Tag: financial independence

Money on My Mind: Capital One Edition
From time to time, I’ll post about current events and news I come across that adds to our recent discussions.

In today’s post, we’ll talk about Capital One’s alleged deceptive practices, rising credit card balances, and how much we should save for retirement.

Like with our Q&A posts, please leave a comment below, email me, or reach out on the socials if there are any stories you’d like to discuss here.
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Let’s start with recent news that impacted me personally.

A reminder to consistently evaluate your banking relationships.

For a long time, I used Capital One for all my savings accounts. When I started law school in 2006, there was a Capital One cafe right next to my school. You could get a cup of coffee for $.75 and talk to a banker at the same time. It was a cool concept and convinced me to bank with Capital One.

I told everyone about how great Capital One was. I had Capital One savings accounts and a Capital One credit card. You could say I was a huge Capital One fan.

Key word: was.

In November 2023, I had been a loyal Capital one customer for 17 years. This was during the time period when interest rates on savings accounts were rising dramatically. Many banks were advertising rates as high as 4% or 5%, which were higher than most of us had ever seen.

One day that November, for whatever reason, I logged into my Capital One account to see what rate I was earning. I was sure it would be in the 4% range, and probably closer to 5%, since Capital One was a leader in online banking.

When my statement loaded, I was shocked.

0.30%!

Shocked probably isn’t the right word. I was disgusted.

0.30% in 2023 might as well have been 0.0%… from a bank that had been a leader in online savings accounts that I had banked with for 17 years.

What the heck happened?

Capital One, unbeknownst to me, switched my savings from its high interest platform into an account with the much lower interest rate. At the same time, Capital One was still advertising and offering top rates to new customers.

It wasn’t just me. I am one of the many people that Capital One switched out of high interest rate savings accounts into inferior products. These deceptive practices are now the subject of a federal lawsuit brought by the Consumer Federal Protection Bureau.

When I discovered the sneaky switch, I immediately closed all of my accounts and transferred my money to a new bank. I no longer have a Capital One credit card, either.

Capital One, of course, denies the allegations. Maybe they did nothing legally wrong. For me, I saw the deceit in my own statement and the damage was already done.

Why do stories like Capital One’s alleged deceptive practices matter?

It wasn’t the amount of interest I lost out on that bothered me.

This all happened during that time we talked about when my wife and I were aggressively acquiring properties, so we never had a lot of money sitting in savings for an extended period.

For me, it was about the principle. I don’t want to have any relationship with a bank that would do that to its customers, especially long-term customers like me.

That said, I have to admit that writing this post is reopening old wounds.

I did a quick search in my inbox and found a Capital One statement from December 2022 showing a 0.30% interest rate. That means Capital One had deceived me for at least a year before I caught on.

Now I’m getting hot all over again.

“Take a deep breath,” as my son says to his sister when she’s crying.

On the bright side, this experience was a good reminder of how important it is to look at our accounts regularly.

You could also say it’s a good reminder to regularly think and talk about money so something like this doesn’t happen to you.

No matter how much you trust your bank, keep an eye on your accounts.

Americans are spending more on credit cards and carrying bigger balances.

The Wall Street Journal reported this week that Americans are spending more on credit cards and carrying higher balances month to month.

As The WSJ notes, “Bigger credit-card balances mean people are paying more in interest charges, with rates hovering around their highest levels on records. The average credit-card rate was around 21% late last year, according to data from the Federal Reserve.”

These findings are consistent with a recently published study by The Federal Reserve reporting that consumers are using credit cards more often when compared to cash transactions.

Higher credit card balances combined with more frequent credit card use is a problematic combination.

I am no stranger to carrying a credit-card balance. These reports don’t come as a shock to me. Especially in an era where the cost of living is rising so sharply everywhere.

It’s because I’ve personally felt the negative emotions tied to credit card debt that I never like seeing stories like these.

I understand that some people don’t have options besides using credit cards because of life circumstances. I’m hopeful that through money wellness education, more and more people will realize that they do have options.

I’m not saying it’s easy. But, there is a path forward. You can create a money plan that is consistent with your life goals and does not include high-interest debt.

How much money should you have saved for retirement by age 50?

Investopedia recently summarized reports from three major 401(k) providers on the average balances people have in their 401(k) plans. These articles can be helpful to measure your progress. Just be careful on what you take away from them.

We all have different goals in retirement. That could mean when we hope to retire. Or, how we plan to spend our money in retirement.

Plus, some of us have different investments, such as real estate holdings, that would not be reflected in studies like this.

For many of the same reasons that I’m not a fan of a rigid 50-30-20 budget framework, I don’t find these types of comparisons too helpful. I prefer we strive for personal improvement, like fitness instructors have been teaching us for years.

Let’s look at one of the potential issues with articles like these. Empower reports that the average balance for someone in their 50’s is $592,285, and the median balance is $252,850.

That’s a big difference. Let’s refer back to high school math (ok fine, Google) for a refresher on what “average” and “median” are.

The average balance is calculated by adding up everyone’s account balance and dividing by the total number of people. The median reflects the middle account balance if we list everyone’s balance from smallest to largest.

Using Empower’s data, the average balance seems skewed on the high side. This is likely because of a subset of high net worth individuals driving the average up. The median value is probably a more informative number for the average American.

Let’s put this all another way. Whether my colleague has $50,000 saved or $500,000 saved should not impact my retirement planning. The amount he has saved doesn’t matter to me.

Instead of talking about his numbers, I can still benefit from talking to him about his goals. I should be talking to him about his money mindset, like what motivates him to save in the first place.

Am I saving too little or too much for retirement?

Since 2011, I’ve represented individuals with mesothelioma, a terminal cancer caused by exposure to asbestos. Most of my clients are in their 70’s and don’t get the chance to enjoy their retirements because of their mesothelioma.

My perspective on work, family, and life has undoubtedly been shaped by visiting with my clients in their homes and talking about their life experiences. I am forever grateful for what I have learned in these moments.

When I see stories like this one from The WSJ about the financial regrets of people over age 80, I pay attention. I read these stories about people who are living longer than they expected and can’t help but think of my clients with mesothelioma who won’t have that same experience.

I also think about Bill Perkins and his excellent book, Die with Zero. You can read more about Perkins and his philosophy that many of us are saving too much for retirement on the Die with Zero website.

For my own money decisions, I’m still sorting out these three competing realities:
1. Some people, like my mesothelioma clients, don’t get to enjoy a full retirement;
2. Others outlive their money in retirement; and
3. Still other people saved more than they’ll ever spend in retirement.
My main takeaway is that I want to make choices today that allow me to spend more time with the people I love and more time doing the work that I love. However those three realities play out in my own life, I’m confident I won’t regret living this way.

This mindset is what led me to start Think and Talk Money. I enjoy helping people think through these types of choices.

Please help me spread the word about Think and Talk Money so more of us can consider these important concepts.
January 31, 2025
How to Best Optimize your Savings
In our last post, we talked about the importance of fueling your savings and how savings differ from investments.

Here, we’ll discuss how to best optimize your savings so you are protected in times of emergency and can achieve your short-term goals.

We’ll also talk about whether you should automating your savings, and if it makes sense to start saving while you’re paying off debt.

Let’s begin with the most important savings account we all need: an emergency savings account.

The first savings account you need is an emergency savings account.

The first savings account you need is commonly referred to as an emergency savings account. This is your ultimate security blanket for whatever life throws at you.

For example, if you lose your source of income, your emergency savings will keep you afloat until you find a new source of income. The idea is to use your savings so you don’t have to pull from your long-term investments.

Your emergency savings is not just for when you lose your job. Your emergency savings will also protect you in times of emergency (brilliant, huh?), like unexpected medical bills or expensive home repairs.

The idea remains the same: instead of pulling from your investments, you will have cash available in your savings account to cover your needs.

Aim for 3-6 months of Now Money saved for emergencies.

Aim for building up 3-6 months of your Now Money saved in a dedicated emergency savings account.

Why aim for saving enough Now Money instead of saving enough to cover your total Budget After Thinking?

Because Now Money represents the consistent, reoccurring expenses that you need to pay every month to take care of yourself and your family. Since you will only be using this money in times of emergency, you can, and should, forego some of life’s luxuries until you get back on track.

The same is true for fueling your Later Money goals. Take a pause until you sort out whatever it was that caused you to spend your emergency savings in the first place.

Come on Matt, should I save 3 or 6 months of Now Money?

It depends! Personal finance is personal.

If you have no dependents, 3 months worth of savings is a good benchmark. In most circumstances, that should give you enough time to get back on your feet.

If you have dependents, that means you are responsible for additional humans, sometimes tiny humans. These humans are counting on you for support. Targeting 6 months of savings is a good idea so you can continue to provide for them.

You should also consider your source and consistency of income when deciding how much you’ll need saved for emergencies. If you are not paid regularly throughout the year, you should target a larger amount in your emergency savings to cover those longer gaps between pay.

When you are part of a dual-income household, you may be able to get away with less emergency savings since two people are contributing to the monthly bills. If one of you suffers a sudden job loss, the other person’s income can still be used to keep the household afloat.

One last thing: Building up to 3-6 months of emergency savings will take time. Don’t pressure yourself to accomplish this goal overnight. Each month, you can add to this account until you reach your target. Any and all progress is good progress.

Do not rely on credit cards for emergencies.

