to be again.
- Be Patient And Do NOT Depend On Credit.
Don’t buy things besides cars and houses on credit through a loan. More than half of millennials (~54%) say debt is their “biggest financial concern” (Wells Fargo Millennial Study). If you’re just starting out, then buying furniture on credit can be extremely tempting. When I got my first career job I wanted my place to look like a professional – a real grownup – lived there. However, to do that I would have had to charge it all to a credit card and paid interest on the balance every single month. Instead, I bought super cheap secondhand stuff and dealt with the reality that my home décor wasn’t ideal until I could save enough money to buy the things I wanted in cash.
Being patient will help you save up and keep you safe from disaster. What if you ran $3,000 up on a credit card and then lost your job? Not only would you still have to pay your rent somehow but those credit companies would still want their balances due too. If you don’t charge anything, it’s one less thing to worry about. Plus, when you buy things outright, you can always sell the items you’ve purchased for cash back when necessary.
By not racking up credit cred debt, you maintain flexibility. You become a responsible owner instead of a renter.
- Save As Much As Possible, And Invest When You Can.
This one was lost on me when I was younger and in retrospect I’m thankful that it was. I didn’t invest much at all in my early twenties. I just sat on cash in my accounts. As a result, when 2008 rolled around and wiped out everyone’s 401Ks, I only lost about $2,000. Some of my loved ones lost 50% of their portfolios, money they’d been putting aside for decades.
Keep cash in a savings account. As you get raises and promotions, try to push the amount you put aside from each paycheck as high as you can. Through discipline you can shelter yourself from financial pain in the worst circumstances.
As for investing, I’m a big fan of index funds. They’re less likely to rip you off with fees (401Ks are notorious for eating up tons of your savings in fees) and they’re highly diversified and quite cheap. Investment doesn’t have to be complicated or expensive. Remember, investment managers are there to sell you products, not make you money.
- Don’t Lend Money You May Want Back.
In fact, don’t lend money at all. I’ve had friends in the past who’ve needed help. If I could afford it (sometimes even when I couldn’t), I gave them money. The one thing I learned from lending is that someone who needs to borrow money from friends probably won’t have the ability to pay that person back.
Owing friends money also complicates relationships. So instead of lending, I give. That way, you’re helping out a friend without expecting anything in exchange or setting yourself up for disappointment. If they offer to pay you back one day, tell them to hold onto it until you need it one day.
Giving money instead of lending saves friendships and it’s a form of investment in the people you love the most.
These are the guidelines that have served me pretty well. Saving and investing is about security, not acquiring stuff. If you approach it from the viewpoint of securing your own future, it becomes far easier. After all, none of the stuff in the world will be able to help you when the unexpected strikes.
Check out one person’s financial literacy story on this week’s episode of Secret Lives of Americans (Friday at 10 p.m ET/PT on Pivot), which follows Quincy, a working mother in serious debt, as she reveals this secret to family and friends, and seeks the help she needs to get her life back on track.
Inspired by Secret Lives of Americans, Pivot is offering tools and resources to further the conversation around some of the topics explored in the series, ranging from literacy to religious tolerance. Visit the “Take Action” hub to learn more about the issues and get involved.