Tag: financial literacy

  • How to Pay Off Debt on a Budget

    How to Pay Off Debt on a Budget

    In this post, we’ll learn how to pay off debt on a budget. In our initial series on debt, we first looked at some scary stats about how common debt is in society.

    We learned that 8 out of 10 people have some form of debt. We also learned that nearly half of credit card users carry a balance. Finally, we saw that consumer debt is a worldwide problem.

    By recognizing that debt is something that impacts nearly all of us, I hope that you stop feeling alone if your’e in debt. There’s no reason to be ashamed. You are not a bad person.

    If people were more willing to talk about money, you may not have had those feelings in the first place. You may have already learned how to pay off debt on a budget.

    Understanding how you got into debt is the first step in working your way out. That’s why we next looked at three big reasons why people are in debt.

    Of course, there are other explanations, but in my opinion, these three explanations sum it up:

    1. We can be careless with our money.
    2. We don’t plan ahead for emergencies.
    3. We try to keep up with the Kardashians.

    With these common causes in mind, we can now start focusing on how to pay off debt on a budget.

    These strategies can work whether you are trying to eliminate Good Debt or Bad Debt.

    In my experience, both Good Debt and Bad Debt can feel heavy. While Good Debt can help you achieve financial freedom, the debt will still hang over your head until it’s paid off.

    Before we get to my top 10 strategies to eliminate debt, let’s get one thing straightened out:

    If you’re looking for a magic wand to immediately erase all your debt, you’re in the wrong place.

    Paying off debt takes time. It requires patience and discipline. You may not notice much progress in the beginning, but you need to stick with it.

    It most likely took you years to get into debt, so be reasonable with your expectations of how long it will take to pay it off.

    My top 10 strategies for how to pay off debt on a budget.

    1. Write down your Tiara Goals.
    2. Create a Budget After Thinking so the debt stops growing.
    3. Prioritize Later Money funds for debt.
    4. Apply our Top 10 strategies for staying on budget.
    5. Talk to your people about paying down debt.
    6. Track your net worth and savings rate for small wins.
    7. Pick a strategy and stick with it: Debt Snowball v. Debt Avalanche.
    8. Think about loan consolidation.
    9. Get a side hustle.
    10. Don’t let yourself fall backwards.

    1. Write down your Tiara Goals.

    Have you ever asked yourself what you would do with financial freedom?

    I asked myself that powerful question on a beach years ago and came up with my Tiara Goals.

    Debt is a major obstacle on the way to financial freedom. To help you stay motivated to eliminate debt, write down your version of Tiara Goals. By reminding yourself what you’re actually striving for, you’re more likely to stay on track.

    Whenever we talk about good money habits, it always starts with establishing strong motivations. This is especially true when it comes to debt. There are too many temptations that can push us off track.

    When you’re faced with these inevitable temptations, take a look at your Tiara Goals. I keep my Tiara Goals in my notes section on my phone. I also have a picture on my phone of the original sheet of notebook paper I scribbled on.

    All it takes is a quick glance at my most important life values to overcome whatever temptation is in front of me.

    Getting out of debt is not easy. Make it easier by regularly reminding yourself what you would do with financial freedom.

    2. Create a Budget After Thinking so the debt stops growing.

    If you’re currently in debt, it’s crucial that you stop that debt from getting larger. Think about it. If you’re paying off $1,000 of credit card debt each month, but you’re still spending $1,200 more than you earn, your efforts will be for nothing.

    Your debt is growing faster than you’re paying it off. You’re not getting any closer to being debt-free.

    That’s why to eliminate debt, you need to first create a Budget After Thinking.

    Once you’ve stopped the disappearing dollars and learned where your money is going each month, you can make thoughtful decisions to pay off debt on a budget.

    Then, you can be confident that any money you allocate to debt will actually lower your debt balance.

    3. Prioritize Later Money funds to pay off debt.

    As we’ve discussed, the art of budgeting is to generate fuel for your Later Money goals. The more fuel you can generate each month, the faster you will achieve your personal finance goals.

    There are lots of options on what to do with your Later Money. For example, you can invest in real estate or the stock market.

    When you’re in debt, I recommend you prioritize using your Later Money to eliminate that debt. This is especially true if you have Bad Debt, like credit card debt. Your number one money focus needs to be to eliminate that debt.

    This is the key to learning how to pay off debt on a budget.

    There’s a good reason to focus on paying off your Bad Debt.

    The interest rate on Bad Debt is generally very high. The amount you pay in interest each month will be significantly greater than what you may reasonably expect to earn through investments.

    If you only have Good Debt, like student loan debt, you have some more flexibility in whether to focus on that debt or your other investment goals. This is because Good Debt generally carries lower interest rates, so your investment returns may match or even exceed what you’re paying in interest.

    In this scenario, I suggest that you consider splitting your Later Money between debt pay down, savings, and investments. This is what my wife and I are currently doing in 2025.

    Seeing your savings and investments grow while focusing on how to pay off debt on a budget can provide an emotional lift. Establishing good savings and investment habits now will also have longterm benefits that should survive your debt phase.

    4. Apply our Top 10 Strategies for staying on budget.

    Our Top 10 Strategies for staying on budget will help you generate more money to allocate to debt. These tips are crucial if you’re trying to learn how to pay off debt on a budget.

    For example, when you see something that you might want to buy, make a note in your phone instead of buying it right away. After a couple weeks, you probably won’t even want that thing anymore. Take that money you didn’t spend and put it towards your debt.

    As another example, how about playing The $500 Challenge Game? When you come in under budget that month, use the excess funds to pay down debt.

