3 Financial Decisions that Revolutionized How I Think About Money
Don't worry. This is not an article about budgeting. I’ve never lasted more than a week or two on a budget I created for myself.
This is also not an article about:
Picking home run stocks (looking at you, r/wallstreetbets)
Finding buried treasure
Or giving up your morning coffee run
Learning to embrace my own financial situation
Four years ago, I was afraid to learn about personal finance. I thought learning how to manage my money meant shining a spotlight on problems I’d rather not address.
So for a long time I took the what-I-don’t-know-can’t-hurt-me approach.
But by my mid-twenties, faced with the realization that I was about to get married, I finally purchased my first personal finance book.
I started taking ownership of my financial life. It was slightly scary, but mostly empowering.
As they say, money can’t solve all your problems. But it can solve all your money-related problems.
I’m not a financial expert. But if there’s one theme within personal finance that I’ve taken to heart, it’s that getting the big things right matters a lot more than trying to get a thousand small wins every month.
So here are 3 big financial wins that revolutionized how I spend and think about money:
1. Invest the same proportion of every paycheck
As many as 78% of Americans live paycheck to paycheck. This includes many households earning well into the six figures.
There are dozens of reasons for this phenomenon. But the way to escape it, I believe, is to start making your money work for you.
You must become an owner, not just an employee. This happens through investment.
The old adage that it takes money to make money can be leveraged even with as little as $10, $20, or $50.
Investing as a nonnegotiable
Before I started reading about personal finance, I assumed wealth was a prerequisite for investing. The reality is, you can start investing with just a few dollars. And the easiest way to invest is to set aside a small, dedicated portion of every paycheck.
The key is to see it as nonnegotiable. It's helpful to think about investing as if it's a tax to yourself. You can’t get away without paying the government their dues. Paying taxes with a “whatever’s left over” mindset would never cut it. And neither should that mindset work with investing.
In fact, I mastered the art of consistent investing because of taxes. As a self-employed individual, I don’t have an employer taking out money on my behalf for taxes. I had to learn to set that money aside from every paycheck.
💡How I invest
I’ve since leveraged this practice of consistent saving for taxes and applied it to investing. Now, every time a check hits our account — before I spend a cent on groceries, rent, or anything else — I send a fixed portion to the tax fund and another fixed portion to an investment account at Vanguard.
My investing strategy is pretty straightforward.
Bet on the total market (index funds) NOT individual stocks for one-off companies
Invest for the long term (minimum 10 to 20 years — probably more like 30+)
Invest the same amount every month instead of hoarding money to time the market
Start by investing in tax-advantaged accounts like an IRA or 401K
Invest through low-fee, reputable companies like Vanguard
Isn’t investing risky?
Investing for the long term in a broad stock index is one of the surest and simplest paths I know to growing wealth.
Of course, every investment carries some risk. But betting that the American market will, on average, continue to go up over the long term seems like a pretty safe bet to me. The data seems to think so too.
“While 10% might be the average, the returns in any given year are far from average. In fact, between 1926 and 2014, returns were in that “average” band of 8% to 12% only six times. The rest of the time they were much lower or, usually, much higher. Volatility is the state of play in the stock market.
But even when the market is volatile, returns tend to be positive in a given year. Of course, it doesn’t rise every year, but over time the market has gone up in about 70% of years… There are no guarantees in the market, but this 10% average has held remarkably steady for a long time.” - NerdWallet
Besides, the riskiest investment is no investment at all.
Index fund investing doesn’t require timing the market or trying to find the next best stock. All you need is time and consistency — compounding does the hard work for you.
2. Create dedicated savings accounts for big purchases
One of my favorite realizations of the last few years has been that you can have as many savings accounts as you like — and they can be dedicated to anything you want.
I used to think of savings accounts as just one account. You have one checking account and one savings account. But it’s hard to put goals or rules around something like that. It’s too all-encompassing. Too generic.