Unfortunately, many of us rely on credit cards to pay our bills. When we do this, our debt grows and cancels out any gains we’re making through our savings and investments.

Just as you shouldn’t pull from your investments in times of emergency, you should not rely on credit cards to protect you.

Savings is also for more fun, short-term goals.

We just talked about the first savings account you need, an emergency savings account. I agree with you that thinking about emergency savings is not exactly fun. Job loss… medical treatment… car repairs. Yup, not fun.

Let’s talk about more fun stuff. Savings is also for short-term goals, whatever those goals are for you. This is your Later Money in action fueling your life goals.

Remember, we said emergency savings was your first account. Not your only account.

Once you’ve identified your specific Later Money goals, it’s a good idea to create separate savings accounts, or buckets, for each goal. This will help you visualize the progress you’re making towards each goal. It will also help you not use your savings that was intended for one goal on something else.

What kind of savings buckets might you have? Before I got married, I had separate savings accounts for:
- Engagement ring
- Wedding
- Down payment on a home
- Travel
- Cubs Season Tickets
- Emergency Savings
- Budget Busters
I had a specific amount in mind for each category and would make transfers each month into those buckets. Not each account received an equal amount.

For example, I knew how much I needed for Cubs tickets, usually payable at the end of the year, and divided that amount by 12 months.

The amount needed to purchase something like an engagement ring was more… fluid.

My students in recent years have suggested other savings buckets, as well. We’ve talked in class about saving for a car, saving for holiday presents, and saving for kids’ schooling.

Whatever your savings goals are, using separate buckets will help you stay on track.

Setting up separate savings accounts online is easy.

It’s easy to set up separate savings accounts online with most major banks. Once you create your initial account, you can create sub-accounts that will appear on the same landing page as your primary account. Each account will have an individual account number, and you can label them however you like.

When you do set up your savings accounts, it’s a good idea to have a different bank for your primary checking account and your savings accounts. This will help you resist the temptation to spend your savings. Out of sight, out of mind, and all that.

I’ll soon have a post on my favorite online savings accounts. There are a number of them out there that offer good interest rates and a solid user experience.

Automating your savings is a good idea, but I don’t personally automate.

I automate a lot of my money tasks, like setting up automatic bill payment for every bill that comes to mind. This includes my mortgages. I also have automatic deductions taken from my paycheck for my 401k plan.

Automating your money is a very good idea. In The Automatic Millionaire, David Bach explains how the single step of automating your finances can help you live rich and retire richer. You can learn more about Bach’s philosophy on his website.

I don’t disagree with Bach and implement many of his strategies in my own life. The Automatic Millionaire is definitely worth a read.

Still, I don’t automate my savings transfers.

I automated my savings transfers in the past and learned that I prefer the emotional high of manually making savings transfers.

Money is emotional. This is just one example.

I like how it makes me feel to go into my checking account and transfer that month’s Later Money to my savings. It makes me feel good to see the pop up on my computer: “Your transfer is complete!”

I like that feeling so much that I’m not worried about skipping a savings transfer. That moment gives me a lot of joy.

Whether you choose to automate or manually transfer into your savings account, please make sure the dollars are not disappearing and are actually going towards your most important goals.

If you have debt, should you still build up your emergency savings?

During my money wellness class, I usually get a question like this:

“Should I build up my savings while I’m paying off student loans or other debt?”

My recommendation is different depending on the type of debt. That’s because interest rates are generally much lower for student loans or mortgages than for credit card debt.

In a future post, we’ll talk about what is commonly referred to as “good debt” and “bad debt.” Student loans and mortgages, in my opinion, represent good debt. Credit card debt is almost universally considered bad debt.

Typically, good debt has much lower interest rates than bad debt. You might be paying 20% or more on your credit cards and closer to 8% on your student loans (and probably even lower on your mortgage).

If you have high interest credit card debt, pay that off first before you prioritize savings. It doesn’t make any sense to pay 20% interest to a credit card company just so you can earn 4% interest in a savings account.

On the other hand, if you have student loan debt or mortgage debt, I recommend you start building your emergency savings account while you’re simultaneously paying down that debt.

Yes, paying 8% interest is mathematically worse than earning 4% in savings account. If you are driven strictly by the math, you should pay off that 8% debt before you start saving in a 4% interest account.

Never forget that money is emotional.

But, money is emotional. I think it’s worth paying the interest on your good debt so you can experience your savings growing.

Plus, if you do have an emergency that requires you to tap into your savings, you won’t have to rely on credit cards and pay the much higher penalty.

Keep in mind that if you go this route, you still need to make your required debt payments. We are only talking about extra money that you have available that could go towards additional debt payments or to savings.

The temptation to ignore your savings is real, especially when you have debt.

The temptation will be there to pay off whatever debt you have as quickly as possible and forego saving altogether.

I still feel this temptation every month. Should I contribute my next dollar to building up savings or paying down mortgages?

For most of the past year, I was laser focused on paying down mortgage debt. More recently, I’ve reassessed and have been working to build up my savings.

Having talked it over with my wife, we want to make sure we’re protected should something unexpected happen, even if that means temporarily slowing down our progress on our mortgages.

This way, we won’t end up in a cycle of using credit cards to cover us in times of need.

If you’re faced with a similar decision, know that you’re already ahead of the game by even thinking about how to use your Later Money to fuel your goals.

Whether you are paying down debt or increasing your savings, you are heading in the right direction.

Please drop a comment below if you have any additional tips to share!

Do you prefer automatic savings or manual transfers?

What are some of your favorite savings buckets you’ve used?
January 29, 2025
Why You Need to Fuel Your Savings
Would it surprise anyone to learn that most Americans are not satisfied with the amount they have saved?

Let’s take look at some of the key findings in the recently published Yahoo Finance/Marist Poll 2025 National Survey on the State of Savings:
- Only 10% of households are completely satisfied with the amount of money they have saved.
- Only 20% reported saving more in 2024 than in 2023.
These numbers are scary. You can read more here. The scariest part for me is that these results aren’t surprising at all. They closely mirror the stats I first showed my students back in 2021 when discussing savings.

Why are these numbers so scary?

In the abstract, I can understand why these stats may not seem too scary to you.

Let’s look at another stat that illustrates what happens when we don’t have adequate savings:
- About 33% of households would not be able to pay their bills or expenses for one month, if faced with a sudden loss of income.
- This number rises to 38% of Gen Z and 41% of Millennials who report they could not pay their bills for even a month.
What do these numbers mean?

1 in 3 people currently reading this post, in the comfort of their homes they have worked so hard for, would not be able to afford those homes for even one month if they suddenly lost their jobs. It’s worse for Gen Z and Millennials.

Maybe you’re on the train commuting to work while reading this. How many people are in the train car with you? 30 or so? Pick out 10 passengers, really look at their faces.

They’re just like you, typically good people, working a job to provide for themselves and their families. If these 10 people suddenly lost their jobs, they wouldn’t be able to pay their bills next month.

Count me in the group of people not completely satisfied with their savings.

If you read these stats and are honestly not worried about your savings, you are in the minority and are doing a tremendous job managing your personal finances.

Keep up the good work and please let us know in the comments below what strategies are working for you.

On the other hand, if you’re being honest with yourself, you’re most likely in the 90% of people that are not completely satisfied with their savings.

Count me in this group.

From 2017 to 2024, my wife and I prioritized using all of our available money to acquire real estate. The downside was limited funds available for savings.

We now have work to do to build our savings back up. Instead of presently shopping for investment properties, we are now focused on paying down mortgage debt and increasing our savings.

Most people attribute their low savings to rising cost of living.

What is the most common explanation given by people that have so little saved? Rising cost of living across the nation:
- Nearly 66% of Americans believe that the cost of living for the average family is not affordable in their area.
Millennials and Gen X are the most worried about the cost of living, with more than 70% of each group feeling unprepared. 64% of Gen Z and 59% of Baby Boomers likewise feel unprepared.

Cost of living includes necessary expenses like housing, food, transportation, and healthcare. In other words, Now Money.

There are any number of reasons we can point to that are combining to drive up the cost of living, like limited housing inventory, higher interest rates, and more expensive groceries.

Whatever the reason for why costs are going up, I’m more interested in adapting and thriving in the current environment rather than making excuses.

So, what exactly can we do to improve our savings?

We can first eat Italian beef while working on our money mindset.

Then, we can create a Budget After Thinking that fuels our goals.

The next part, figuring out what to do with that money you generated for savings, is much easier. Before we talk about specific savings tips, let’s make sure we’re on the same page as to what we are trying to accomplish through saving.

Savings are for short term protection and short term goals.

When we talk about savings, what exactly are we talking about anyways?

According to Merriam-Webster, saving means “the preservation from danger or destruction: deliverance.”

Uhh, that’s intense.

Scrolls down…

Savings (pleural) means “the excess of income over consumption expenditures.” Much better.

That’s about as simple as it gets. Savings is the money you have left over that you didn’t otherwise spend. In Think and Talk Money vocabulary, it’s your Later Money.

In The Richest Man in Babylon, George Clason described savings with one of my favorite quotes in all of personal finance:

“A part of all you earn is yours to keep.”

Translation: you worked hard to earn that money. You should think about keeping some of it.

Actively saving money to fuel your Later Money goals is a non-negotiable step towards financial independence.

You can use your savings to protect yourself and your family in times of need. You can also use your savings for short-term goals, like paying for a wedding or a downpayment on a house.