    When you have debt, applying our Top 10 strategies to staying on budget can teach you something powerful. You’ll see for yourself that the emotional high of paying down debt is better than the feeling you’d get from spending that money on things you don’t care about. It’s important not to ignore these emotional wins when learning how to pay off debt on a budget.

    5. Talk to your people about how to pay off debt on a budget.

    Stop me if you’ve heard this before:

    Why do we insist on struggling with our money choices alone instead of talking to the people we trust and love?

    Talking money is not taboo. That includes talking about our current money goals and money challenges. Of course, it includes talking about how to pay off debt on a budget.

    I’m currently focused on paying down HELOC debt, building up my emergency savings, and funding my kids’ 529 college savings plans.

    What are your current money priorities? If you don’t want to share with us, are you sharing with your friends or family?

    I struggled with debt when I began my career as a lawyer. For years, I kept that to myself. I wish I had been more open. I’ve recently learned that many of my friends were struggling in the same way.

    The problem was that none of us talked about it. I think about how much stress we could have saved each other if we were just willing to talk about money like we talked about everything else. Instead, we hid our truths from each other. Even worse, we likely enabled each other’s poor spending habits.

    I now know that it didn’t have to be that way. I would have been better off if I was open about it.This part still bothers me today: I also might have helped my friends facing the same challenges just by starting the conversation.

    6. Track your net worth and savings rate for small wins.

    Remember that your net worth grows when you reduce your liabilities, meaning debt. When we think of net worth, it’s common to focus on growing our assets. Don’t forget that reducing your debts has the same impact on your balance sheet.

    For example, when tracking your net worth, eliminating $1,000 in debt is the same as an investment that grows by $1,000.

    Even when you’re focused on how to pay off debt on a budget, tracking your net worth can be very motivating. Every payment you make to reduce that debt improves your net worth.

    This is especially helpful if you are focused on paying off student loans or paying down a mortgage. You may not have many appreciating assets, but you can still make a positive impact on your net worth by reducing your debt.

    The same logic applies to tracking your savings rate. Measure and feel good about each additional amount you dedicate to eliminating debt. The goal is to stay motivated while you pay off debt on a budget.

    7. Pick a strategy and stick with it: Debt Snowball v. Debt Avalanche.

    There are two common strategies to consider when you hope to pay off debt on a budget. These strategies are referred to as “Debt Snowball” and “Debt Avalanche.”

    Debt Snowball means paying down your smallest debt balance first, regardless of interest rate. When you’ve paid off that loan completely, you then move to the next smallest balance, again regardless of interest rate.

    Debt Snowball is ideal for people that are motivated by the emotional wins that come with eliminating a loan completely, even if it costs more money in interest in the long run.

    Debt Avalanche means you pay down the debt that has the highest interest rate first, regardless of the balance. Once that debt is gone, you move to the loan with the next highest interest rate.

    Debt Avalanche is for people who would prefer to pay less overall interest, even if it will take longer to pay off a single loan and receive the emotional win.

    A snowball has grown large due to the force with which it rolls, tumbling down a forested mountain during the snowy season, lifting small amounts of snow along its path, illustrating the preferred method for how to pay off debt on a budget.

    We’ll discuss the pros and cons of each strategy in a subsequent post. Some people will prefer the emotional wins of the Debt Snowball method, while others will prefer the mathematical advantage of the Debt Avalanche method.

    Personally, I use the Debt Snowball method.

    I value the emotional wins of eliminating a debt entirely, even if it ends up costing me more in the long run. I am currently applying the Debt Snowball method to pay off HELOC debt.

    I’ve experienced firsthand that our money choices have more to do with emotions than they do math. If you prefer to play it strictly by the numbers, I completely understand.

    The key is that whichever strategy you pick, stick with it. You’ll save yourself a lot of unnecessary mental gymnastics by choosing one approach and then moving on.

    One word of caution: whichever method you choose, be sure to always pay the minimum on all of your loans. Otherwise, you’ll be in violation of your loan terms and face devastating penalties.

    The idea with either of these methods is to allocate whatever funds remain to the single loan you have prioritized after paying the minimum on all loans first.

    8. Think about loan consolidation or balance transfers.

    Whether you have credit card debt, student loan debt, or even mortgage debt, you may have the option to consolidate each type of loan into a single loan. If you do your homework, you should end up with a lower overall interest rate and have only one loan payment to make each month.

    If you choose to go this route, make sure you fully understand the fine print involved.

    For example, if you’re thinking about consolidating your student loans, you’ll end up sacrificing certain loan forgiveness provisions that accompany federal loans.

    The same caveat applies when considering a credit card balance transfer. A balance transfer is when you move the balance from one credit card to a different credit card with a lower interest rate. Most major credit cards accept balance transfers from other banks’ credit cards.

    The main reason to consider a balance transfer is if the card you are transferring into carries a significantly lower interest rate than your current card. In some instances, you may even qualify for a promotional rate with no interest charged for a limited period of time.

    I used balance transfers when I was focused on eliminating credit card debt at the beginning of my career. I did my homework and found a card that was advertising 0% interest for 12 months with no balance transfer fees. That meant that for an entire year, I paid no interest. Every payment I made went directly to lowering my overall debt.

    If you’re considering a balance transfer, be mindful that there are usually upfront fees involved, usually around 3%. That fee may end up cancelling out any benefit from doing the transfer in the first place.

    9. Get a side hustle to help pay off debt on a budget.

    You’re not too busy or too important for a side hustle.

    At the end of the day, there are really only two ways to more quickly pay off debt on a budget: spend less money and/or make more money.

