Peer Profiles: "If I can impulse shop, I can impulse donate."
People always ask me how I have come to learn so much about money at such a young age. While having a degree in Finance and a professional background in Corporate Finance is helpful, the majority of my learning has come through self-education. I have never felt that finance was "taboo" or had any reservations around discussing money openly. One of the easiest and most effective ways to get better at managing your own money is to simply ask those around you what they do. I guarantee that even your most financially clueless friend has at least one small tip that you could learn from and implement in your own life!
To get the conversations started, I'm introducing a new monthly post, Peer Profiles, sharing my real-life discussions with friends on money. I am actively searching for people to feature...anonymously :) If you're interested in participating or have any questions you think should be asked, get in touch with me here.
First up, a 24-year old Software Development Manager based in Seattle, Washington.
Q: Let's be real, opening up about money is nobody's favorite activity and always a little easier discussed over a drink or two. We'll start with something easy...what's your favorite drink?
A: My go-to is always a glass of red wine or champagne.
Q: Cheers to that! When it comes to finances, I think that most people's attitudes and perspectives are, at least initially, shaped by their childhood. Looking back, what were your parents' attitudes towards money and how does that influence you today?
A: Growing up, my parents never talked about money, but I knew it wasn't something they ever wanted us to stress about because they both came from having nothing. We never had an allowance because we were taught that if we wanted anything, we should just ask for it. When we asked, the answer was usually "Yes." We had no insight into how much or how little we had, but I would always get as much as I asked for. As a result, I never learned how to budget or the value of a dollar.
This has influenced me to be hyper-focused on my own budget today. Once I started working and earning and spending my own money, it was a big wake up call to me about how much things actually cost. For me, it was motivation to become financially independent. I don't want to continue in the "Yes" culture of my parents giving me everything that I ask for.
On the other hand, giving back is extremely important to both of my parents. My dad was only able to go to school because other people paid for his education. My parents try to donate 75% of their income to charities. My dad's goal in life is to "adopt" 1 million children by sponsoring their education. This has influenced me to make giving back a fundamental part of my budgeting. I set aside money for charities every month. If I can impulse shop for $200, I can impulse donate too!
Q: Wow, I love that! What a great motto and perspective - we all make impulse shopping decisions every now and then. We should easily be able to find the money to give back to others too. While we're looking back on your past, what do you think is the smartest financial move you have made?
A: My biggest victory is, by far, my commitment to saving. If I gave myself the option to make the decision myself every month, I might think too much about it or not make the right choice, so I make saving automatic. Whether it be my monthly deposits to my Wealthfront account, my 401(k) or my general savings account, automatic saving is the best decision I have made.
Q: I couldn't agree more! It can be so hard for young people to think much about the future or "one day," but there is no better and easier time than the present. Now that we know your biggest victory, what do you think your biggest mistake has been?
A: The biggest mistake that I made was when I initially began my startup company. I came across a marketing tool that another company was selling to create focus groups and assist with data collection. It was extremely expensive and I did not do enough research on the benefits. To date, it is the biggest expense that I have made in my company. I wish I had done more research to know if it was truly worth the money and if it would be the best option to get the results that I was looking for.
Q: Thanks for sharing! I know it can be hard to open up about our mistakes, but, at least for me, I have learned SO much more from mistakes than any of my successes. Now that we've covered your past and gotten to know you a little better, let's get into the present. How many credit cards do you have and what do you use them for?
A: I have a total of 7 credit cards, but use each for pretty specific reasons.
Bank of America - I use this card exclusively for gas and groceries because I earn 3% cash back on these categories.
Target - Target...obviously. Offers 5% off on all Target purchases.
American Express - I use this card exclusively for travel related purchases because I receive 5 times as many points for this category.
Chase Sapphire Preferred - I use this card for a majority of my purchases and receive double points for restaurants. I redeem all of my points from this card for travel.
Citi - I use this card for any recurring payments that I have such as Hulu and I receive 2% cash back
Nordstrom - I, of course, use this card for my purchases at Nordstrom and receive points for every dollar spent, complimentary alterations, access to private and exclusive shopping events and more
Amazon Prime - I use this card for any of my Amazon purchases and receive 5% cash back
Q: Such great advice. You clearly have done your research and figured out a way to make your cards work for you. I LOVE my Chase card and the benefits it offers, but I will definitely be looking into a few of those, especially the Amazon Prime card. The membership fee could pay for itself! When it comes to using these cards and making spending decisions, what category do you think is your biggest splurge?
A: In the past, my highest spending was always on home decor, but lately travel has been my biggest splurge.
Q: Good thing you have a few great travel cards! What about a category that you try to cut the most costs on or keep your overall spending low?
A: Shopping. I'm a really bad impulse shopper. I'll walk into Nordstrom or Sephora and just buy things that I didn't even go in looking for or wanting. I really need to kick that habit.
Q: I see where your motto around impulse shopping and impulse donating comes from now. What are you doing to counteract your impulse shopping?
A: To counteract this, I set a budget for my impulse spending. I anticipate July (Hello, Anniversary Sale!), November (Black Friday) and December to be challenging months for my impulse shopping habits. I actively try to underspend in this budget category during the remaining months of the year. My budget in Mint rolls over month-to-month, so it's really more of an annual budget for impulse shopping than monthy. I do feel guilty when making these purchases though because it is often more about the satisfication of buying something.
Q: Agreed. I love that you use Mint, though, and think it is an amazing tool for budgeting. Despite the impulse shopping habit, it's pretty clear that you know what you're doing when it comes to money. Is there any book that you have read that has helped you learn?
A: I really liked the book Happy Money. It talks about what you spend your money on rather than budgeting your money. It made me think about what really matters and that money is a means to an end. When it comes to finances, I definitely read more blogs (like yours!) versus books.
Q: I'm excited to add that one to my reading list! To close, what would be your biggest piece of advice for other 20-somethings out there in terms of money?
A: Saving and investing!! While I was interning at various companies during college, I was super lucky not to have to worry about living expenses or spending money, so I was able to save all of my income. When I started working at my first job, I maxed out my 401(k) each year. I set a maximum amount that I would allow myself to put in my checking account that would force me to save more than I spent. I pay off all of my credit cards in full every month which has allowed me to build great credit. Overall, my biggest recommendation is to figure out what the least amount of money that you can live on is and ONLY put that amount in your checking account. Put the rest in your savings account and start using apps like Wealthfront, Digit and Acorn. Never touch these accounts and don't even think about them.
Out of sight, out of mind. I love that!! Thank you so much for opening up about your finances and giving other HENRYs advice and a fresh perspective on money!