Think of it this way, your savings make it so all those hours you spend on the job- the time away from your family or your passions- was not for nothing.

What is the difference between saving and investing?

Keep in mind that savings is different from investments, although both count towards your Later Money.

Savings is for (1) short term protection and (2) short term fuel for your life goals. Your savings is your security blanket for the here and now so you don’t have to take away from your wealth-generating investments at the wrong time.

Keep this money in a dedicated savings account (or accounts) so the money is readily available when you need it.

There is very little, if any risk, involved with saving money. That’s because reputable banks in most countries carry deposit insurance to protect your money. In the United States, deposits are protected up to $250,000 by The FDIC.

So, how are savings different from investments?

Investments are assets that you purchase with the goal of making a profit over time. That might be through the stock market, real estate, or any number of other options. Think of investing as the best way to supercharge your wealth over the long term.

Investing is a major component of overall money wellness, but investing comes with risk. As the saying goes, “you don’t get something for nothing.”

Because you can lose your money in any investment, it’s not a good idea to expect that money will immediately be there when you need it. That’s one reason why you should have savings distinct from your investments.

One way to counteract investment risk is to invest for the long-term, so you don’t want to interrupt those investments for short-term goals. This is another reason why we need savings in the short term.

One final point about saving vs. investing. There is a point when you will have enough saved in the bank that you can solely focus on growing your investments. This is a very comfortable place to be and where I am currently focused on returning.

Saving is an essential part of overall money wellness.

To recap, saving money to fuel our Later Money goals is crucial to overall money wellness. Sometimes, we’ll use our savings for protection, like in times of emergency. Other times, we’ll save with a clear goal in mind, like paying for a wedding or a house.

Saving is not the same as investing, although both are important. The reason we save money, rather than invest it, is so that money is readily available when we need it.

In our next post, we’ll discuss what to do with the money we are saving for maximum results. We’ll cover some key strategies for what to do with the money you have generated so your savings align with your overall money goals.

Let me know in the comments below if you’re not completely satisfied with your savings, like me.

Have you taken any steps to join the 10% of Americans who are completely satisfied?
January 27, 2025
Better at Making or Keeping Money?
When people learn that I’ve been teaching money wellness to law students, I usually get a reaction like, “I need that class! I know nothing about investments and the stock market.”

It’s a fair reaction. Investing in the stock market can be complicated. Most of us never learn basic stock market principles, let alone how to manage an investment portfolio.

It’s also a reaction that has always fascinated me. Yes, wanting to learn about investing is important. But, it’s not where money wellness begins.

I often wonder, why do people automatically assume that money wellness means investing? There are so many things that we need to get right before we can focus on investing.

Learning about the stock market wasn’t going to help me when I was struggling with debt. I needed to first figure out how to make better spending choices and get out of debt. I needed to play defense before I could go on offense.

Yes, investing is important.

No, it shouldn’t be the first thing we think of when we hear money wellness.

We’ve hardly mentioned investing so far in this blog.

Have you noticed that so far in the Think and Talk Money blog we have hardly even mentioned the word “invest”?

That’s because in order to invest, we first need available money.

To have available money, we need a budget that actually works.

To have a budget that actually works, we need honest, powerful life goals.

Are you starting to see why we first talk about money mindset? Then we moved on to budgeting?

We will talk about investing once we have a plan to continuously generate money to invest.

We will soon talk about investing. A lot. Don’t worry. In my money wellness class, we discuss in depth the importance of investing to create wealth.

Here at Think and Talk Money, we will also talk extensively about investing, including in the stock market and in my preferred asset class, real estate.

Investing is not as hard as generating money to invest.

For now, our goal is to establish sound habits so we have real money to consistently invest over time. It doesn’t make sense to learn how to invest until we have a strong foundation in place.

I think you’ll also find that investing is really not that hard. If learning how to do it on your own doesn’t sound like something you want to do, there are professionals that can do it for you. Whether it’s a good idea to go that route is something we’ll discuss so you can make an informed decision.

If you do hire a professional to invest your money, you still need to know enough so you can talk to this person.

Plus, this person will likely tell you that your ongoing mission is to generate more cash to fuel investments. That’s what we’re focusing on now.

The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

You could be a terrific investor. If you only have $1,000 to invest a single time, your upside will be limited. If you continuously generate $1,000/month of Later Money to invest, your options (and your wealth) will grow exponentially.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals. I don’t just mean we wouldn’t have had money available to invest, although that is certainly true.

I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business. If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

Maybe that’s not your path. Still, these skills are critical whether you are a consultant, a writer, or a teacher. Would you agree that having money issues and stress at home can distract you from performing your job at the highest level?

How many hours per year do you work to make money?

Lately, when people ask me why I’m so passionate about money wellness, I respond with a question of my own that goes something like this:

“Let’s say we work 2,000 hours per year to make money (40 hours per week, 50 weeks per year).

We won’t even count all the hours we spend getting dressed and commuting to our jobs.

We also will pretend we’re not looking at our emails in the evening and on weekends.

We definitely won’t count the hours we’re staring at the ceiling fan because we can’t sleep.

OK, so that’s 2,000 hours (plus) per year, to make money.

How many hours per year do we think about what to do with that money?”

Let that sink in for a moment.

How many hours do you work every year to make money? 2,000? 3,000? I’m guessing a lot of those hours are stressful.

Now, how many hours do you think about what to do with that money?

Do you spend any hours at all talking about what to do with that money?

This is why I am passionate about money wellness. Most people spend the vast majority of their lives worried about making money and practically no time at all thinking about what to do with that money.

No, I’m not suggesting that you need to think about money for 2,000 hours per year.

What I am suggesting is that even that little bit of time each week spent thinking and talking about money is just as important as the time you spent earning it.

Think and Talk Money is about encouraging each other to make purposeful money choices.

Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

Think and Talk Money is all about actively thinking and talking about money so we can help each other make informed choices with our hard earned money.

Whether you make a lot of money or a little money, it doesn’t matter. What you choose to do with that money is up to. It’s your life.

All I want is for you to make those choices from a position of informed confidence.
One response to “Better at Making or Keeping Money?”
1. Kevin
  
  January 22, 2025
  
  Great insight! The foundation is so important!
  
  Reply
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January 22, 2025
Help a Professor Out: Ask Your Money Questions Here

Think and Talk Money’s motto is “Money Wellness Together.” The more we all talk, the more we all benefit. The best way to keep the conversation going? Ask questions!

I’ve learned through teaching in law schools for the past 15 years that most of us prefer seminars with questions and answers to long lectures. Thanks for all the great questions so far! I’m hoping we can do a Q&A post like this just about every week.

Please keep the questions coming in the comments on any post, by responding to our newsletter, or on Instagram.

In our first Q&A post, we’ll cover my favorite personal finance books, whether you should keep your condo as a rental unit, and the most important question of all: what is Italian beef?

1. Do you have a favorite personal finance book that you would recommend?

What a great question. I always recommend starting with books that focus on money mindset. Like we always talk about, the first step is getting our money mindset in the right place. I would start with:

1. Rich Dad Poor Dad by Robert Kiyosaki. There’s a reason this is the best selling personal finance book of all time. If you read Rich Dad Poor Dad, your entire money mindset will be changed. Kiyosaki brilliantly shares the stories he learned growing up from his Rich Dad (really his best friend’s dad, very successful real estate investor/business owner) and his Poor Dad (his actual dad, highly educated/traditional career path). Using these two role models in his life, he makes a very compelling and easy to follow case that most of us go about life and money all wrong.

Read Rich Dad Poor Dad. It will light a fire under you like no other book I’ve read.

2. Think and Grow Rich by Napoleon Hill. Another longtime classic that will shift your money mindset. I first read this book in college when I learned my friend’s dad offered him $50 if he read this book. $50 to read a book? I’m in.

Originally published in 1937 and recently updated, Think and Grow Rich, will convince you that we can all be successful. Hill studied innovators like Henry Ford and Thomas Edison. In the updated version, you’ll learn about modern figures like Bill Gates and Mary Kay Ash. To translate the title into my own words: Wake up! Use your brain! You can be successful in any walk of life if you just stop sleepwalking through life like everyone else and do something!

Read Think and Grow Rich. You will be motivated to do that thing you’ve been saying you would do, but haven’t yet.

3. The Richest Man in Babylon by George S. Clason. A third classic originally published nearly 100 years ago. Clason wrote a simple collection of fables set in the ancient city of Babylon to illustrate the power of fundamental money habits: earn, save, invest, protect. Through his stories, you’ll see how you can get ahead in life by practicing strong financial wellness habits.

Read The Richest Man in Babylon. You’ll understand the building blocks of a healthy financial life.

4. Your Money or Your Life by Vicki Robin and Joe Dominguez. Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the Financially Independent Retire Early (FIRE) movement. They have a lot to say about the relationship between money, work, and time.

Most of us are doing it all wrong. We chase money at the cost of our precious time. By making good choices about how to earn money- and as importantly what to do with that money- you can get the most out of your money and your life.

Read Your Money or Your Life. You will start to value your time for what it’s really worth.

5. Die with Zero by Bill Perkins. Perkins makes a strong case that many of us are saving too much for retirement. We work too many hours and save more money than we’ll ever need. Instead, we could be using that money during the best years of our lives to create lifelong memories.