Instead, I love maintaining multiple savings accounts. One is an emergency fund. Another is a travel fund to let us save for big trips every year. Sarabeth and I have a savings account for taxes, one to help us save for a down payment on a house, one for an emergency fund, and even one to help us set aside money for next month’s expenses.
Maintaining dedicated savings accounts allows us to have guilt-free spending on certain things that cost more than we could comfortably afford in a single month’s income. The alternative, which I’ve been guilty of many times, is to throw those large expenses on a credit card.
If I want to purchase a $1,500 couch, I can save for it — get ahead of my expense — or I can pay for it with a credit card — get behind the expense. Putting the purchase on credit means borrowing money from my future self — and limiting the buying options of that future self.
💡How I save
Use Capital One (no hidden fees and you can open as many savings accounts as you like)
Generate a saving account for any large purchase (house down payment, travel fund, emergency fund, Christmas presents, next month’s expenses) that you like
3. Start a business
In 2016, I quit my full-time job and launched a freelance business. At first, I didn’t earn much money. I had to take on a few side hustles to cover my expenses. After about a year, I learned enough about running a business that I could quit the side hustles and focus all my energy on writing.
Running a small business has taught me to rethink a lot of what I used to know about money. For one thing, the market — as opposed to an employer — decides how much money you can earn. If you’re good at what you do, and know how to market your skills, there’s almost no cap on your earning potential.
Lewis Commercial Writing has grown at about 55% year on year.
While most people think of managing their personal finances as a responsibility in lowering their expenses, there’s also another side. Starting a business allows you to raise your earning potential, making it easier to save and invest.
Of course, this isn't fool-proof. Every reward requires taking risks. Starting a business isn’t easy and certainly doesn’t guarantee a better income than someone working a full-time job. But at the very least, it teaches you skills that will help you get ahead in almost any employment situation.
💡How to start a freelance business
There are thousands of business ideas out there. The one I know best is freelancing, so that’s what I’ll speak to here.
These are three of the most common routes to launching a full-time freelance business:
Quit and hustle: Lower your expenses, quit your job, and take on side hustles (like driving for Uber) to cover your bills while you grow your business. This is the route I took, except my side hustle was setting up and dismantling stages for concerts around Austin.
Turn your boss into a client: Many employees start their business as a side hustle. When your side income grows large enough that it feels crazy to keep your day job, you can approach your employer and — instead of resigning — ask them to become one of your clients. Keep the responsibilities you like, and drop everything else.
Save, save, save: Another popular route is to save at 6 to 12 months of expenses and then quit your job. This money is your runway to building a business full time. If you don’t want to side hustle your way to independence, you can give yourself enough financial cushion to take some of the risk out of that first year of freelancing.
Even if you never decide to go full-time with your own business, there are certain skills I think are worth achieving that are foundational to running a business. These skills have taken my career — and financial life — to new heights.
Sell yourself: From job interviews to presenting ideas to your team, knowing how to sell yourself can send your career forward by leaps and bounds. It’s also, in my opinion, the skill at the foundation of entrepreneurship.
Take ownership: In the early days of entrepreneurship, you wear all the hats in your business. If the marketing doesn’t get done, the expenses aren’t tracked, or taxes aren’t paid on time, there’s no one to point to except yourself. Entrepreneurship teaches you to take action — and to take responsibility for your actions.
Innovate: When you go into business for yourself, at first every other business owner looks like they’ve got everything figured out. Eventually, you realize everyone is just winging it. That’s when you can start innovating with confidence.
Good financial management, I’ve learned, is more about getting a handful of big wins right every year than about trying to get dozens of small wins right every week.
This list was not meant to be extensive. These just happen to be the three big decisions that, in hindsight, have had the biggest impact on the financial success I've experienced until now. There are many big wins you can get right with your finances: good credit score, investing in real estate, getting the right degree, gaining a rare expertise, and so many more.
The key to finding those big wins starts with simple curiosity and an insatiable desire to learn.
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