    We already talked about creating a Budget After Thinking to help on the spending side.

    If you really want to get rid of your debt faster, earning more money and the same time you’re spending less money is a dominate combination.

    If you take on a side hustle, you can use every dollar you earn to pay off debt. Since this is new money you’re earning, you shouldn’t need it to fund your Now Money or Life Money.

    Avoid the temptation of using that money on things you don’t really want anyways. Think about how much faster that debt will disappear if you’re able to throw additional money at it each month.

    If you’re not ready for a side hustle, the same logic applies anytime you earn a bonus or commission at your primary job. Put that money to good use by paying down your debt.

    10. Don’t let yourself fall backwards while you pay off debt on a budget.

    When you do succeed in eliminating a debt, don’t let yourself fall back into bad habits. It’s hard to pay off a debt. It takes time. It takes patience and discipline.

    Don’t let it all be for nothing.

    When you pay off a loan, celebrate that accomplishment!

    Be proud of yourself and let that good feeling motivate you to continue on your journey towards financial freedom.

    Before you know it, debt will be part of your past life. You can shift all your attention to the opportunities that comes next for you and your family.

    Let us know in the comments below:

    Have you used any of these strategies to pay off debt on a budget?

    What about any other strategies to pay off debt on a budget that have worked for you?

  • Money on My Mind: Always Working?

    Money on My Mind: Always Working?

    Simple question. Don’t lie to yourself.

    Do you work too much?

    I’m not asking if you work too hard.

    I mean too much, as in too many hours of your life dedicated to a job.

    I started thinking about this question after recently coming across a few surveys.

    Let’s talk it out. Let me know what you think in the comments below.

    I am shocked by these survey results.

    I’m not often surprised by survey results. This is one of the rare exceptions.

    According to a recent report from MyPerfectResume, 81% of workers worry they may lose their jobs in 2025.

    8 out of 10 people! Is it just me, or is that mind-boggling?

    On the flip side, only 4% of workers report no concerns about losing their jobs.

    These numbers are shocking to me, but maybe I shouldn’t be that surprised. As Yahoo Finance explains,

    Many large corporations have already announced or kicked off a round of layoffs, including Chevron, CNN, Estee Lauder, Meta, and Southwest Airlines. And that, of course, doesn’t count the thousands of workers terminated under Elon Musk’s campaign to reduce the federal workforce.

    My mind immediately jumps to a follow-up question:

    How many of those people worried about losing their jobs have an emergency savings account?

    Sadly, the answer is probably very few people have meaningful savings.

    Surveys like this one motivate me to continue bringing attention to core personal finance issues, like having adequate emergency savings. This is why I so strongly believe that talking about money is not taboo.

    Life is too short and too precious to be in a constant state of worry. Is there any sense worrying about something, like getting laid off, when you have practically no control over whether it happens or not?

    Instead of worrying about what we can’t control, I think it’s better to use our energy on what we can control, like saving up for emergencies.

    Hopefully, you’re not one of these people worried about losing your job. If you are, there’s no better time than right now to prioritize your savings.

    If the first survey shocked me, this one just makes me angry.

    According to this Pew Research Center study, 46% of US workers take less paid time-off than they’re offered.

    I need to say that again.

    Nearly half of US workers choose to work more days than they are required to!

    And, it gets worse if you’re a high earner or highly educated.

    According to the same study, the more money you earn, the less likely you are to take your full paid time-off.

    The more educated you are, the less likely you are to take your full paid time-off.

    The more senior you are, like being a manager vs. non-manager, the less likely you are to take your full paid time-off.

    If the first survey mentioned above surprised me, this one just makes me angry.

    Do you recognize a difference between working hard and always working?

    Don’t misunderstand why these results make me angry. It’s not about working hard vs. slacking off. It’s not about being a good employee vs. a bad employee. I am 100% in favor of people working hard and working with integrity to get the job done.

    My frustration is that somewhere along the way, “working hard” turned into “always working.”

    By the way, before you accuse me of being a slacker, I am no stranger to working hard.

    I work full-time as a lawyer, manage 11 rental properties, teach law school courses on Wednesdays and Sundays, and publish three blog posts per week. Still, none of these things are more important to me than spending quality time with my family.

    Years ago, I first read Tim Ferris’ game-changing book, The 4-Hour Workweek. Ferris described how his small business took off as soon as he started doing less, not more. He empowered his staff and stopped himself from getting in the way. Not only did his company thrive, he had more time available to pursue what really mattered in his life.

    Since writing The 4-Hour Workweek, Ferris has become one of the most influential thought leaders around. To learn more from Ferris, visit his website here.

    Why do you work so much?

    If you’re one of these people choosing to work more hours instead of taking your earned vacation time, have you ever asked yourself why?

    Keep in mind, these are days off that your company has already agreed to give you. You earned them. Why are you not taking them?

    Are you worried about getting fired? Passed up for a promotion? Is your self-worth tied to how many hours per week you work?

    Years from now, when your grandkids are huddled up for story time, do you plan on telling them how much you worked and how many life experiences you skipped out on?

    These are hard questions to truthfully answer. If you’re being honest with yourself, you may start thinking about another set of questions:

    Is this job the right job for me? Do I want to spend my life stressed from working too much? What would be a better use of my working hours so I can spend more time doing the things that I love with the people that I love?

    I’ve spent a lot of time thinking about these questions. I’ve realized that I’ll never understand what the point is of working so much at the cost of spending time with the things and people you love.

    Maybe I’m the weird one. But, I don’t think I am. Unfortunately, the data backs me up and confirms that working too much can have series consequences.