Perkins also questions the conventional wisdom of waiting until we die to pass money onto our kids. He suggests helping our kids earlier in life when the money will be more meaningful.

Read Die With Zero. You won’t wait any longer to book that vacation you’ve been putting off for no good reason.

If you have read these books already, but it was some time ago, read them again. I didn’t fully appreciate all the lessons until I was years into my career and knew what it felt like to work for money.

2. $500 Challenge? I could never do that!

In Part 3 of our series on budgeting, I gave you 10 of my favorite tips to help stay on budget. One of the tips involved a game my wife and I play called the “$500 Challenge.”

Part 3: How to Win the Budget Game

If $500 is a nonstarter for you, increase the amount of the game. Whether you play with $750 or $1,000 or more, the point of the game remains the same. If $500 is too much for you, pick a smaller number that works. The amount doesn’t matter. The point is to set a number for yourself that will get you back on track after overspending in the previous month. January is a great time to play the game.

3. When I’m creating my budget categories, does my health club membership count as Now Money or Life Money?

When I said I‘m not a fan of a rigid budgeting framework like 50-30-20, this question illustrates exactly why. Elizabeth Warren popularized 50-30-20 in her book, All Your Worth: The Ultimate Lifetime Money Plan, first published in 2005.

In a 50-30-20 framework, you must choose what category to put your health club membership in. Same with every other borderline expenditure. What if you think working out should be Now Money, but it pushes you over 50%? OK, just move it to Life Money. Wait, now I’m over 30% in my Life Money. Why is this so hard?

Take it from me and my students who have attempted 50-30-20 budgeting, making these choices gets to be very frustrating. What is the point in agonizing over decisions like this?

So, what should you do with your health club membership?

It doesn’t matter! You saw in our really lost boy’s budget that I counted it as Now Money. Today, I’d actually probably count it as Life Money. How’s that for an answer!?

Instead of agonizing, pick a category and leave it there. The whole purpose of our budget is to generate fuel for our Later Money. Whether that fuel comes from adjustments to Now Money or Life Money is irrelevant.

In our Budget After Thinking, we’re not limiting ourselves by rigid frameworks and agonizing over spending categories. We’ve got better things to focus on, like creating more fuel for our dreams.

4. Do I need to actively budget forever?

Nope! I’m going to do a post soon on what I recommend for people that have done the budgeting thing for a while and have a pretty good idea what their spending is. If you’re at that point, and are relatively responsible, you won’t need to track your spending anymore.

Let’s look at a quick example. Say you learned that your Budget After Thinking includes $1,000 of Later Money. That means each month, your top priority is to put that $1,000 of fuel towards your financial goals.

In this plan, you’ll need a “cushion” in your checking account to make it work. In this example, let’s use $5,000 as our cushion. At the end of the month, after you’ve made your Later Money transfers out of your checking account, and you’ve paid all your bills and credit cards, you should have $5,000 left.

If you have less than $5,000 left, compensate the next month by spending less so you get back to $5,000 at the end of month 2. If you’ve way overspent, that’s an indication you are not ready to stop budgeting.

No matter what, don’t short your Later Money. Do the $500 challenge if you need to. If you have more than $5,000 left, transfer the surplus to your savings account so you can use the excess to cover budget busters or top off your checking account if you overspent a little the previous month.

This budgeting process is similar to zero-based budgeting, a concept that’s been around for a long time. I find this method takes almost all of the anxiety out of budgeting. The key is you just have to be disciplined enough that if you have less than $5,000 left at the end of month 1, you course correct in month 2 so you’re back on track.

5. I am thinking about either selling my condo or keeping it as a rental unit. What should I do?

I’m a real estate investor, so my mind always goes first to keeping the condo as a longterm rental unit. Based on the question, it seems this reader is interested in real estate investing, too. If that’s true and your financial situation permits, I would consider keeping the condo as a rental unit.

It could be a great way to see if you like being a landlord without putting time and resources into acquiring a different property. Best case scenario, you hold the condo for many years and it turns out to be a great investment. Worst case scenario, you sell it in a year or two if being a landlord isn’t your thing.

Of course, there are so many factors that go into real estate investing. You need to do your homework first on whether your condo is a plausible rental unit. Leave a comment below or reach out on Instagram if you need some help deciding if your condo might be a good rental unit.

6. What is Italian Beef?

This person, I cannot help.

Fortunately, there’s a current Emmy winning show out there about Chicago and Italian beef!

Thanks for all the questions! Please keep them coming in the comments on any post, by responding to our newsletter, or on Instagram.

January 17, 2025
You will Easily Know and Feel Money Well Spent

Coming up, we’re going to do our first Q&A post where I’ll answer questions from readers. So many good questions have already come in. Please keep them coming! Leave a comment below, subscribe to our newsletter, or find us on Instagram.

One question we already received was so good, I’ve answered it here in a dedicated post. The question came from someone that I love to talk money with. He read the Think and Talk Money Welcome Post where I mentioned that my credit card debt was partially due to having Chicago Cubs season tickets.

He knows that I’m a big Cubs fan and asked me if I would I really trade all those great experiences and memories just to save money.

It’s such a good question because it points to the intersection of money and life. It took me all of two seconds to know and feel the answer was, of course, “No, I would not have given up my Cubs tickets.”

He was absolutely right. If I gave up my tickets in 2010 when I was struggling with debt, I never would have been in the stadium in 2016 with my family for the Cubs’ World Series run. Those are some of the best memories I have.

In hindsight, I would have done some things differently so I could enjoy the experiences without the money worries. Let’s talk about that.

But first, story time.

Our nice friends, Phil and April.

Throughout that World Series run, we sat next to the nicest couple in the world, Phil and April. Phil was a diehard Cubs fan. April was more reserved. Both were smart and very friendly. They were enjoyable people to sit with. We chatted baseball, mostly. Pitching changes. Send the runner. Question the manager. That sort of thing. Completely normal, unremarkable stuff.

Until Game 5.

Game 5 was played on a crisp, October evening. Jackets and beanies weather in Chicago. Phil and April were sitting next to my brother and I, as usual. Mike Napoli was playing first base for Cleveland.

Around the 3rd inning, a jerk four rows in front of us taunted Napoli with a crude, juvenile insult. It was apparent the jerk was doing his part to keep Old Style in business for another year.

Phil was nice…and tough.

Anyway, the rest of our section was none too pleased with the jerk’s shameful display. Nobody was more displeased than Phil, who did what the rest of us were thinking but were too scared to do ourselves. Phil stood up. In so many words, Phil sternly recommended that the jerk knock it off and show some class.

The jerk turned around, aggressively scanning the crowd for the man who had publicly shamed him. The jerk had that unmistakable look in his eye that meant, “Let’s dance.” My brother and I were a bit worried for our nice… and all of a sudden tough…friend, Phil.

April did not look worried. She sat there like nothing strange was happening. Almost like she had seen this movie before.

When the jerk locked eyes with Phil, he immediately saw that Phil was happy to accept the invitation to tango. Well, the jerk was sloppy, but he had enough sense to recognize that he wanted no piece of Phil. He wisely turned back around and sat down quietly.

That was the last we heard from the jerk that night. Our nice, and now confirmed tough friend Phil had restored order.

Phil’s on TV!

On the day of the Cubs’ championship parade, my brother called me excitedly, “Phil’s on TV! Phil’s on TV!” It didn’t register right away who he was talking about. When I turned on the TV, sure enough, there was Phil, our World Series friend. I was so confused. Phil was giving an interview on set with the Cubs announcers. Our nice (and tough) friend, Phil? On TV?

I turned up the volume and listened to Phil talk about his experience watching the Cubs win the World Series. Maybe I was hoping he’d mention his nice friend, Matt. He didn’t.

I still couldn’t figure out why Phil was on TV. Why won’t they just put his name on the screen already!?

It wasn’t until the end of the interview that I learned who Phil was. All I could do was laugh.

Our nice, and confirmed tough, friend Phil is better known as World Wresting Entertainment (WWE) champion and icon, CM Punk.

His wife? WWE champion and bestselling author, AJ Mendez.

Life, huh?

A memory I wouldn’t trade for anything.

As much fun as the World Series was, my favorite Cubs memory actually took place during the 2015 season, the year before they won the World Series. It was during the 7th inning of Game 4 of the NLDS. This was the game where the Cubs knocked the rival St. Louis Cardinals out of the playoffs.

In the 7th inning, with the Cubs up 5-4, Kyle Schwarber hit one of the most epic home runs in Cubs history, landing his moonshot on top of the new right field video board. It was such a feat, the ball is now enshrined where it landed.

The entire stadium was rocking so loud, you could feel the ground shaking beneath your feet. Every fan was jumping up and down, hugging anyone close enough to touch. We were all dancing like nobody was watching. That moment was pure happiness.

I was there with my mom. A lifelong Chicagoan, she too was jumping up and down and high-fiving all the other diehard fans in our section. After the game, we met up with my wife at a restaurant and relived the victory over Champagne.

What does this have to do with money?

What does any of this have to do with money? When I said money was emotional, this is what I meant. I wouldn’t trade that memory with my mom for anything. My brother and I still joke about our nice friends, Phil and April.

These are the types of experiences that I want more of. These memories, and the desire for more like them, continue to motivate me today. I want to be good with money, not so I can stash it in the bank, but so I can use that money to create joy for me and my family.

