Episode 82: Facing Your Money Fears & Figuring Out Your Finances with Melanie Lockert
This week I sat down with blogger and author Melanie Lockert to discuss the struggles people face when it comes to debt.
Melanie is the founder of the blog and author of the book, Dear Debt. Through her blog, she chronicled her journey out of $81,000 in student loan debt. Her work has appeared on Business Insider, Time, Huffington Post and more. She is also the co-founder of the Lola Retreat, which helps bold women face their fears, own their dreams and figure out a plan to be in control of their finances.
HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:
Melanie’s background and how she began educating others about debt
Have you ever wondered whether or not you’re doing “okay” financially? One good way to take a health-check of your finances is to review your net worth every once in a while. Although net worth is definitely not the end-all-be-all indicator of financial health, it’s a good baseline to get an idea of where you and your family stand.
How to Calculate Your Net Worth
Your net worth is easier to calculate than you think. Here’s a step-by-step process for calculating your net worth:
1. Total all of your assets. 2. Total all of your liabilities (or debts). 3. Subtract your debts from your assets. 4. That number is your net worth!
There are several calculators out there that can help you pull together the numbers you need, butthis one from Kiplinger is really comprehensive.
In general, the assets you should be totaling up are:
The value of your business
Other property you own (including cars, jewelry, antiques, etc.)
Your liabilities might include:
Let’s Look At the Numbers
Now that you know how to calculate your net worth, we can talk about what your net worth should be by age 30. Keep in mind that your situation is unique to you. Even though these average numbers provide you with a good baseline to estimate your own net worth, or financial health, with, they don’t tell your whole story.
According toListen Money Matters, the average net worth for people in the United States under age 35 is right around $6,676.The Financial Samurai has a similar number – estimating that the average 30-year-old has a net worth of about $7,000.
Does that seem low to you? The truth is that most 30-year-olds are still working to pay off a mountain of student loan debt. On top of that, they may be dealing with a mortgage, auto loans, and consumer debt (like credit cards). The more debt you carry, the lower your total net worth is going to be.
A better indicator of financial health at this age is likely how much you have in savings. By the time you’re 30, you can shoot for having between half of your annual salary, to a full year’s salary saved. That’s not to say that all of your savings needs to be in one place! You can contribute to your workplace retirement account, a Roth IRA, a cash savings account, a money market account, or a traditional investment account to keep growing your savings.
Factors That Are Negatively Impacting Your Net Worth
Your net worth is negatively impacted by two different things:
1. Your debt. 2. Your lack of saving.
If you’re swimming in student loans (and paying the minimum balance), and are only saving a little bit each month, the likelihood that your net worth will improve is pretty low. The best things that you can do to boost your net worth are to knock out your debt and to start saving more.
What You Can Do To Improve Your Net Worth
Ready to really level up your net worth? At age 30, you’ve got a lot going on in your life. You might be getting married, starting a family, growing your career, buying a home – the list goes on and on. The good news is that your 30s are an exciting financial time. You’re likely starting to break out of the constantly-grinding, Ramen-for-dinner phase of your life, and you get to start enjoying your wealth a little bit more as it grows. However, in order to get to that point, you have to start actively working to improve your net worth.
The higher your net worth is, the more opportunities you open up for yourself and your family – financially and otherwise. With less debt to weigh you down, and more savings to protect you against expensive emergencies, you’re able to set up the lifestyle you’ve always envisioned for yourself.
If you’re ready to buckle down and startgrowing your wealth (and your net worth!), here are a few ways you can get started.
A lot of people feel nervous to start investing. When you’re working hard to pay down your debt, you don’t always have a lot of extra cash flow to start investing with. Luckily,getting started with investing isn’t as intimidating as you might think! When you’re a new investor, define your “why” for investing, and start small. For example, if you want to start investing to build your retirement nest egg, you might start looking for target date funds within your company 401(k) that line up with your retirement timeline.
Investing is as easy (or as complicated) as you want to make it. You don’t have to be a stock picker, hunched over your laptop at all hours of the day, to get started! Looking at your workplace retirement accounts, orIndividual Retirement Accounts (IRAs) are both great places to start.
1. Savings (I’m a big fan of separate savings accounts for separate goals). 2. Debt repayment. 3. Everything else.
A few general percentages I like to use are: saving 20% of your after-tax income, using 30% to pay down your debt, and 50% to cover everything else. This general budget system can help you to prioritize savings without feeling overwhelmed by tracking every last penny that you and your family spend each month.
The debt snowball strategy says that you start by paying down your smallest-balance debt first. Then, once that debt is paid off, you roll the monthly payment to your next-biggest debt.
