#039 | Adulting + Money

May 25, 2020

Episode Summary

We talk about adulting and how to handle your money if you want to act like an adult.  We share advice on how to enter financial adulthood, and all the things we wished we had done more of when we were younger.  We cover advice like avoiding debt, not overspending on things like housing and cars, managing your mindset and avoiding lifestyle inflation, take advantage of company benefits, investing early and often, tracking your expenses and net worth, communicating with your partner about finances and your goals in life, and pursuing your passions.  

 

Episode Notes

This episode was inspired by a 23 year old who left us a voicemail that said, “I am new to this adulting thing, so if you have any advice for me…”  We love the honesty and vulnerability in that statement, and so we will do our best to give our best “adulting” advice for everyone in their early 20s, though really the same advice applies if you’re in your 30s, 40s, 50s, or beyond.  And for those who have never heard the term “adulting” before, the dictionary defines “adulting” as “the practice of behaving in a way characteristic of a responsible adult, especially the accomplishment of mundane but necessary tasks.”

 

Our top “adulting” with money advice: 

  1. Avoid debt.  Don’t go into debt for things you don’t need and can’t afford.   If you already have debt, aggressively focus on paying it off.  Get into the habit of paying off any bill the month it’s due. Credit card debt should NEVER be carried over.
  2. Buy a reasonable car, aligned to how much money you have/make.  Don’t buy a fancy car. No one cares about your car.  
  3. Think differently about your home and real estate.  Buy a cheaper house than the bank might approve you for.  Get a 15 year mortgage, or if you can’t afford that reconsider your home choice.  Run the math on renting vs. a mortgage… it might be Ok to rent.  
    • Consider house hacking while you can, it’s a bit easier when you’re younger.  Buy a place and have 3 roommates to cover your mortgage.  In episode #18 we interview Andrew Kerr from the househacking podcast, listen to that and listen to his podcast for more specific tactics and inspiration.  
  4. Manage your mindset and realize what’s important in life.  Too many people realize these things later in life, and have lost decades of better financial practices.  The earlier you realize it and change our practices and approaches the better.  Don’t keep up with the Joneses..instead keep up with Mike and Maggie.  We just did an episode on top 10 FIRE extinguishers and talked about these topics more, so check out episode #35 for more on this.  
  5. Be aware of what lifestyle inflation is and avoid it. No one cares about your stuff. You’re not entitled to an income, you’re not entitled to a nice car. Don’t take these things for granted if you are fortunate enough to have them available to you.   
  6. Research, learn about, and then take advantage of every benefit your company has to offer.  This could be anything from your 401-K, to HSAs (Health Savings Accounts), to FSAs (Flexible Spending Accounts), to discounts on large purchases like mattresses or insurance.   
  7. Invest early and often.  Understand compounding interest and take advantage of it. 
    • Max out your 401k as early as possible.  
    • Invest in the market – simple and basic.  Start buying low cost index funds.  Use something like Wealthfront if you’re intimidated by how to get started.  Go open an account with Vanguard or Schwab and buy something like:
      1. The Schwab US Broad Market ETF (SCHB) tracks the Dow Jones Broad Stock Market Index – the largest 2,500 publicly traded companies in the U.S.
      2. The Vanguard Total Stock Market ETF (VTI) tracks the performance of the CRSP U.S. Total Market Index, which is all stocks on the NYSE and NASDAQ.
    • Develop a tolerance for market fluctuations. Don’t beat yourself up if you lose. Don’t congratulate yourself too much if you win. A $10 loss might seem huge when you have little invested. Over time, you’ll want to be able to emotionally deal with $10K losses. Or $100K losses. Start now and it will get easier.
    • Don’t gamble and play with the market – just keep it simple and basic and keep buying in at a young age, and stick with it.  
  8. Track your expenses and net worth early on.  
  9. Don’t get into a long-term relationship with someone who is not like-minded with you about money and what’s important to you in life.  It’s OK if they have some different views on money, but if you can’t have open and honest communication about things like money then there’s a problem.  Yes, we are suggesting you potentially reconsider your relationship choices.  This is the time to truly think about what’s best for you and make strong decisions. It will make your relationship stronger down the road if you have these tough discussions upfront.  Also, consider a pre-nup, even if you think you have nothing to protect.   We’ll do a whole episode on this, but it’s something Maggie highly recommends, to protect both people in a relationship.   
  10. Lastly, pursue your passions. If you can make it your career, that’s amazing. If you can’t, make it your hobby. When you have hobbies and passions in your life, you have less need to fill your life with “stuff” and waste your money.

 

Key Takeaways:

  1. Avoid debt.  Minimize your car, house, and other big debt items.  
  2. Take advantage of compounding interest and invest early and often. 
  3. Communicate early and often with your partner, and if that doesn’t work then choose a new partner.  

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