So, to get back to my friend’s question. Would I really have given up my Cubs tickets? No, absolutely not.

What would I have done differently to keep the tickets but not the worries?

In hindsight, what could I have done differently so my Cubs tickets were not a major source of financial worry?

Even back then, I knew and felt that spending money on Cubs tickets was money well spent. I didn’t need to wait for hindsight to come to that conclusion.

That said, I would have put more thought into solutions to keep the tickets and the experiences without the debt and the shame. I would have looked at expenditures in my Now Money and Life Money buckets that were ripe for adjustment.

Maybe that would have meant giving up something else less meaningful, like my gym membership. Or, I could have looked into a side hustle as a way to earn more money, something we’ll explore at another time.

Whatever the solution was, I would have been more intentional with my decisions so my experiences were not overshadowed by my worries.

Talking money is really just talking life.

This was such a good question to illustrate a foundational concept of Think and Talk Money. Yes, we discuss money. But, we’re really talking about our lives and our experiences. Money is just a tool to help us.

And before you get cynical on me, of course money is not required for good experiences. That’s not the point. What I’m suggesting is that if you’re spending most of your time each week at your job, like most of us do, shouldn’t we think about the money we earn so we can maximize experiences like I had with my mom?

Think and Talk Money is all about awakening that thought process so we can use the tool of money to fuel meaningful lives. Would you use that tool to get you Cubs tickets? Or, do you prefer trips to Disney World? What if money is just the currency that you trade to get your time back, so you can do more of what you want with who you want?

Whatever it is that you’re after in life, thinking and talking about money will help get you there.

Keep the questions coming!

January 15, 2025

How to Budget with a Real Life, Really Lost, Boy

In Part 1 of our series on budgeting, we learned that the art of budgeting is having a plan for your next dollar before you earn it. That way, you avoid having disappearing dollars. It’s not a good feeling to work hard all month and then realize you have nothing to show for it.

We also learned the three steps to get started with a realistic budget based off your current personal situation:

Step 1: Track your spending for at least 3 months.
Step 2: Separate your spending into 3 main categories.
Step 3: Make adjustments so your spending better aligns with your true motivations and desires in life.

Here, in Part 2 of our series on budgeting, we’ll use a real life example to work through the budgeting process together. Through this example, you’ll see how even seemingly minor adjustments can make a big impact to your budget.

In Part 3, we’ll take a deep dive into my top 10 strategies for making thoughtful adjustments to our budgets so we can add more fuel to our financial and life goals.

Before we get ahead of ourselves, let’s meet a real life, really lost, boy.

Learning from a real life, really lost, boy.

In today’s budgeting example, we’ll look at real numbers from a real life, really lost, boy: 26-year-old Me. Remember when I told you I started a money journal in 2010? The dollar amounts below are what my actual income and spending looked like back then, adjusted for today’s dollars and rounded for easier math.

For some context, I was 26-years-old, living by myself in Chicago (no dependents, no pets), and working as a slasher. Not a joke, that was my actual job title. I worked for a judge with the Appellate Court of Illinois, and as the junior member of the team, my responsibilities included lawyer duties and secretarial duties. I was a judicial law clerk “slash” secretary. Hence, slasher. Lawyers are funny, huh?

In today’s dollars, I earned an annual salary of $90,000.00. That means I earned $7,500.00 per month. We did not have bonuses at the courthouse, so the $90,000.00 salary was my full compensation.

How to benefit from this budgeting example.

The benefit of going through an example like this is not to compare your situation to mine. Your income might be much higher or much lower. Same with your expenses. Instead of the numbers, focus on the thought process so you can start to think about adjustments that suit your current life.

Below, you’ll see charts showing that I completed each of our three budgeting steps:

Step 1: I tracked my spending for 3 months and reflected the average monthly amount for each expenditure in the column labeled “Baseline Budget.”
Step 2: I created a separate chart for each of the three main categories: Now Money, Life Money, and Later Money.
Step 3: I made thoughtful adjustments to better align my spending with my true motivations in life. I illustrated my decisions in the third column labeled “Budget After Thinking.”

Now Money

Now Money is what you need to pay for basic life expenses. These are expenses that you can’t avoid and should be relatively fixed each month. If you have expenses for kids, pets, and other fixed life expenses, be sure to include them in your Now Money category.

Now Money	Baseline Budget	Budget After Thinking
Apartment rent	$2,200	$2,200
Renter’s Insurance	$20	$20
Parking spot	$430	$0
Gas for car	$40	$40
Car Insurance	$50	$30
Car Maintenance	$150	$150
Utilities	$120	$120
Internet	$60	$30
Cell Phone	$55	$35
Groceries	$300	$240
Personal upkeep(wardrobe, haircuts, etc.)	$100	$75
Gym Membership	$360	$360
Budget Busters	$300	$300
Now Money Total	$4,185	$3,600

What I learned tracking Now Money.

Now Money is pretty easy to track. There is not a whole lot of variance from month to month.

You’ll notice immediately that I had one major expenditure that needed immediate adjustment. That parking spot for $430? Definitely did not need that. I lived 2 miles from work in one of the best cities for public transportation in the country. It was frustrating at times to look for street parking, but I didn’t use my car enough to justify the cost of a parking spot.

The other adjustments resulted in more minor savings, but don’t ignore these. Each adjustment took relatively no effort to make, just a little bit of thought beforehand. When I say relatively no effort, I mean three phone calls and three reductions for car insurance, internet, and cell phone. That’s $70 saved per month, or $840 saved per year, for about 30 minutes of effort.

Otherwise, I decided to show a bit more restraint when grocery shopping and found a cheaper place to get my haircut.

All told, I reduced my Now Money Budget After Thinking by $585 per month with a little bit of thought and hardly any effort. That’s $7,020 per year of fuel for my Later Money.

Life Money

Two happy girlfriends looking on the shopwindow while standing with shopping bags near the mall because they created a budget with think and talk money

Life Money is what you spend every month on things and experiences in life that you love.

Life Money	Baseline Budget	Budget After Thinking
Social Life (dining out, concerts, ball games, etc.)	$800	$700
Purchases (books, fun clothes, gifts, etc.)	$200	$150
Travel	$500/mo ($6,000/yr)	$400
Cubs Season Tickets	$400/mo ($4,800/yr)	$400
Budget Busters	$200	$200
Life Money Total	$2,100	$1,850

What I learned tracking Life Money.

When you’re reviewing your Life Money expenses, don’t be overly aggressive in cutting here. These are the things and experiences that make your life enjoyable. Even modest adjustments can make a big difference in the long run.

In Part 3 of our series on budgeting, I’ll show you my favorite strategies for adjusting your Life Money without sacrificing the things and experiences you love.

As we saw with Now Money, with some thought and very little effort, I reduced my Life Money Budget After Thinking by $250 per month. That’s another $3,000 of fuel for my Later Money.

Some bonus tips for tracking Life Money

Life Money is the most annoying category to accurately track. These expenses vary month-to-month. You may buy concert tickets or have a trip planned some months, but not every month. So, how do we get an accurate picture of our Life Money?

This is why I recommend you track your spending for at least three months. You’ll get a more accurate picture because you can average your Life Money spending over those 3 months and balance out any inconsistencies. Of course, if you have the patience to track your spending for even longer, you’ll get an even more accurate picture.

Fortunately, it is easier to track our spending today with the availability of apps and online banking platforms that can automatically track your spending. We’ll review some of these tracking options in a future post.

Keep it simple when tracking your Life Money.

I highly recommend you keep it simple when tracking your Life Money. Many of my students give up on budgeting because they make this category more complicated than it needs to be. I really struggled with this at first because I was so concerned about doing it right.

What I learned was that it doesn’t matter. If you go to happy hour with friends, don’t agonize over whether that goes into your “Dining Out” category or your “Drinks” category? It doesn’t matter. Make it easy on yourself. Have one category called “Social Life” and move on.

Don’t forget that the point of budgeting is to learn your current habits so that you can make thoughtful adjustments. Don’t let yourself become so obsessed with the details that you get stressed and give up on budgeting.

Break down large, annual expenses on a monthly basis.

One last tip, when you have large expenses, like season tickets or a big vacation, it’s helpful to break down those expenses on a monthly basis. That way, you can see how much those individual purchases are impacting your overall monthly goals.

I’m not suggesting you actually pay for that trip over 12 months (like on a credit card), or that you can only spend that much on travel in a certain month. Think of it this way: you likely will not take a trip every month of the year.

Using my Budget After Thinking figures, let’s say I did not take a trip in January, February or March. That would mean that for my planned April trip, I now have $1,600 available that I can use, assuming you didn’t let those dollars disappear. In Part 3, we’ll talk about what to do with the money you didn’t spend in the first three months to make sure they don’t disappear when April rolls around.

Later Money

happy family mother father and children dancing at home in their home they bought by budgeting with think and talk money.

Later Money is what you are saving, investing, or using to pay off debt. This is the fuel for your most important goals.

Later Money	Baseline Budget	Budget After Thinking
Student Loans	$1,100	$1,100
Credit Card Debt	$150	$900
Savings	$0	$50
Pretax Retirement (401k)	$300*	$300*
Other Investments	$0	$0
Total Later Money	$1,250	$2,050

*This was pretax money to my employer’s retirement plan. For budgeting purposes, it’s easier not to count the amount here.

What I learned tracking Later Money.