    Fortunately, we can learn from strategies geared towards retirees. Let me explain.

    Apply lessons for retirees to your life today.

    Writing for BBC Science Focus Magazine, Hayley Bennett shares 5 expert tips for a healthy post-work life.

    The tips include finding a purpose, strengthening your body, and rebuilding your brain.

    Woman on beach in summer thinking about spending more time during her working years living with purpose and focused on health as learned on Think and Talk Money.

    When I came across this story, I immediately thought that we shouldn’t wait for retirement to do these things. This is solid advice for all of us, at any stage in our lives.

    Do you know what sounds pretty great to me?

    A life filled with purpose sounds pretty great. The same goes for being fit and smart.

    The challenge is that work often gets in the way.

    When we let this happen, the consequences can be catastrophic.

    As just one example, lawyers as a profession have long struggled with mental health issues. I first learned about these challenges during law school orientation. Today, I see it in practice. Being a lawyer is a hard way to make a living. When you work as a lawyer, the hours are intense and stress levels are consistently high.

    In 2023, the Washington Post analyzed data from the U.S. Bureau of Labor to determine what the most stressful jobs are. The study confirmed that lawyers are the most stressed.

    Of course, lawyers are not alone in struggling in this regard due to long, stressful hours. The same study showed that people working in the finance and insurance industries were right up there with lawyers as being highly stressed.

    Anecdotally, I’ve personally talked to people recently in a wide variety of other fields, like consultants and small business owners, who are frustrated for the same reasons.

    The point is, regardless of industry, many of us struggle with work stress.

    What can we do about it?

    That’s a complicated question with many possible answers. For starters, I firmly believe that by building strong personal finance habits, we can create more opportunities to find purpose and practice good health.

    I recommend you think back to our conversations about Parachute Money and why you should want to be good with money. When you’ve made thoughtful money choices, you can choose to live a life right now on your terms rather than waiting until retirement.

    I agree with what you’re probably thinking. These are not easy or fun topics to think about. However, in my opinion, it’s much worse to let life go by while failing to take responsibility.

    Am I wrong about people working too much?

    Maybe I’m wrong about people working too much?

    I don’t think I am.

    The data paints a very sad picture for lawyers, and I have to believe anyone else working long and hard hours. If you have similar data about your profession, please share it with us. I hope I’m wrong about what that data will show, but I fear I’m right.

    As always, let us know what you think in the comments below.

    And, thank you for continuing to share stories you’ve come across that would be good to discuss here.

  • How to Responsibly Use Good Debt

    How to Responsibly Use Good Debt

    There may not be a more polarizing debate in personal finance than the concept of Good Debt vs. Bad Debt.

    “Good Debt” generally means loans used to acquire income generating assets, like rental properties or businesses.

    “Bad Debt” generally refers to consumer debt, which is personal debt owed because of buying things for personal or household use. For most people, this simply means credit card debt.

    Two absolute giants in the field, Robert Kiyosaki (of Rich Dad Poor Dad fame) and Dave Ramsey (maybe the most well known personal finance expert in the world), take opposite viewpoints.

    If you’d like to learn more about Kiyosaki, check out his website here. For more on Ramsey, click here.

    Before addressing their different opinions, it’s important to highlight that both Kiyosaki and Ramsey agree on a critical point:

    All consumer debt is bad.

    You’d be hard-pressed to find any personal finance expert who says that credit card debt is OK. I’d be concerned if you found anyone at all, expert or not, who seriously took the position that credit card debt is OK.

    We’ve talked about how this type of debt is scary and can drag down your finances. We also explored the three big reasons why people end up with credit card debt. The bottom line is you’ll never be truly financially free if you’re burdened by debt.

    A quick side note: There is some difference in opinion as to what else besides credit card debt qualifies as consumer debt. For example, is your primary home mortgage considered consumer debt? What about your student loan debt? I’ll give you my take below.

    Now, let’s take a look at how each Kiyosaki and Ramsey differ on Good Debt v. Bad Debt.

    Kiyosaki believes in the power of Good Debt.

    Kiyosaki argues that Good Debt is a powerful tool to generate consistent cash flow from investments. Kiyosaki defines Good Debt as debt that is used to buy assets like real estate or businesses that generate income.

    As long as the debt leads to positive income, it’s considered Good Debt. For example, Good Debt would include taking out a mortgage to buy a cash flowing rental property.

    Kiyosaki suggests that Good Debt can be responsibly used to quickly acquire more assets, even if the debt is considered a liability.

    To better understand the difference between assets and liabilities, check out our post on net worth.

    In Rich Dad Poor Dad, Kiyosaki discusses in detail how investors grow their wealth through the responsible use of Good Debt.

    Ramsey believes all debt is Bad Debt.

    Ramsey could not disagree more with Kiyosaki.

    If it were up to Ramsey, there would be no distinction between “Good Debt” and “Bad Debt.” All debt is bad and carries risks that will weigh on your emotions and drag down your net worth.

    Ramsey is adamant that debt should not be used as a tool to build wealth. He contends that a person’s income is the best way to consistently build wealth.

    In his bestselling book, The Total Money Makeover, Ramsey walks you through how to build wealth without relying on debt.

    So, where do I come out on the Good Debt v. Bad Debt debate?

    Kiyosaki and Ramsey are personal finance legends. There’s no right or wrong in this debate. I appreciate each of their viewpoints.

    Ultimately, what side of the debate am I on?

    I’m on Team Kiyosaki.

    When you responsibly use Good Debt, you can more quickly create income streams to accelerate your journey towards Parachute Money. However, if you’re struggling with consumer debt, taking on any additional debt, even Good Debt, is a bad idea.