The debt avalanche strategy focuses on interest rate instead of debt balance. You’d start by paying off your highest-interest debt first, then roll the payment from that debt into the debt with the next-lowest interest rate.
Some people like the debt snowball strategy because it’s easier to get momentum on the front-end of your debt repayment. Others prefer the debt avalanche because it saves them money in the long-run by paying off high-interest debt first. Find a system that works best for you and your family, then stick to it!
Set Goals – and Save For Them
A big part of growing your wealth issetting smart and specific goals, then saving for them. That means every time you have a big purchase coming up, whether it’s an expensive vacation or a new-to-you car, that purchase becomes a goal. You set aside money each month until you can afford it – that’s it. The purpose of this exercise is simple: you’re growing your savings, and staying out of debt. This can be tough, especially in today’s instant-gratification world. But the longer you’re able to stay out of consumer debt, the more you’ll be able to grow your net worth!
Ready to Boost Your Net Worth?
Having a clear-cut financial plan can help to put you and your family on the right track. Getting started early while you’re in your 30’s gives you a lot of time to grow your savings, and to use your wealth in a way that supports your values and the lifestyle you want. Your financial plan sets you up for success, not just during retirement – but right now, too! Ready to get started?Reach out!
Fights over finances can stem from a number of causes, ranging from disagreements over goals and priorities to feelings of anger and resentment over who earns more. Sometimes it can be a challenge to make smart money choices together.
Here’s the good news: arguing over money doesn’t need to be the norm in your relationship. You can reduce anxiety, fear, and other negative emotions over your household finances by taking action to become a financially savvy couple who feels confident and excited about the future.
And most importantly, you can feel financially in tune with your partner so that money fights don’t happen in your house. So, what money choices can you start making together? And how do you get on the same page?
Talk It Out
You need to be communicating about your finances from the early days of your relationship. If you’re already a few years in – better late than never! The first step to becoming a financially savvy couple: communicate! Remember, you’re a team and you can work together to achieve your goals and get what you want. But you can’t do this successfully if you don’t speak up, share your ideas, and understand what your partner thinks.
Always be honest, remain open, and don’t bottle up negative feelings.
Set up a framework to ensure each person’s thoughts and ideas are heard on a regular basis. Put a monthly “money date” on your calendar. Take 30 minutes to an hour once a month to sit down with your partner and go over all of your finances.
Look at your budget, pull up your bank and credit card accounts, examine your bills, and look at your retirement fund and investments. Evaluate what happened with your money last month, and make a plan to correct any mistakes or reign in any runaway spending for the upcoming month.
Then, brainstorm ways you can continue to improve your current actions with your finances. Save some time at the end to discuss goals, hopes, and dreams and ways you can continue to feel motivated and inspired to work for those things.
When you sit down for regular check-in’s, or “money dates” to talk about your finances as a couple, it can be helpful to ask each other questions and listen to your answers. A few of the questions you can be asking one another are:
Are we combining our bank accounts?
What’s our monthly budget?
Are we staying on track to meet our financial goals?
What are our financial goals?
Who is in charge of the day-to-day finances?
Are you happy with how we’ve been handling our money?
Having these conversations on a regularly scheduled basis is key to finding your financial footing as a couple.
Set Goals as a Team
If one of you is set on paying down your debt, and the other is focused on fully funding your retirement savings, you may have to pick and choose which goals get prioritized. In an ideal world, we’d all be on the same page about our financial priorities, but that doesn’t always happen. Checking in regularly to better understand what your goals are, and if priorities have shifted, is incredibly important.
Couples who are financially savvy understand the importance of staying organized. This can help with everything from small, everyday situations to your big annual trip to your accountant’s office to file taxes.
When you keep records and document all aspects of your finances, you create a detailed source of information when you have questions or aren’t sure about the right decision to make. You can reference your files to solve problems, answer questions, and realize what money moves make the most sense for you in the present.
And of course, keeping records of your cash flow — in other words, keeping a budget — means you stay on track for the future, too.
Track Your Progress
Don’t let your money run wild without supervision. Financially savvy couples track income and spending so they can evaluate whether or not they’re putting their available dollars to the best use.
Another smart money move once you’ve started tracking your finances: measure your progress! Each month, measure how much your savings has grown. Keep tabs on your home value. See if your income is growing or staying stable.
You can also put all these metrics together to measure your net worth. This is a good indication of your overall financial health.
When you track and measure, you understand what’s going on and you can see your progress over time — and that can be a huge motivating factor to help you keep going.
