I got a really interesting/confusing email the other day that initially through me for a loop. It was from my friend B. and went something like this:
“Hey Jay! Do you still do money coaching? I need some help getting my finances in order and thought maybe you get me back on track. Lemme know.”
Nothing too out of the blue, right? Plenty of people need help with their money or else blogs and coaching and, well, the entire financial industry wouldn’t be around. So at first glance everything’s normal here…
But here’s the kicker – the person who emailed me? He’s a PERSONAL FINANCE BLOGGER!! Someone who’s helped hundreds, and probably thousands, of people throughout his blog lifetime just like me. And who’s always given great, if not excellent, advice.
So why would my friend need ME to help him out? When he knows money just as well as I do? Well, after the shock wore off and I flat out asked him. And his answer was one I’m sure is familiar to all of us:
“I’m in one of those funks… I’ve got so much $hit going on in my life right now that I just can’t keep up. I literally need someone to look at my money, assess it, and then just tell me what to do with it. I need a plan.”
Wow, yup – understood! I was the same with investing. Took me forever to finally do something about my money scattered everywhere, until one day I literally asked a blogger friend what he’d do in my shoes, and then I did exactly that. Humans are notorious for dwelling on things forever and not taking action, so sometimes we just need an outside (trustworthy!) source to knock us straight and get us going again :) And for B., that was me.
So that’s takeaway #1 here: It doesn’t matter who you are, or what you do – everyone needs help with money. Some just hide it to themselves while other, smarter people (like B.) do something about it when they realize they’re stuck. So don’t ever think you’re alone in this money game – we’re all trying to figure it out!
Takeaway #2 is that we’re all in different phases with this stuff. And sometimes we repeat some of them when life gets in our way too. I’ve said this plenty of times on this blog before, but I can’t stress it enough. We have to do our best not to compare our situations with others because everyone’s in a different stage with money right now. Perhaps your peers in high school or college, or even 1st “real” job out of college are on a similar level, but even so we all have different goals and dreams, and some of us take longer for the $$ bulb to go off than others.
Hell, it took me 27 years to finally stop and pay attention to this stuff! So I’ve only been fiscally savvy for a good 7. That’s not a lot in the grand scheme of things. And throughout those 7 years I’ve gone from breaking even with money, to doing great, to freakin’ rolling in it, to breaking even again, and now to losing a little every month (though, more consciously than when I didn’t know what I was doing before).
Regardless of the stage you’re in right now, just remember it’s all temporary. Things will get better later, just as things may get worse. But if you’re eyes are open the whole time you’ll get through everything just fine :)
So what did we put together for my friend, B.?
Well, we hopped on the phone for 40 mins, talked about everything he wanted to accomplish over the next few years, and then formulated a plan specifically to that. And it was the plan, itself, that he needed most out of everything. It’s hard to reach your goals when you don’t have the schematics to get there, am I right Jack Bauer?
Here’s what B. wanted to accomplish, in order of priority:
- Pay off all his debt ($20,000)
- Build back up an emergency fund ($4,000)
- Start saving for a house
- Contribute to retirement again at some point
And then here’s some things about B. that’s helpful to know before reading the plan:
- B. has a 9-5 job that covers all his living expenses
- B. has a side hustle that brings in some decent money (personal finance blog)
- B. has another side hustle that brings in some money, but not as much as the blog
- B. is a “chunker” – someone who gets more motivated paying things off/saving in chunks of money vs tiddlywink amounts here and there
- B. will spend anything that’s “extra” in his accounts and usually not have anything to show for it
- B. is GREAT with money once he’s on a mission
(It’s also important to note that he recently went through some pretty big life changes… It doesn’t excuse a lot of the actions here, but it’s still something to keep in mind. We try to get the whole back story with coaching so we know if it’s a lifelong problem we’re dealing with or more of a one-off, but from knowing B. it seems to be more of a recent issue. So we leave it alone, do our best not to judge, and then get to work on setting things straight again.)
The Plan For B.’s Money…
Okay, so here’s the plan we set up for him… Loosely based on the Gigs For Goals concept we’ve blogged about before on assigning specific income streams to specific bills or goals you have.
