This may be a controversial article but it’s something that I’ve lived and experienced so take that context as you will.
Growing up in a low-income household with fiscally-conservative parents, money has always been something that has brought me a lot of stress. I was always acutely aware of the lack of money that my family had, and my parents often made it a point to remind me that we didn’t have the means to be frivolous. This made money something that I thought about often. From wondering if I’d be able to afford college, to being fearful of taking risks financially, money and finances came to impact many facets of my life.
However, now in my late 20s, I realize that much of the fear around my financial stability was unwarranted. Though not easy by any means, the path to financial stability is a fairly straightforward one, and advice about how to reach this ever elusive lifestyle is widely available on the internet. But for whatever reason, people seem to openly flout this advice and choose to take paths that are proven to be financially irresponsible. Though I understand how difficult it can be to listen to the opinion of “boomers” (see my last article), I would encourage you at the very least to hear me out as I distill boomer advice into steps that I’ve taken in my own life to become financially stable.
Tip #1: Don’t listen to CNBC, you need to budget!
Though this may seem excruciatingly obvious, you need to have a budget. Internet financial gurus from the likes of Graham Stephan to Dave Ramsay have preached for years that your finances can be reduced down to simple math and the truth is, they’re completely right. You cannot expect to have money in excess for savings or investing if you don’t keep track of what’s coming in each month, and what’s going out. Having even more granular categories such as what you’re spending on food, housing, vehicles, and discretionary items allows you to fine-tune your spending further, and makes it really obvious when you’ve gone a little too crazy with the credit card.
Tip #2: Credit is not for emergencies, don’t use it if you can’t pay it back.
My partner and I both use our credit cards like debit cards. Many of our friends do this and it was something my parents always taught me to do. If you’re in the Dave Ramsey camp, you may believe I shouldn’t be using credit at all, but because I keep such a strict budget I’m not worried about overspending. If you’re in a pinch, do not turn to credit cards! You have to realize that the interest rate is going to kill you and you’re better off getting a loan from the bank. If you have poor credit, I understand it can be difficult to acquire a loan from the bank. Though you’ll always suffer from worse APR rates, lenders like Best Egg and Payoff can provide loans at rates that are significantly lower than you’d find at payday loan sharks or credit cards. Credit card debt per household is higher than ever and if you’ve ever tuned into The Dave Ramsay Show, you’ll know that next to student loans, credit card debt is by far one of the main reasons people find themselves in financial trouble.
Tip #3: Student loans are a scam, don’t go to college unless it’s necessary!
In today’s world, we are told that college is necessary for financial success. Though this may be true for certain professions, it not true for many people. The trades are experiencing worker shortages and yet we constantly tell students that technical schools are lesser than universities. Countless amounts of people have leveraged the internet to upstart business and personal brands. Student loan debt is higher than it has ever been, and yet there seems to be no solution to addressing this problem.
Here’s a fact that many people refuse to accept: no one cares which school you attended, especially for your undergrad. Unless you’re trying to get into a top business or law school at the graduate level, your local community college is more than sufficient for most careers. My family doctor graduated from the university in my hometown and I trust him no less for it. I’m a public school teacher who attended a local university. There are teachers at the top-rated private schools in my city who were a part of my graduating class. My partner works in a highly-paid position for Amazon Web Services and he has never set foot in Silicon Valley. The myth that we need to spend obscene amounts of money on prestiguous schools continues to leave students in irreparable amounts of debt and the families most impacted are from low-income neighbourhoods. The cycles needs to stop and it starts with rejecting the notion that universities make you successful because they don’t. Your skills, attributes, and drive make you successful.
Tip #4: Financially stable doesn’t mean you’re a millionaire!
It’s easy to see all the self-made millionaires on YouTube and think that financial success requires 7 or 8-figure salaries. This is simply not true! Financial stability means that you can live comfortably within your means and you debt is under control. My partner and I chose not to buy a detached home, even though our bank pre-approved a mortgage large enough to do so. This ensured we had enough money to save and invest each month, and this way we have the funds to move-up when we’re ready. We don’t buy expensive clothes, we can’t afford more than one vacation a year, and most of our days are spent working. However, we have a lovely home that suits our needs, a dog to love, and each other’s company to enjoy. Happiness starts now, not sometime into the future. If you’re unhappy with your current lifestyle, you really need to consider whether or not that is in relation to the lifestyle of others. Living within your means does not mean living a life of sacrifice. Be grateful for what you have and find ways to bring yourself happiness that don’t involve money.
Tip #5: Listen to your parents, they are right sometimes.
We’ve all heard how important it is to ensure that we try our best in school, get a stable job, and find partner who loves us. This is easier said than done, but financial stability genuinely hinges upon these things. I know I sound like your parents right now, so let me digress. It’s not about going to college, getting a government job, or living within a white-picket fence. The things that your parents have told you for years really boil down to self-discipline and personal responsibility.
If you refuse to budget because you know that it will limit your spending, you lack self-discipline. If you refuse to admit that you made a mistake taking student loans out for an unnecessary degree, you lack personal responsibility. I understand that life is difficult and we’re all given different cards. My parents immigrated to Canada in the 80s with nothing but $15 and the clothes on their back. Through their dedication, sacrifice, and hard work, they were able to build a life for my brother and I. Yes, we still lived in the poorest area of the city and attended schools that couldn’t compare to those even 10 minutes away, but they refused to accept that their lives were good enough and had the discipline to do better.
My partner and his single-parent family left Bolivia when he was 11 to escape a totalitarian government. They arrived in Canada and stayed in a motel where most of their possessions were stolen almost immediately after they arrived. They lived in a public housing complex where they dealt with drug dealers and gang violence. My mother-in-law went from being a dental surgeon to working minimum wage at Zellers, unable to speak English. It was their self-discipline that got them through tough times. It was their sense of personal responsibility that allowed them to realize that the fate of their lives relied solely on their actions and choices.
This truth can be a hard pill to swallow, but it could also be the difference between financial stability and financial ruin.
Hopefully I haven’t lost you in my long-winded “hot-take”. I understand that as COVID-19 continues to loom over us, much of this advice may be difficult to accept and follow. Wherever you are in your financial journey, know that there is support for you out there. Our mental health suffers the most when we are in financial disarray and this can cause us to make poor decisions. Make sure you take care of yourself and your basic needs first before you dive into the world of savings and investments.
The path to financial stability is not an easy one, but the rules that dictate how you get there have largely remained the same. It really comes down to making good choices and accepting responsibility for your mistakes. If you’re ready to get started on this path, I’d love for you to join me.