This is where all your efforts in tracking your spending and making thoughtful adjustments starts to pay off, IF you have a plan for your next dollar before you earn it.

In my baseline budget, I was very good about paying my student loan debt in full every month. I knew enough not to mess with student loans. The consequence was my credit card bills were the last to get paid each month. This usually meant only paying the required minimum since I had run out of money by this point. It also meant no money for savings or investments.

In my Later Money Budget After Thinking, because of the thoughtful choices I made with my Now Money and Life Money, I created $800 of fuel.

With that fuel, I had committed myself to paying off my credit card debt as quickly as possible. I also wanted to start the habit of saving each month. So, I added $750 of fuel to my credit card bills and $50 of fuel to my savings. I stayed true to my plan and put that money to work. Otherwise, what was the point of budgeting?

Some bonus tips for tracking Later Money.

When I run through this exercise with my students, I usually get a question along the lines of, “I’m aiming to save 20% of my income each month. Should I count the pretax money I’m saving for retirement towards that 20%?”

It’s a sneaky question. Think about it: the rest of your budget relates to your take-home paycheck, meaning your after-tax money that hits your checking account. Your retirement savings are typically withdrawn from your paycheck before taxes and before you ever see the money.

How to account for your pretax retirement savings can be another one of those tricky areas when you start budgeting. In my example, you may have noticed that I contributed $300 of pretax money through my employer’s retirement plan, but I did not count that money in my budget calculations.

Should you count that money if you’re aiming to save a certain percentage each month? Setting aside that this question demonstrates how a standardized framework, like 50-30-20, can be very confusing…

Yes! Give yourself credit where credit is due! Contributing to your retirement plan is a good choice. If you are aiming to save 5% or 10% or 20% each month in Later Money, count your pretax money towards that goal.

Make budgeting as easy as possible for yourself.

That said, I want to encourage you to make budgeting as easy as possible for yourself so you stick with it. In my example, I excluded the $300 pretax retirement savings because I am creating a plan for the $7,500.00 that hit my checking account each month. These are the dollars in jeopardy of disappearing.

The entire point of your budget is to create a plan for your next dollar before you earn it. You already wisely chose to save your pretax dollars by enrolling in your employer’s retirement plan. Those dollars are already accounted for and working for you. They are not disappearing dollars. You did your job!

Like in my example above, you can exclude the amount you’re saving for retirement in pretax dollars from your budget calculations. Feel good knowing that you’re saving that money. It’s icing on the cake. No need to worry about it when budgeting.

The real life, really lost, boy was starting to figure it out.

Let’s look at the complete picture before and after I started the budgeting process:

	Baseline Budget	Budget After Thinking
Now Money	$4,185	$3,600
Life Money	$2,100	$1,850
Later Money	$1,250	$2,050
Total	$7,535*	$7,500

Income of $7,500

With some thought and relatively little effort, I was able to stop the disappearing dollars and start making progress towards my ultimate life goals.

In my baseline budget, I was spending more than I earned each month. That meant I had no money to pay my credit card bills, which kept getting bigger because I kept spending. In my Budget After Thinking, I broke my habit of living above my means and generated $9,600 of fuel in one year for my Later Money goals.

Taking these first steps may seem like minor steps on the way to financial independence, but they were the most important steps I ever took on my personal financial journey.

The real life, really lost, boy was starting to figure it out. The spark was lit. There was no turning back.

January 11, 2025

How to Make a Budget After Thinking
In Part 1 of our series on budgeting, we’re going to learn that the art of budgeting is having a plan for your next dollar before you earn it. That way, you avoid having disappearing dollars.

Here, we’ll learn how to create our baseline budget based off of our current personal situation. Wherever you currently are in life, you can then make adjustments to your spending based on what you truly want.

In Part 2 of our series on budgeting, we’ll use a real life example to work through the budgeting process together. Through this example, you’ll see how even seemingly minor adjustments can make a big impact to your budget.

In Part 3, we’ll take a deep dive into my top 10 strategies for making thoughtful adjustments to our budgets so we can add more fuel to our financial and life goals.

In the end, I’ll show you how to use the information you’ve learned about yourself to create a lasting money plan that does not require you to track every penny. What I mean is that if you can practice these budgeting tips for just a little while, you actually won’t need to budget anymore. That’s when thinking and talking about money starts to be a lot of fun.

Let’s start with a question:

What would you do right now with $20,000.00?

What would you do right now with a $20,000.00 bonus that was unexpectedly deposited into your checking account?

No strings attached. It’s your money to do anything with.

Answering this question should be fun. It’s a free $20,000.00!

But, my guess is that if you thought seriously about it, you didn’t have much fun at all.

Many of us likely struggled with what to do. We want to do the right thing, but we don’t know what that right thing is. Should we pay down debt? Should we invest? Take a vacation? Do nothing?

Do you have a plan for where your next dollar is going?

The reason we struggle with decisions like this is because most of us don’t have a plan for where our next dollar is going. What ends up happening is we do nothing. Our money hits our checking account, we spend it on this or that, and pretty soon that money has disappeared. We haven’t used the money to advance any of our priorities. It’s just gone.

To me, this is one of the most important money mistakes that we need to fix right away. Having a plan for our money, before we earn it, is essential if we want to reach our goals. With a plan, we can eliminate the disappearing dollars with confidence that our money is being used to serve our purposes.

Budgeting is about having a plan ahead of time where your next dollar is going.

And, that leads us to budgeting. The word “budget” is synonymous with “plan”. The art of budgeting is to know what you want to do with your money before it hits your checking account. Otherwise, it’s too late. Those dollars will disappear.

I teach my students that to create a budget, you need to first study your own personal situation to figure out where your dollars are currently going. Then, you can figure out a plan for how to use your next dollar before you earn it. This applies not just to bonuses or other unexpected dollars, it applies to every dollar you earn.

When you put the time in to study your own habits, you can then create a realistic budget. When you have a realistic budget, you will have confidence that your dollars are working for you.

Some dollars will be used to pay your ordinary life expenses, some dollars will be used for all the things in life you love, and some dollars will go to your financial goals.

That’s all there is to it.

Let’s take a look at three steps to take when first creating a budget.

Step 1: Track your spending for at least 3 months.

I recommend everyone, regardless of where you are in life, start with this first step of tracking your spending for at least three months. Without knowing where your money is currently going, you won’t be able to think about adjustments.

I won’t lie to you. This step can be hard and you probably won’t like it. This is the step that makes people think budgeting is a nasty word. I get it and don’t blame you for having that reaction.

Still, there’s no getting around this first step. Remember, you don’t have to budget forever, just long enough to learn your own behaviors towards money.

Please know that many of us struggle with this first step. You might not like what you learn by tracking your spending. When I first started budgeting, I learned that I was $20,000.00 in debt and was spending way more than I earned. That wasn’t fun, but I’m happy that I put in the effort to find my blindspots and make adjustments.

I often think to myself, “Where would I be today if I didn’t go through this process 15 years ago? How much further into debt would I have fallen?”

Talk to your people as you go through the budgeting process.

One last thing, budgeting is one of those areas where it can really help to talk with our people along the way for support and encouragement. You don’t have to budget in secret. We’re all in this together. Put the mental energy into this step, so you can stop wasting mental energy worrying about money and start getting energized thinking about money.

In Part 2 of our budgeting series, we’ll talk about the different ways you can track your spending. I’ve used apps, spreadsheets, and even the notes function on my phone. The good news is, tracking your spending is easier today than it’s ever been.

Regardless of how you track your spending, be honest with yourself. If you intentionally or mistakenly leave out certain expenditures, you won’t learn where your money is actually going. A budget, which is just a plan, is only as good as the data it’s built off of. Be honest about your data.

One quick note: Budgets are usually done monthly, so you’ll want to create a separate accounting for each month you tracked. The reason we track three months of spending is so you’ll be able to identify any patterns or inconsistencies in your spending from month-to-month. This helps ensure you’re making decisions based off the best data possible.

Step 2: Separate your spending into three three main categories.

Great work completing the first step! That wasn’t easy, but you did it.

Now that you have tracked your spending for three months, you can assign each expense into separate categories. Most personal finance experts agree, though we have different names for each category, that you should divide your money into three main buckets. I refer to these buckets as:
1. Now Money
2. Life Money
3. Later Money
1. Now Money

Now Money is what you need to pay for basic life expenses. These expenses include housing, transportation, groceries, utilities (like internet and electricity), household goods (like toilet paper), and insurance. These are expenses that you can’t avoid and should be relatively fixed each month.

2. Life Money

Life Money is what you are going to spend every month on things and experiences in life that you love. This bucket includes dining out, concerts, vacations, subscriptions, gifts, and anything else that brings you joy.

We can’t be afraid to spend this money. This bucket is usually what makes life fun and exciting. The key is to think and talk so you are spending this money consistently on things that matter to you.

3. Later Money

Later Money is what you are saving, investing, or using to pay off debt. This bucket includes long term goals, such as retirement plan contributions (like a 401k or Roth IRA), college savings for your kids (like a 529 plan), emergency savings and paying off student loan or credit card debt. This bucket also includes any shorter term goals, like saving for a wedding or a downpayment for a house.

Most fun of all, this bucket includes any investments you make to more quickly grow your wealth, like investing in real estate or the stock market.

You’ve probably guessed it already. Later Money is the key category that fuels your ultimate life goals, like financial independence. The more you fuel this category, the faster you can reach your goals.

