my two cents
By Charlotte Cowles, the Cut’s financial-advice columnist. In addition to “My Two Cents,” she writes about work and parenting for the site. Previously, she was the senior features editor at Harper's Bazaar and a senior editor at the Cut. She was also the editorial director for MM.LaFleur. Her work has also been published in Glamour, Art in America, Politico, and other places.
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I’m 26, and I want to get on top of my finances. But everyone I know who’s good with money is also obsessed with it — they track their spending, use money apps, listen to money podcasts, and talk about budgeting, etc. Maybe this sounds lazy, but that’s never going to be me. My brain goes blank when I hear about investing, and I hate math. Plus, I’d rather put my time and energy into my actual career (I’m a social worker) and focus on what I’m good at and fulfilled by. Is there a middle ground where I could just set up a couple of things and know that I’ll be okay?
I do have student debt, but thanks to a lot of scholarships, it’s not horrible (under $10,000, and I’m still paying it off because most of it is from private lenders). Otherwise, I’m just trying to get by with a pretty low salary (about $45,000) in an expensive city. I don’t have any savings to speak of, but beside my student loans, I don’t have any debt, either. I basically just try to spend less than I make every month.
I’m not looking to get rich or game the system; honestly, I don’t think that’s even possible for me. I just want to know that I’m not actively screwing myself. I also want to keep things simple. From what I can tell, it seems like the more you think about money, the harder and more stressful it gets, and I don’t want to get into the rat race of keeping track of “points” or investments or whatever. I also don’t really have any big, concrete goals like buying a home or having kids. Are there a couple of simple financial things that will be good for me in the long run but won’t take a lot of time or commitment or brain space?
I wish more people asked these questions. Too many of us (myself included for much of my life) get intimidated by the amount of effort and discipline that being “good” at personal finance seems to require, and figure that we’re just not cut out for it.
But you shouldn’t be scared off. There’s nothing wrong with wanting your money to serve your life instead of the other way around. In fact, it’s realistic and healthy. Getting obsessive about finances (and humblebragging about it to your friends) is sort of like spending all your free hours at the gym. If you truly enjoy it, and it makes you feel good about yourself, then go ahead, I guess? But ultimately, I don’t believe that your self-maintenance should interfere with your real life. If you spend too much time getting ready, you miss the event.
I also love that you don’t have concrete goals, because I almost never do, either. I used to feel vaguely embarrassed about this and wonder if it was a character flaw. Goals get a lot of airtime! People love to talk about them, which is fine, but they never seemed motivating to me. (And even when they were, I wasn’t sure what to do after I reached them.) Then I heard a theory about how habits are more important than goals (from the psychologist Adam Grant, although the concept is hardly new), and it clicked. The point is that the processes you establish — i.e., day-to-day routines that act as scaffolding for the kind of life you want to have — are often more rewarding and important than any fixed objective you’re working toward.
Of course, you can establish a habit (say, saving a certain amount of money every week or month) in service of reaching a goal (buying something, taking a vacation). But sometimes the habit can be a worthy goal in itself, and a more manageable one than chasing some pie-in-the-sky endgame. Reaching a big goal is exciting, but getting into the groove of a good routine can bring you a lot more satisfaction on a daily basis.
The takeaway is that you should focus on setting up a few financial habits that feel doable to you, and not stress about goals for now. These habits won’t require a ton of thought or a big life overhaul, but they will add up.
The first important habit is to set aside a regular time to go over your finances. This could be once a week or once a month — whatever feels doable. It can take as little as ten minutes. All you need to do is review your bank balance, look at where your money is going, ensure your bills are paid, and survey your expenses to make sure you weren’t mistakenly charged for something. It’s also a good time to look at what’s coming up and think about whether you want to set aside money for it. There! You’re done. This practice might get a little more complex as your finances evolve over the years, but for now, that’s all you need to do.
A lot of financial advisers call this a “money date.” If you ever share your finances with a partner, it’s great to do this together. But for now, you can do it on your own (or with a friend, if you want more accountability). Either way, make it cute! Setting some ambience — with music, a coffee, comfy clothes, whatever —will help you focus and gussy up what can otherwise feel like a drag. I spent much of my 20s treating my finances like a painful Band-Aid that I had to rip off and deal with when I had no other choice. Now, I set a timer for 15 minutes, light a fancy candle, and dive in.
Your second habit is to put money away for emergencies as well as long-term needs. There are a few ways you could do this, but to start, this beautifully simple flowchart (thank you, Reddit) gives you a visual for your priorities.
To save up an emergency fund, figure out a small amount that you can set aside regularly without too much hassle or scrimping. Then automate it so it’s off your plate. For your retirement savings, find out if your employer offers a 401 (k) match or something equivalent. If so, you’ll want to transfer at least the minimum amount from your paychecks to take full advantage of the match. Again, automate this so you don’t have to give it another thought.
If your employer does not offer retirement benefits, then you’ll want to open an IRA. This is a type of retirement account that is not connected to your employer. (Bear with me —I know it sounds painful, but I promise it’s not.) Both Ellevest and Vanguard make the process very easy and help you to automate your IRA contributions going forward. Remember, begin with small amounts that you won’t miss, and make sure it doesn’t compromise your emergency savings.
That’s it for now. You don’t need to download any budgeting apps or track investments or even do math. All you need to do is review your money on a regular basis, spend less than you make, and stash some of it in savings (cash for emergencies and investments for retirement). If something changes for you — say, you get a raise or finish paying off your student loans — scale up your savings. But for now, it’s best to stick with what’s simple and what works, and don’t let anyone make you doubt it.
The Cut’s financial-advice columnist, Charlotte Cowles, answers readers’ personal questions about personal finance. Email your money conundrums tomytwocents@nymag.com.
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