    Like other real estate investors, my wife and I have experienced firsthand the power of Good Debt. In seven years, we have acquired four cash flowing rental properties (three in Chicago, one in Colorado) that add extra income to our personal balance sheet each month. Without that income coming in, our financial picture would look completely different.

    On top of that, we have benefited from appreciation with each of our properties, further increasing our net worth. Of course, appreciation is largely out of anyone’s control. Market conditions have been very favorable for us.

    Some people may condescendingly say that we’re just lucky. As bestselling author and thought leader Mel Robbins would say, “Let them think that!”

    Of course we’ve been lucky!

    That doesn’t change the fact that we acted on opportunities when others only talked. We lived in small apartments for six years with a growing family. We responded to tenants whether we were on vacation or it was the middle of the night. Above all else, we stayed disciplined, focused on our goals, and paid the bills even when money was tight.

    For these and so many other reasons, I believe in the responsible use of Good Debt to acquire cash flowing assets.

    Just because we’ve taken on debt doesn’t mean we don’t worry about it.

    All that said, Ramsey’s voice still rings in my ears when it comes to debt. Up to this point in our lives, my wife and I are comfortable with the Good Debt we’ve taken on to build our portfolio. Even so, we frequently think about Ramsey’s point of view and the valid debt risks he highlights.

    Even with the extra rental income coming in, we still feel the heavy burden of mortgage debt. That’s why our goal for 2025 is to prioritize eliminating as much mortgage debt as possible. While we are comfortable with a certain level of debt, we don’t ever want to be reckless.

    If you’re thinking about using debt to acquire assets, don’t ever ignore the heavy emotional toll that debt will have on you. Just as importantly, if you’ve struggled with debt in the past, be careful about going down that road again.

    It’s easy to get blinded by the potential cashflow of an investment while ignoring the accompanying debt. Long before you ever sign the loan documents, make sure you’ve done your homework and thought hard about what it’ll take to pay that loan off.

    What about primary residence mortgage debt and student loans?

    I mentioned that I would share my perspective on whether debt to buy a primary residence or student loan debt is Good Debt.

    I think both should absolutely be considered Good Debt.

    This is one area where Kiyosaki and I don’t agree.

    Why I consider a primary home mortgage Good Debt.

    Kiyosaki favors using Good Debt to buy assets, meaning investments that put money in your pocket. A primary home does not put money in your pocket, so Kiyosaki would not recommend using debt for this purchase.

    He’s not alone in this viewpoint. Many smart people think it’s financially foolish to buy a primary residence instead of renting. For an in-depth analysis on the question of buying vs. renting, check out this video from Khan Academy.

    I don’t agree with this viewpoint. For most of us, our primary residence is the best way to build generational wealth for our families. This is not my personal strategy for building wealth. That said, I understand that this strategy is how most of us do build wealth.

    Besides just wealth building, I appreciate more than ever how owning a home can be emotionally beneficial. Since we moved to our longterm home, I’ve already experienced the psychological benefits of establishing roots and feeling connected to a community. After bouncing around apartments in Chicago for nearly 20 years, I can tell you that it feels good having a permanent home.

    So, I consider a primary home mortgage Good Debt. For similar reasons, unlike Kiyosaki, I recommend including your primary residence in your net worth.

    Why I consider student loans Good Debt.

    I also disagree with Kiyosaki on whether student loans count as Good Debt.

    I don’t want to put words in Kiyosaki’s mouth, but his perspective seems mostly shaped by how he feels about the modern educational system in this country.

    How exactly does he feel about our education system?

    He… hates it.

    All things considered, it makes perfect sense that he thinks student debt is Bad Debt.

    I don’t agree. I’m grateful for my education through law school. I learned how to think and solve problems. I learned how to challenge myself and do hard things. I think this is true for anyone that goes to school and takes it somewhat seriously.

    I’m not discounting Kiyosaki’s point that maybe the system needs fixing. Regardless, I believe that education opens doors, whether that’s through connections made along the way or licenses earned (like the license to practice law).

    From my perspective, debt incurred to pay for that experience and training is well worth it.

    If that wasn’t enough, the data shows highly educated people earn more money. In fact, men with graduate degrees earn $1.5 million more over a lifetime than those with only high school degrees. That’s another reason why I consider an investment in yourself through student loans Good Debt.

    Are you Team Kiyosaki or Team Ramsey?

    Maybe you feel there is such a thing as Good Debt. Maybe not. Either perspective is completely valid.

    In the end, can we at least all agree that credit card debt is always bad debt?

    Are you Team Kiyosaki or Team Ramsey?

    Let us know in the comments below.

  • Three Big Reasons Why You’re in Debt

    Three Big Reasons Why You’re in Debt

    “Live below your means.”

    “Money doesn’t grow on trees.”

    “Don’t break the bank.”

    We’ve all heard these common money phrases. If you were to ask someone older than you for one piece of personal finance advice, I’m betting you’ll hear one of these lessons. Let me know if I’m right about that in the comments below.

    There’s a reason these phrases are so common. They’re simple and easily reflect some of our core personal finance principles. In fact, we’ve covered these concepts in detail in earlier posts:

    Like many personal finance concepts, it’s not too challenging to understand the meaning of these phrases.

    Most of us understand that it makes sense to spend less money that we earn, right?

    How many of us remember rolling our eyes as kids after our parents wouldn’t buy something we wanted because “money doesn’t grow on trees”?

    Does anyone truly disagree with these lessons? If so, I’d be very appreciative to hear your perspective in the comments below.