Don’t worry about assigning a percentage to each category.

I have intentionally not recommended target amounts or percentages to allocate to each of your three categories. The reason is because of what I’ve learned from my students over the years. I’ll lay out my full reasoning in a separate post.

The short version is that in my experience working with law students, assigning target percentages for each category is counterproductive. When I used to teach my students to aim for certain percentages in each category, I could tell that they would get discouraged as soon as I put the numbers on the slideshow. I completely understand why.

Each of us is starting in a different place. If you are currently spending 80% of your monthly income on Now Money, it’s not helpful to have someone tell you to create a budget that automatically drops that level to 50%. My students would tune me out as soon as I put those numbers on the board.

Now, I teach my students to think and talk about their current personal realities and aim for steady and lasting improvements. I want my students to create a plan that will last, not an unrealistic plan that they give up on after a few months.

So, whatever amount you’re currently spending in each bucket, that’s what we’re going to work with as we move on to step 3.

One other thing before you move on to step 3: don’t get hung up stressing about what type of expense goes into each category. Sometimes, it gets tricky. Do clothes you buy for work count as Now Money or Life Money? Don’t stress. It doesn’t really matter. It’s not worth the mental energy thinking about it. Just stay consistent and move on.

If you still want a target, aim for 20% of your income added to your Later Money each month.

All that said, I know that some of us operate better if we have a specific target in mind. If that’s you, the conventional wisdom is to aim for 20% of your income added to your Later Money each month.

Targeting 20% savings each month was popularized in Elizabeth Warren’s book, All Your Worth: The Ultimate Lifetime Money Plan, first published in 2005 (before she was Senator Warren, she was a law professor and author). Senator Warren advocated for a 50-30-20 budget framework with 50% going to fixed costs (what I call “Now Money”), 30% going to wants (“Life Money”), and 20% going to financial goals (“Later Money”).

Most personal finance experts agree that the 50-30-20 framework is a solid plan for your budget.

In theory, I agree.

In reality, I’ve become convinced through working with my law students that the 50-30-20 framework does not cut it in today’s environment. Like me, some experts have also recognized a 60-30-10 framework may be more appropriate today.

While I agree the 60-30-10 framework is more realistic, my experience has taught me that assigning rigid percentages is just not a practical framework for most people at the beginning of budgeting process.

Step 3: Make adjustments so your spending better aligns with your true motivations and desires in life.

OK, so now that you have assigned your spending to each of the three categories, the next step is to think and talk about your current habits and whether you’re spending matches your true motivations and desires in life.

If you decide that your spending does not match your life values, then it’s time to make some adjustments. What kind of adjustments?

We’ll talk much more about how to make those adjustments in Part 2 of our budgeting series. In essence, my budgeting philosophy is to aim for steady and lasting improvements based on your current reality and your ultimate motivations. What does that mean?

Your budget is really just about finding fuel for the best things in life.

This is where we circle back to the importance of having a clear understanding of what we want out of our money. Money is a tool. Ask yourself:

“Is your current spending aligned with how you want to use your money to fuel your goals and ambitions?”

If not, you can make incremental adjustments as you progress towards your ideal spending alignment.

The idea will be to continuously add more fuel to our Life Money and Later Money, the buckets that represent the things we love the most (Life Money) and our most important life goals (Later Money).

You can make small adjustments, which are usually easier and faster to put in place. These adjustments might include dining out a bit less, cutting out a concert, or cancelling a gym membership or subscription you don’t use.

You can also make big adjustments, like moving to a cheaper part of town or getting rid of you car.

Small or big, the key is that when you make these adjustments, you repurpose that money in a thoughtful and intentional way. You’re now starting to align your budget with your money motivations.

With each thoughtful decision, you’re progressing towards your best money life. Most importantly, you’re learning about yourself and developing lasting habits. You won’t get discouraged and give up on budgeting.

As we wrap up Part 1 in our budgeting series, keep the three initial steps in mind.
- Step 1: Track your spending for at least 3 months.
- Step 2: Separate your spending into 3 main categories.
- Step 3: Make adjustments so your spending better aligns with your true motivations and desires in life.
As you start to implement these steps, you’ll start to have a clearer picture of how your money can work for you.

And, the next time you’re asked what you would do with $20,000.00, you’ll know the answer ahead of time because you have a plan in place.

Answering the $20,000.00 question will be fun. No more anxiety-inducing, disappearing dollars.
January 8, 2025
You Should Want to be Good with Money
So far, we’ve talked about why we need to think about money, why we need to talk about money, and Italian beef. Before we dive deep into budgeting, saving, paying off debt, and investing, we need to make sure our money mindset is locked in.

I hope you’ve started thinking about why you want to be good with money. This will be personal for all of us and may change with time. The more you think and talk about why you want to be good with money, the clearer your motivations will become.

Three powerful reasons why I want to be good with money:
1. Money can give you choices.
2. Money can give you personal power.
3. Money can give you time.
1. Money can give you choices.

This may seem obvious, but when you have money, you have choices. You can choose where to live. You can choose who you work for, or can work for yourself. You can choose how you eat, exercise, relax, and travel.

This holds true whether you make $50,000 or $250,000. Of course, your options may be different. The point is that when you’ve made good money choices, you’ll at least have options.

2. Money can give you personal power.

This is another way to say that money gives you control of your life situation. If you are in a bad relationship, a bad job, or just need a change, money gives you the personal power to do something about it.

3. Money can give you time.

When you have enough money to be truly financially independent, you have earned the freedom to do whatever you want with your time. You can spend your working hours at a job that is meaningful to you. You can spend more time with people who are meaningful to you.

It’s been said many times, “time is our most precious resource.” When you have money, you can buy your time back.

Photo by Aron Visuals on Unsplash

The most important part of talking is listening.

From the time we’re in diapers, we start learning by observing people older than us. As my family prepares to leave the house, my son has recently started chanting “Let’s roll! Let’s roll! Let’s roll!” Yup, that one’s on me.

The same idea applies when it comes to life and money. I’ve mentioned before how much I’ve learned about life from listening to my clients suffering with mesothelioma. I’ve learned even more by listening to my family, friends, and mentors.

When you listen to enough people with more years behind them than you, certain themes continue to surface, like the importance of family. You’ll hear about creating experiences and memories, usually involving vacations or time with friends.

One thing I’ve never heard? Someone saying “I wish I spent less money on doing the things I loved.”

You don’t have to agree with everything you hear, but the act of listening will start turning the wheels in your own mind. And when your wheels start turning, you can’t be afraid to spend money on the things that make you happy.

Why do we need to actively think about the things that make us happy?

A sneak peak of how I look at budgeting.

I said we weren’t going to discuss budgeting yet, and we won’t. “Budgeting” is kind of a nasty word. Nobody likes to say it out loud, let alone aggressively do it each month. This is why we spend so much time in the beginning talking about our money mindset.

A budget is worthless if you are not motivated to stick to it. Sure, you may stick to your budget plan for a month or two, but you’ll fall back into old habits if you haven’t prioritized what matters most to you.

We’ll save the particulars for another day. A sneak peak at how I teach my students:

Like it or not, everyone needs a budget… for a little while. Once we’ve identified what we spend money on and made some thoughtful choices, most of us don’t need a rigid budget.

If you’ve thought and talked enough about your true motivations, you won’t need a budget either. Each month, you will take care of your obligations, grow your net worth, and use the rest of your money to buy things you love and to create experiences.

Talking money should be emotional.

If you’re being honest with yourself, talking money should be emotional. Remember, most of us exert mental energy pretending we’re not worried about money. My challenge to you is to exert that same energy into figuring out why we behave in certain ways when it comes to money.

The reason it matters is because we’re soon going to be talking in detail about budgeting, which is just the process of making thoughtful choices about how we spend our money. If we don’t know why we choose to spend in certain ways, we won’t be able to make lasting adjustments to our budget.

Have you ever thought about why you dine out?

Photo by Kevin Curtis on Unsplash

Let’s look at an example to start prepping ourselves for the budgeting process. This is a good time to revisit one of the main principles when talking money with your people: no judgments allowed. We’re not looking to shame ourselves or each other. We are aiming for understanding so we can make thoughtful decisions.

Say you’ve looked at your monthly spending and realize that you’re spending a lot of money dining out. The key to creating a budget you will actually stick to is actively thinking about why you spend so much money dining out. You might learn that dining out is an essential part of your best life. You might learn it’s really not.

Ask yourself these questions:

Is there an emotional reason you dine out frequently, like it makes you feel successful? Or, you like spending time with friends? Do you get joy out of trying new dishes?

Maybe it’s something else entirely and unrelated to your emotions. Maybe you don’t have time to cook at home because of your work schedule? Maybe it’s just laziness?

It might have nothing to do with how often you eat out, but where you choose to eat and what you choose to order. Do you order a bottle of wine with dinner? Could you have drinks at home beforehand instead?

When you honestly think about and answer these questions for yourself, you can start to make thoughtful decisions on whether that spending matches your priorities. If it doesn’t, then it’s an area for adjustment.

And, that’s really all that budgeting is. Not so nasty, right?
January 6, 2025
How to Think About Money and Italian Beef
Too many of us are really good at pretending not to worry about money.

“Credit card debt?” Everyone has it.

“Emergency savings?” My job is secure.

“Retirement?” I have so much time.

Accept money for the tool that it is.