Focus on Debt
Debt is a huge point of contention amongst couples, so focusing on a gameplan to knock it out together can take a lot of financial pressure off of your relationship. If you have multiple debts, they may feel completely overwhelming. Before you panic, know that you and your partner can do this! And there are a few strategies you can use to help make it easier. The first strategy is known as the avalanche method.
This method directs you to prioritize your debts by their interest rates. You work to pay off the debt with the highest interest rate first (while still paying the minimums on your other debts). Mathematically, this makes the most sense. The interest rates on loans and credit cards cost you more the longer you hold on to them, and of course higher rates cost you the most. But some people find it really intimidating to try and tackle their biggest, baddest debt as the first step toward debt freedom.
If you prefer to start small, you can try a different strategy that comes at the problem from the other end. This strategy, known as the snowball method, involves prioritizing debts in order of the amount of money you owe. You start with the debt with the smallest balance and work your way up, regardless of interest rate.
This is helpful for those that feel discouraged by the amount of debt they’re in, as it should give them a quick win. However, it may not be the most financially efficient way to deal with all of your debt. You may end up paying more in the long run if you let high interest rate debts sit on the back burner while repaying other balances. What matters is that you’re making progress with your debt and moving in the right direction. It’s best to just start. If there’s one debt really weighing on you emotionally, tackle that first!
Discuss Your Investing Strategy
If you don’t know anything about finances or investing, recognize that you need to increase your financial literacy. Ask for help from a professional, start reading up on personal finance books, and look into educational courses on money and investments that you can take together. You don’t need to be financial experts before you start investing, but you do need to understand the fundamentals so you aren’t throwing your money around blindly. Start by reading this post on How to Get Started with Investing and then following up with Basic Investing Terms You Should Know part one and part two.
Keep Learning Together
The couple that learns about money together stays together! Sure, it sounds a little silly, but communicating and constantly adding to your financial knowledge as a couple goes a long way. Disagreements and misunderstandings about money lead to serious marital stress.
Remember that you and your new spouse are a team and you’re working together towards what you want to achieve in life. It’s up to you to create an ideal, secure retirement for the two of you. No one else is going to take care of your financial needs in the future, so it’s important that you plan ahead and start saving now.
Episode 64: Paying Down Six-Figures of Student Loan Debt with Travis Hornsby
This week I sat down with Student Loan Planner, Travis Hornsby to talk about student loan debt.
Travis founded Student Loan Planner after helping his wife figure out her six figure med school loans and realizing that all their friends needed help too. He’s consulted on more than $250 million of student debt, which is more than any one person in the country. He loves helping clients realize that financial freedom and security is possible no matter how high their student loan balance. He lives in St. Louis, MO.
HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:
How Travis got into the student loan business
The difference between undergraduate and graduate student loans
Where most people get into trouble with student loan debt
The two best approaches when you are in a ton of student loan debt
How much debt you should have if you’re considering the refinancing option
A large tax bill doesn’t have to be as scary as you think
The importance of shopping around during refinancing
Places to turn to if you feel your student loan debt is unbearable
How to manage stress from student loan debt
Options to deal with student loan debt as a couple
Conversations to have with your spouse if one or both of you have student loan debt
Common professions that find themselves in student loan debt
The shift in the education industry that is increasing student loan debt
Why you should look at a financial aid/school admissions department like a sketchy used car lot
Episode 59: Paying Off Debt While Still Living the Life You Love with Brittney Lynn
HOW DO I PAY OFF DEBT AND STILL ENJOY LIFE?
This week I sat down with PR & Online Marketing Strategist, Brittney Lynn.
Brittney Lynn has almost 10 years of experience working in the online marketing industry and has a passion for helping others grow their brand through strategic PR.
She’s also the host of the Day in the Life podcast, which gives a glimpse into the daily lives of people from across the world who work in a variety of industries. Stepping into the lives of these fascinating guests will encourage, inspire and challenge listeners as they share in each guest’s trials and triumphs, learning that we are all connected and are more alike than we realize.
HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:
The first steps Brittney and her husband took to tackle their debt
Brittney’s motivation and inspiration behind eliminating their debt
How the Debt Snowball Effect empowered the couple
The ways debt impacted their lives and interactions with friends
Lifestyle changes that were made
How they worked in “fun money” while simultaneously paying off debt
Ways they enjoyed the things they loved while on a budget
The negative effect too many money restrictions can have when paying off debt
How the couple survived pitfalls and stayed focused
When and how Brittney launched her own company
The importance of continuing to save while you’re paying down debt
Easy tweaks you can make to pay down debt and still save for retirement