    Assuming we’re in relative agreement on these philosophies… what am I getting at?

    I’ll answer that with a question of my own:

    Why is it that we can all agree with these core personal finance lessons and at the same time choose to ignore them?

    For example, we intuitively know that we should live below our means, but nearly half of us carry a credit card balance.

    On top of that, hardly any of us are completely satisfied with our savings.

    It’s not that we want to have high debt and low savings. So why is this the reality for so many of us?

    I have 3 main theories why we fall into debt.

    There are countless theories on why people end up in debt. I have three primary theories. Looking at each of these explanations can help us understand and avoid common pitfalls that lead us into debt.

    1. We fall into debt because we are simply careless.

    When I struggled with debt at the beginning of my career, it was basic carelessness.

    I didn’t have any idea how to budget or make intentional choices with my money. I had never thought about why or how to be good with money.

    Like many people, I failed to create a budget and assumed that my W-2 income was plenty. I ignored emergency savings and never even thought about creating Parachute Money.

    The saddest part is that I didn’t even realize that I was slipping backwards. I had no idea because I didn’t track my net worth or savings rate. I worked hard all year long and just hoped things would work out.

    By the way, if this sounds familiar, you should know by now I’m not judging anyone. I’ve been very open about my money mistakes. We all deserve a chance to learn about and talk about strong personal finance habits.

    That’s why I’m on a mission to flip the script: talking money is not taboo.

    2. We don’t plan ahead for emergencies.

    So, being careless with money is one common reason people fall into debt. Another common reason is that bad things happen in life.

    This might include medical emergencies, home repairs or car troubles. It’s not our fault that these things happen. But, it is our fault if we’re not prepared in advance. 

    While these events are unfortunate, and maybe even tragic, they are not unexpected. We all need to expect that bad things will happen.

    Preparing for the unexpected is part of every solid organization’s planning. In government, planning ahead means having a “rainy day fund.”

    When managing properties, planning ahead for big repairs means having a “Capital Expenditures” or “Cap Ex” fund. For our personal finances, planning ahead means having an emergency fund.

    Whether it’s government, business, or personal finance, the goal is to have options other than taking on debt to get through challenging circumstances.

    3. Blame the Kardashians.

    Besides carelessness and emergencies, there’s another powerful force that contributes to rising debt levels across the world. This force is nearly impossible to ignore. It’s become a part of our daily lives, whether we want to admit it or not. 

    What is this powerful force that contributes to our rising debt levels?

    The Kardashians.

    OK, not just the Kardashians, but they’re kind of the mascots.

    The era of social media and on-demand entertainment has made it harder than ever to avoid temptation. It’s everywhere we look.

    Blaming the Kardashians realtes to another timeless, common money phrase: “Keeping up with the Joneses.”

    The Kardashians are the modern day Joneses.

    Once upon a time, “the Joneses” represented your neighbors, people you could observe from a distance on a regular basis. The idea behind the phrase is that you can see what your neighbors are spending money on and are either consciously or subconsciously tempted to do the same.

    If your neighbors buy a new car, you buy a new car to keep pace. If your neighbors vacation in Australia, you research diving tours at The Great Barrier Reef. When you notice your neighbors hosting a backyard BBQ party with lots of happy looking people, you decide to host a party the next weekend.

    As humans, it can be difficult to ignore the temptation to keep up with our neighbors. Whether we like it or not, we are concerned with our social status. Part of our self-worth gets tied to comparing ourselves to others.

    Who better to measure up against than the people in our neighborhood who we probably have a lot in common with?

    This same idea is oftentimes compounded in the professional setting. It is not uncommon to compare ourselves in the same way to our colleagues at the office.

    Some professions heighten the pressure to keep up. Have you ever noticed that real estate agents seem to always drive nice cars? Or, big city lawyers wear fancy suits? It’s easy to get caught up in expensive tastes when you’re expected to fit in.

    One of my favorite personal finance books, The Millionaire Next Door, discusses this concept in detail. I highly recommend you read this book if you are struggling with comparing yourself to others.

    What does this all have to do with the Kardashians?

    In today’s world dominated by social media and the internet, we’re no longer influenced just by our neighbors or colleagues. We’re now influenced by people throughout the world. That could mean friends or complete strangers.

    Instead of just learning your neighbors went on vacation, now you know when anyone in your circle is on a trip. At any moment, you may be on the train in 12 degree weather heading to work. One look at your phone and you’ll see plenty of wonderful pictures of people doing cool things. It’s hard to not want that for yourself.

    The byproduct of social media and the internet is the never ending temptation to spend money. Even if that means spending money we don’t have. That’s a powerful force pushing us deeper into debt.

    I am fighting this temptation in my life right now. Having moved to a new home not long ago, there are so many things we want to buy and projects we want to do. I need to constantly remind myself to slow down so I don’t again fall victim to consumer debt.

    So, what’s the solution? 

    Deactivate social media? Cancel the internet?

    Nah. If you did that, you’d miss out on epic Instagram reels like this one where I share my top five favorite personal finance books.

    Instead, the first part of the solution is to recognize when you’re making careless money decisions based on what you think other people are doing.

    Making money decisions based off of your neighbors, let alone the Kardashians, is the fast road to debt. You have no idea why or how another person is spending money. For all you know, it’s all for show and that person is barely getting by.

    Do you really want to blindly follow this person’s choices? Wouldn’t it be better to confer with people you trust to help you think through money decisions? 

    The second part of the solution is to recognize that everywhere you look, companies are clamoring for your dollars.