Instead of honestly assessing our relationship with money, we actively ignore it. Yes, actively ignore. We don’t passively hide from our credit card bills. We all have the credit card apps on our phones and receive multiple emails about our bills. We know what the numbers are, and we bury that knowledge. We exert mental energy to not think about our money.

Let’s stop doing that and re-frame how we think about money. Instead of convincing ourselves that we’re not worried about money, let’s accept money for the tool that it is. Let’s get energized thinking about what money can do for us.

Thinking about money does not make you a bad person.

Thinking about money does not make you a bad person. Always remember what money is: a tool. You are not a bad person for wanting to use that tool to build the best life for you and your family.

Remember, the goal is not to fall in love with or obsess over the dollars in your bank account. The goal is to think about how you can use those dollars to maximize your life experiences. When you start thinking like that, money is energizing.

A higher income won’t cure your money worries.

You are not immune from worrying about money just because you have a high income. Ask people further along in their careers if earning more money magically solved all their money worries. A lot of times, the opposite is true.

The more we earn usually means the more we spend. We tell ourselves that we deserve to spend more. Or, we need to spend more to match our neighbors or colleagues. You can see this through the clothes people wear, the vacations they take, the restaurants they eat at. This habit of spending more, even as we earn more, explains why credit card debt in America continues to surge.

The other thing about earning more? It also usually means we’re working more. If you were worried about money when you had more available time to think about it, what’s going to happen now that you’re working longer, harder hours?

Vicki Robin, often credited for laying the groundwork for the FIRE movement, has a lot to say about the relationship between money, work, and time. Her book Your Money or Your Life is a must read.

“Sushi Rice” by Skitter Photo/ CC0 1.0

I could go for an Italian beef.

Years ago, my friend came to Chicago to visit. He loves good food and treated me to one of the premier restaurants in the city. Very fancy, Japanese menu. 12 courses. Sake pairings. At one point, my friend spilled some sauce on his shirt. Having noticed his predicament, the waiter walked over and discreetly handed him a stain removal pen folded in a napkin. Classy, right?

It was one of the best dining experiences I’ve ever had, but it had nothing to do with the food. I loved being there with my friend, and he knows it wasn’t about the food.

Towards the end of the meal, I got up and went to the bathroom. I returned to my friend and the couple at the table next to us gushing about the meal. Turning to me, one of them asked, “Did you absolutely love the food, too?” He choked on his Unagi when I responded, truthfully, “I could really go for an Italian beef.”

I want you to spend your money.

OK, so what’s the point? I am in no way saying we should all stop spending money. Or, that we shouldn’t use our money to enjoy what we want in life. Quite the opposite, actually. I want you to prosper. What I really want is for you to define for yourself what a prosperous life means.

If that means you want to use your money to eat Japanese delicacies instead of Italian beef, please do! Just do it because you put some intentional thought into how spending your money that way fits into your overall life experience.

Get energized thinking about money.

If you’ve read this far, I’m assuming that you’re tired of pretending not to worry about money. You’re tired of treating money just like everyone else. You’re tired of fooling yourself that if you just made more money, everything would be fine. You want the worrying to stop.

Now, you want to feel like you’re moving forward. You’re ready to be energized about using money as a tool to reach your hand selected goals, regardless of how much you make.

To start moving forward, we need to change how we exert our mental energy when it comes to money. In the beginning, many of us exert mental energy into making excuses about our money. Or maybe worse, we actively ignore our money. We convince ourselves that we’re just like everyone else. We pretend not to worry.

Let’s flip that around. Instead of exerting mental energy to ignore our money worries, let’s get energized thinking about how we can use money as a tool to build our lives. It starts with discovering what truly motivates us. Only then can we talk about strong personal finance habits. Without the motivation, we’ll slip back into that existence of pretending not to worry.

There’s no dress rehearsal in life.

Life doesn’t come with a dress rehearsal. There’s no practice game to test out new plays. We need to think about our motivations now and continue to think about those motivations as we go.

You’ll soon hear all about my Tiara Goals, my made-up name for what truly motivates me. At this point, I’ll share the simple recognition that we each only get one life. I don’t say that to be morbid or depressing. I don’t say it to be inspirational, either. I’m saying it simply because it’s true.

Bill Perkins, author of Die with Zero, makes a very convincing argument that most of us wait too long to start using money to create life-changing experiences. You should read Die with Zero and talk about it with your people. This book has led to more money conversations with my friends and family than any other book I’ve read.

This truth is a powerful reminder for me to use money as a tool to accomplish my Tiara Goals. That truth helps explain why I work hard for my clients with mesothelioma, own rental properties, teach law students, and now write this blog.

I encourage each of you to start thinking about what truly matters to you. Not in a theoretical sense. Not what you expect other people would say should matter to you. What you, after deliberate thought, believe truly matters. You won’t have all the answers right away, but you need to start somewhere.

For now, let’s start by helping each other. Let’s stop pretending that we aren’t worried about money, so we can do something about it.

“Credit card debt?” Yup, and I’m attacking it.

“Emergency savings?” Growing each month.

“Retirement?” Not a problem.

“Unagi?” Eh, I’ll have the Italian beef. Dipped, hot peppers.
4 responses to “How to Think About Money and Italian Beef”
1. Kevin
  
  January 11, 2025
  
  This really hit home for me! I read the book Die With Zero, and loved it.
  
  Reply
  
  Matthew Adair
  
  January 12, 2025
  
  Glad you enjoyed the post! And thank you for being a consistent reader of Think and Talk Money!
  
  Reply
2. SA Bandoni
  
  January 12, 2025
  
  So, is the Italian beef like a ‘steak & cheese sub’ in Boston?…if so, then , hell yes… Italian beef over Unagi every time. It is great to see you tackle the topic and attempt to make money a candid discussion. I suspect your teachings, and this blog will inspire more people to do the same.
  
  Reply
  
  Matthew Adair
  
  January 12, 2025
  
  I appreciate those kind words, SA. It’s all about starting the conversation. And, Italian beef is probably like a steak & cheese sub… only better!
  
  Reply
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January 4, 2025

Tag: financial independence

A reminder to consistently evaluate your banking relationships.

Why do stories like Capital One’s alleged deceptive practices matter?

Americans are spending more on credit cards and carrying bigger balances.

How much money should you have saved for retirement by age 50?

Am I saving too little or too much for retirement?

The first savings account you need is an emergency savings account.

Aim for 3-6 months of Now Money saved for emergencies.

Come on Matt, should I save 3 or 6 months of Now Money?

Do not rely on credit cards for emergencies.

Savings is also for more fun, short-term goals.

Setting up separate savings accounts online is easy.

Automating your savings is a good idea, but I don’t personally automate.

If you have debt, should you still build up your emergency savings?

Never forget that money is emotional.

The temptation to ignore your savings is real, especially when you have debt.

Count me in the group of people not completely satisfied with their savings.

Most people attribute their low savings to rising cost of living.

So, what exactly can we do to improve our savings?

Savings are for short term protection and short term goals.

What is the difference between saving and investing?

So, how are savings different from investments?

Saving is an essential part of overall money wellness.

We’ve hardly mentioned investing so far in this blog.

We will talk about investing once we have a plan to continuously generate money to invest.

Investing is not as hard as generating money to invest.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

How many hours per year do you work to make money?

Think and Talk Money is about encouraging each other to make purposeful money choices.

One response to “Better at Making or Keeping Money?”

Leave a Reply Cancel reply

1. Do you have a favorite personal finance book that you would recommend?

2. $500 Challenge? I could never do that!

3. When I’m creating my budget categories, does my health club membership count as Now Money or Life Money?

4. Do I need to actively budget forever?

5. I am thinking about either selling my condo or keeping it as a rental unit. What should I do?

6. What is Italian Beef?

Our nice friends, Phil and April.

Phil was nice…and tough.

Phil’s on TV!

A memory I wouldn’t trade for anything.

What does this have to do with money?

What would I have done differently to keep the tickets but not the worries?

Talking money is really just talking life.

Learning from a real life, really lost, boy.

How to benefit from this budgeting example.

Now Money

What I learned tracking Now Money.

Life Money

What I learned tracking Life Money.

Some bonus tips for tracking Life Money

Keep it simple when tracking your Life Money.

Break down large, annual expenses on a monthly basis.

Later Money

What I learned tracking Later Money.

Some bonus tips for tracking Later Money.

Make budgeting as easy as possible for yourself.

The real life, really lost, boy was starting to figure it out.

What would you do right now with $20,000.00?

Do you have a plan for where your next dollar is going?

Budgeting is about having a plan ahead of time where your next dollar is going.

Step 1: Track your spending for at least 3 months.

Talk to your people as you go through the budgeting process.

Step 2: Separate your spending into three three main categories.

1. Now Money

2. Life Money

3. Later Money

Don’t worry about assigning a percentage to each category.

If you still want a target, aim for 20% of your income added to your Later Money each month.

Step 3: Make adjustments so your spending better aligns with your true motivations and desires in life.

Your budget is really just about finding fuel for the best things in life.

As we wrap up Part 1 in our budgeting series, keep the three initial steps in mind.

1. Money can give you choices.

2. Money can give you personal power.

3. Money can give you time.

The most important part of talking is listening.

A sneak peak of how I look at budgeting.

Talking money should be emotional.

Have you ever thought about why you dine out?

Accept money for the tool that it is.