Goal #1. Kill all debt
Since my friend has a main 9-5 which covers all his normal living expenses, he’s in the fortunate position where all side hustles are “extra.” And since we know he’s loosey goosey with his extra money, the first thing we needed to do was to assign each and every last dollar purpose. So we decide all income from his main hustle (pf blog) will be the gasoline to help light this debt bitch right on up and incinerated once and for all. He’ll be creating a new savings account to funnel all blog money to going forward (and aptly labeling it “Kill Debt!” to further stay motivated), and then at the end of every month he’ll apply the total balance directly against all debts. Nice and easy without any need to think about it again. (Outside of ordering which debts to pay first with the plan)
Why this will work: A) my friend doesn’t need any of this money to live off, b) it’s separated out (and labeled) from all other money keeping everything organized, c) the monthly chunks play towards my friend’s “chunker-ism” and d) it gives all this extra money a purpose so it’s not blown on nonsense. It’s all about structure when you’re trying to get your $hit together
Goal #2. Building back up the emergency fund
Similar to what we’re doing with his debt, we’ll do the same with his second goal here: channel all money from hustle #2 right towards one dedicated spot: cash savings. And again, since my friend has a 9-5 that covers all his normal expenses, we don’t have to worry about him going into further debt, at least in theory. So the e-fund doesn’t have to be top priority, where it might in situations of those living paycheck to paycheck. B. reckons he could have this fund built back up to the $4,000 level (from $0.00 right now) within 8-10 months. At which point we change the direction of hustle #2’s cash flow towards the next important goal on the list. Which, at this point, is the saving for a new house.
Why this will work: For the same reasons as goal #1 will – gives extra money a purpose and diverts into one spot specially allocated to receive it. And as we all know, if you don’t touch your savings the only way for it to go is UP. And up it will, each and every month so long as hustle #2 is in full effect (which he assures me it will). And the beauty of this goal is that it’s temporary.
Goal #3. Start saving for a house
Although this was item #3 on the priority list, once I found out about his employer’s 401(k) benefits, we quickly decided to move this to goal #4 on the list which will take over from the #2 goal above once the e-fund is complete. A 6-8 delay for now, but one we both agreed was smart since the opportunity here to jump start retirement again is incredibly good (as you’ll soon see).
Why this will work: Even though we’re not putting money towards this goal right now, there’s a plan for it in the not far off future, and in the meantime will give B. that much more motivation to make sure that e-fund gets filled. Unless he comes up with side hustle #3 and doesn’t want to wait ;)
Goal #4. Contribute to retirement again
This was the biggest shock of them all to me, and one I’m SUPER glad we caught. My good friend B. – which you’ll remember is a personal finance blogger! – was currently contributing a whopping 0% into his 401(k) retirement account. And what makes it worse/best now? His employer matches up to 6% of his income! Which means he invests 6% of his salary, and THEY invest an additional 6% of his salary – for free. Wow. You could have a 12% savings rate just by putting in 6% of your paycheck every two weeks. And that’s before it grows in the markets year after year too – pretty amazing stuff.
So, of course, this week he’ll be marching into HR and jacking up that % from 0 straight to 6. Will he notice the difference? Maybe. But nothing you couldn’t get used to too quickly. And since my friend admittedly blows any extra money, this will prevent him from having that much extra in the end. Worst case he can lower it later or throw less $$ towards debt if he wants to, but that all requires “work” and we all know once things are set in place we tend to get lazy and leave it be ;) So it’s smart to use that to your advantage especially in these cases.
Why this will work: The investments are automatic, it helps lesson any “extra” money to spend, and it in effect doubles his retirement income without lifting a finger. Putting 12% into retirement will be fine for a while so he can forget about it and know he’s doing well. Once his other goals are complete he can consider plopping in more as he’s still relatively young.
That’s the whole plan in a nutshell :) As you can see, he’s not in that bad of a situation all in all. Having more income than you need every month is a pretty fortunate position to be in, and of course gives you much more options than the reverse. It’ll take a few years for B. to get back on top again, but I have no doubt he’ll be able to do so if he sticks to the plan… (and we didn’t even go over any of his expenses on this first round – there could be room to speed things up there too!)
Here’s the takeaways from everything:
- Everyone goes through phases with money, even professionals
- It’s important we give all our dollars a purpose (try Gigs For Goals if you haven’t before!)
- It’s important we KNOW what our goals and dreams are so we can plan for them!
- It’s good to know how we work emotionally, as well as logically with money
- It’s important to admit when we have a problem (and to then ask for help)
- Side hustles can be game changers!!
Was I surprised that a fellow money blogger needed help with his money? Hell yeah I was. But do I now have mad respect for this guy for reaching out? You can bet your sweet home fries I do… It’s one thing to get yourself into a sucky situation like that, but a whole other to then spill your guts to someone you know. Especially a fellow financial blogger.
So I’m glad he gave me a ring, and I’m doubly glad he then allowed me to share this with y’all. I hope it gives you guys some good ideas, and at the least an appreciation of whatever your own situation is. We’re all in different stages with our money, but our end goals are always the same: Hit financial freedom sooner than later.
So keep pushing forward! You’re one step closer just being on a finance blog! :)
-J to the Hizzy
[Photo cred: Barta IV]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!