    Not an exaggeration: nearly $2 Trillion (with a ‘T’) of marketing dollars are spent worldwide each year with one goal in mind: to separate you from your money.

    Digital Marketing Technology Solution for Online Business Concept - Graphic interface showing analytic diagram of online market promotion strategy on digital advertising platform via social media, leading to us spending more money and sinking into debt as learned on Think and Talk Money.

    If you let that reality sink in, you’ll hopefully pause the next time you’re about to spend money on something you don’t actually care about.

    This is where we circle back to money mindset.

    To counteract social media and mass marketing, you need to have a competing force in your life that’s strong enough to overcome all the noise.

    I’m referring to your ultimate goals in life. I mean the reasons you wake up every morning to go to a job or stay up late to finish a project.

    Why are you working so hard?

    When you can answer that question, you’ll know what your ultimate goals are in life. With those goals in the forefront of your mind, it’s much easier to make consistent, intentional money decisions. 

    Most importantly, you’ll stay on budget and avoid sinking into debt.

    You’ll also be much happier when you stop worrying about what random strangers are spending money on.

  • Scary Stats to Know about Debt

    Scary Stats to Know about Debt

    My four-year-old daughter created a game recently that I’ll call “The Raise Your Hand Game!”

    At random times, she’ll say something like, “Raise your hand if you have an ‘M’ in your name!”

    I raise my hand. Refusing to play along is not an option.

    With my hand in the air, she’ll nod in approval that I participated and didn’t lie.

    That’s the whole game.

    Let’s play. I’ll be the host.

    “Raise your hand if you currently have debt!”

    Come on, play along. Get those hands up.

    Nearly 80% of you should have your hand in the air.

    Yup, 8 out of 10 of us have some form of debt. Put another way, just about everyone reading this post has debt. That’s why learning to effectively deal with debt is a core personal finance concept.

    For the next couple of weeks in the blog, we’re going to focus on debt so we can continue our progress towards financial independence.

    Those of us who can successfully eliminate debt will move closer and closer to financial independence.

    Those of us who don’t want to learn will remain debt’s financial prisoner.

    As we begin our discussion on debt, let’s start with some scary statistics.

    According to the Federal Reserve Bank of New York, total household debt in the United States grew to $18.04 trillion by the end of 2024. That’s such a big number, it’s hard to know what to do with that information.

    Let’s break it down by the type of debt:

    • Credit card balances increased by $45 billion from the previous quarter and reached $1.21 trillion at the end of December 2024.
    • Auto loan balances increased by $11 billion to $1.66 trillion.
    • Mortgage balances also increased by $11 billion and reached $12.61 trillion.
    • HELOC balances increased by $9 billion to $396 billion.
    • Other balances, reflecting retail cards and other consumer loans, increased by $8 billion.
    • Student loan balances increased by $9 billion to reach $1.62 trillion.

    While these numbers are still too big to comprehend, one powerful conclusion is hard to miss:

    In every category, the amount of debt increased from the previous quarter.

    This pattern of increasing consumer debt has been consistent for some time now. HELOC balances have increased for eleven consecutive quarters. Credit card balances have increased or remained the same for 10 of the last 11 quarters.

    Now, let’s look at the statistics on a per household basis.

    Per household, we see the same picture of increasing consumer debt in the United States.

    According to an Experian report that compared consumer debt per household from 2023 to 2024, we see that:

    • Credit card balances increased 3.5% to $6,730.
    • Auto loan balances increased 2.1% to $24,297.
    • Mortgage balances increased 3.3% to $252,505.
    • HELOC balances increased by 7.2% to $45,157.
    • Student loan balances actually decreased by 9.2% in 2024 to $35,208. This one’s an outlier due to federal loan forgiveness programs.

    Let’s look closer at credit card debt for a moment.

    According to a recent survey looking at credit card debt in 2024 by Bankrate.com:

    • 48% of credit card holders carry a debt balance, an increase of 9% since 2021.
    • 53% of the people have been in credit card debt for more than a year.
    • The main causes of credit card debt are unexpected medical bills (15%), car repairs (9%) and home repairs (7%).

    According to another Bankrate.com survey, 33% of Americans report they have more credit card debt than emergency savings.

    These last couple stats helps us begin to understand why so many people fall into debt in the first place. It goes back to our previous conversation about the importance of emergency savings. When we don’t have savings, the first place we turn is to our credit cards.

    Consumer debt is a worldwide problem.

    While the above statistics are specific to the United States, you’re not off the hook if you live elsewhere. In fact, the data in your nation may be worse.

    Any readers in Denmark, Norway or Switzerland?

    According to a recent study by Compare the Market, these three nations lead the way with the highest household debt. The same study ranked the United States at number 18.

    What can we learn from these scary debt statistics?

    Whether we look at the national figures or per household numbers, the picture is clear.

    Worldwide, we have a consumer debt problem. And, it’s getting worse.

    For most of our conversation on debt, we’ll focus on credit card debt. Most everyone agrees this is the worst kind of debt to have. It’s also the type of debt that’s the most relatable applicable to many of us, regardless of where we are in our careers.

    Before we go any further, it’s important to understand the two main reasons why I share studies like these about debt.

    1. If you are currently in debt, please know that you are not alone.

    These scary stats make it abundantly clear that many of us are struggling with debt. You probably don’t know if your friends and family are in debt because we’ve been brainwashed not to talk about money.

    As you know, I’m on a mission to change that.

    Nearly half of us in America are burdened with credit card debt. And yes, it is a heavy burden. There’s no sense in trying to convince yourself that you’re not worried about it.

