Recently we talked about my first experience with hard work and money, the struggles I had learning to manage my finances, and one new idea I'm going to implement (and suggest you try too)! To top off all the money talk, I've asked NYC-based Certified Coach Ashley Feinstein some of my most pressing questions. Ashley's mission is to empower women to redefine success on their own terms, by knowing their value and fearlessly going for it, and her answers definitely have me feeling excited and ready to get debt free (and more!) in 2014.
Here we go!
KMN: One of the greatest financial frustrations in my own history was the feeling of, "why bother budgeting or trying to save when there is always only just enough to live off of?!" How should I have, or how can others in this situation, restructured their financial situations in order to get out of such a rut and shake off that helpless feeling?
AF: First, this is something that is very common - you are not alone in feeling helpless when it comes to achieving savings goals. I have found that the first very important step to financial wellness is awareness. I typically have my clients keep a spending journal for at least the first couple of weeks we are working together. It’s amazing how different what we think we are spending is from what we are actually spending. Another really essential exercise is to understand and pinpoint our core values. Once we know what’s truly important to us, we can spend our money in ways that are meaningful. Often so much of what we are spending isn’t making us happy, we just are in the habit and even think we should be spending money on certain things. A great place to find more money in a budget is a daily habit. A small expense daily can really add up. I really LOVED my morning Starbucks latte but when I realized I could pay for a 10-day trip to Spain if I started drinking the free coffee at work, I chose travel. That being said, many people would make a different choice. That’s what makes personal finance so personal and that’s where knowing what we truly want and are about (values!) can really help guide conscious financial choices.
KMN: The one thing I did right was smartly invest in properties. What other investments should young professionals look into, that won't cost much but will benefit them later?
AF: One very simple thing everyone can do in less than thirty minutes for no additional cost is switch their savings to an online high-interest savings account. Although interest rates are extremely low right now, earning 1% is better than nothing. I always want my money working and growing while it’s sitting away somewhere. Another beautiful thing about an online savings account is that it takes a few days to transfer money to a checking account, so you can’t make any impulsive spending decisions.
More generally, I believe investment decisions should be made based on two factors – your risk personality and when you will need the money back. I keep my emergency fund and short-term savings in an online savings account and money market funds so that the money is liquid and easily accessible. I keep my longer-term savings and retirement investments in index funds.
KMN: Money has always been an extraordinarily emotional thing for me, and I think for many of us. What advice would you give on separating financial decisions from emotional attachment, or separating financial setbacks from shame?
AF: Money is definitely a very emotional thing for most people. It all comes down to the story we are telling ourselves about money. We attribute a lot of meaning to money and often measure our own worth by how much money we have. Naturally, that can make it extremely emotional! In reality, money is just money. Something I work on with my clients is digging into their stories around money, finding out where they came from (usually a parent or authority figure) and rewriting the stories in a way that’s going to improve their relationship with money and actually attract more of it into their life. It seems shocking when a lottery winner can go bankrupt in under a year but if deep down you believe “money is greed,” it would make sense you wouldn’t want to hold on to it! We can learn everything there is to know about investing, saving, 401-Ks and budgets but until we work through our beliefs, we will never be in harmony with money. I’m launching a group coaching series, 6 Weeks to Financial Bliss, in February that I’m very excited about where I’ll work with people on uncovering and changing their destructive beliefs about money.
KMN: For those of us who are beginning to find some success in our careers, what are some ways to treat our money wisely as we find more of it coming in?
AF: When more money is coming in, it’s important to celebrate! I highly recommend doing something to celebrate or treating yourself to something you’ve been wanting when you get a promotion or bonus. That being said, after the celebration, it’s important to maintain your lifestyle as it was. As people make more money, they often start adding expenses to their life, whether it is a nicer apartment, more expensive gym memberships, beauty expenses, or shopping. They are then in the same boat they were before, living paycheck to paycheck. I find it very helpful to treat saving as an expense. Most people view saving as anything that is leftover at the end of the month after you’ve paid your bills and life expenses. When we think like that, we are prioritizing everything before ourselves. We should make sure to pay ourselves for all the hard work we are doing. Set up an automatic transfer to savings or investing after each paycheck. That way you don’t have to think about it and use precious will power every time you want to save.
KMN: What is your greatest tip for paying off debt?
AF: Having debt feels different for different people. Some people feel an immense burden and want to pay it off as quickly as possible and others it doesn’t bother as much. I’d recommend paying off any credit card debt as soon as possible as interest rates can be extremely high and interest paid to credit card companies is essentially wasted money. I equate it to paying 2x-5x for anything you purchased on your card, depending on the interest rate and how long it takes to pay it off. Regardless of how you feel about your debt, a plan with benchmarks coupled with rewards and celebration is very effective. Whether it’s treating yourself to a massage or crossing off numbers on a chart, it’s important to celebrate milestones as you pay off your debt because it’s a huge accomplishment! Breaking your goal up into smaller wins is also very helpful because as you start hitting the benchmarks, you gain momentum and get more determined to hit your larger goal. It can also help you adjust the timing of you goal to be more realistic if you are outpacing your benchmarks or falling behind. I encourage clients to share the achievement with their friends and family by throwing a debt-free party after paying off their credit cards, student loans or whatever debt they may have. Sharing in the achievement will even inspire those around them to do the same!
KMN: Do you have a golden rule when it comes to money, be it saving, spending, or budgeting? What are key tools everyone should be using?
Budgets get a really bad rap but they are just a tool to help us spend our money in the ways that make us the happiest. I like to call them “happiness allocations.” At this point in your life you have a certain amount of money to spend, how do you want to choose to spend it to make you the happiest and most fulfilled? One of my goals as a coach is to figure out what my clients truly want in their lives and then we figure out how they can do that without money getting in the way. Yes, it might feel restrictive to have to choose a less expensive brunch place in order to build an emergency fund or save up for a big vacation, but in the end it’s our choice to spend on what makes us happy! It’s all about choices and as you start to choose to spend on what makes you happier, it becomes much clearer what doesn’t. It’s a very personal journey and the same principles can be applied to every aspect of our lives.
Connect with Ashley:
You can email Ashley directly for a free consult as well as sign up for her online Money Persona Quiz and monthly newsletter, ‘You Are Worth It,’ via her website. For readers in NYC, she's also launching a group coaching program, 6 Weeks to Financial Bliss in February.