    The good news is there are proven strategies for getting out of debt that we will learn in upcoming posts.

    These strategies are not hard to implement, but they are challenging to stick with. Temptation to overspend is everywhere. To succeed in eliminating your debt, you need to have strong motivations.

    Personal finance always come back to your money mindset. Just like with budgeting, I can give you proven techniques and strategies.

    If your money mindset is not in the right place, it won’t matter. You’ll stay in debt, or worse, your debt will continue to increase.

    2. If you think you are immune from falling into debt, think again.

    When we are presented with statistics like this, it’s not uncommon for us to be in denial. We might say to ourselves:

    “No, I understand that other people are in debt. But, that won’t happen to me.”

    Or, “No, I make good money. I can pay off my credit card debt if I really wanted to.”

    If it were really that easy, then why do half of Americans carry credit card debt? Why is our credit card debt growing instead of shrinking?

    You may not currently be in credit card debt, and that’s a very good thing. But, what if one of those emergencies mentioned above surfaces in your life?

    • If you were hit with a large, unexpected medical bill, could you cover it without credit cards?
    • What if your roof needs to be replaced? Or, your furnace breaks during the middle of winter? Do you have tens of thousands of dollars saved to cover these necessary expenses?
    • Do you own a car? How awful is that annoying “Check Engine” light? A simple trip to the mechanic could be another few thousand dollars out of your pocket.

    These types of financial emergencies do not discriminate. Each one of these situations could happen to any of us at any time. Let’s not forget that 90% of us are not completely satisfied with our savings. That means almost all of us would have to turn to credit cards to cover these emergencies.

    Credit cards, close up, illustrating on Think and Talk Money that too many people worldwide have some form of debt.

    Ending up in debt might come as an unpleasant shock to you. Knowing these statistics will hopefully put your mind at ease that you’re not alone.

    So, even if you’re comfortable in your job and make good money, you may still end up in debt. If you do end up in debt, the lessons we’ll soon learn will ensure that your stay in the financial penalty box is as short as possible.

    In our series on debt, we’ll soon learn:

    • How in today’s world of social media, “Keeping up with the Joneses” is really more like “Keeping up with the Kardashians.”
    • There is a difference between “good debt” and “bad debt.” When used responsibly, good debt can help you reach your financial goals faster.
    • Paying off debt is hard. It’s heavy. It’s stressful. There’s no shame in admitting that. Just because it’s hard, doesn’t mean we can ignore it any longer.
    • The top strategies to pay off debt as efficiently and painlessly as possible.

    Whether you currently have debt or smartly want to be prepared just in case, our series on debt is crucial for anyone seeking financial independence. There is no faster way to undue all your hard work than to fall into debt.

    You don’t need me to tell you that debt is a major barrier to reaching financial freedom. In fact, debt is oftentimes the exact opposite of financial freedom.

    When you have debt, your choices are limited. It’s like you’re in financial prison. When you are free of debt, you are in control.

    Learning about handling debt does not have to be depressing or scary. When we talk it out together, I think you’ll find that you’re not alone. Like with all hard things, there’s no point in struggling by yourself.

    Hands in the air. We got this.

  • Why it’s Not Taboo to Talk Money

    Why it’s Not Taboo to Talk Money

    Why do so many smart people feel like they’re barely getting by?

    Even with salaries of more than $100,000, too many people across the United States are living paycheck to paycheck.

    Whether you are a high earner or not, we all need to exert mental energy on our personal finances. Don’t make the mistake that just because you make a lot of money, you are immune.

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    One of the biggest misconceptions in personal finance is that people that make a lot of money don’t have money worries.

    I’m not saying that we should feel sorry for people that are high earners. I’m pointing out that personal finance education is important for all of us.

    It’s not your fault if you’ve made poor money choices, up to a point.

    I don’t blame anyone, high earners included, for making poor money choices (up to a point). Most people never learn basic personal finance skills.

    Think about an emergency room physician. He was likely one of the top students in his class his entire life. He’s proven that he can learn complex matters. He can do the hardest things imaginable, like saving someone’s life.

    The problem is he was never taught to use his brain to manage his own personal finances.

    If that ER doctor is living paycheck to paycheck, he likely won’t receive much sympathy. He’s probably blamed for not making better money choices.

    People will say he makes plenty of money. It’s his own fault. He must be irresponsible or selfish or craves expensive things.

    I don’t think that’s fair.

    I think that ER doctor should get a pass from undeserved judgment. I’m not saying you have to feel bad for him or offer him your sympathies. What I am saying is he should be given a chance to learn about personal finance just like the rest of us.

    Does that mean he is forever excused from taking responsibility for his money choices?

    Of course not.

    We all need to take responsibility to educate ourselves. That’s the reason a website dedicated to thinking and talking about money exists in the first place.

    Fortunately, more than half of the United States now requires some form of personal finance education for high school students.

    That’s a great start, but it’s not enough.

    Personal finance education is for all stages of our lives.

    Personal finance education needs to continue throughout adulthood. So many of the concepts we talk about won’t resonate with high school kids who are still provided for by their parents.

    Personally, I needed to feel the pain of being out on my own before the core lessons sunk in. I had no perspective prior to that.

    One of my priorities with Think and Talk Money is to help you learn these core principles before you feel too much pain.

    If you’re in the early stages of your career, there is no better time than now to develop strong money habits. It can be very difficult to correct bad habits as time goes on. A better plan is to work on developing good money habits now.

    If you’re already established in your career, maybe all you need is a reminder or a sounding board to more consistently make good choices.

    If you’ve struggled up to this point and want to work on your money habits, there’s good news. You have a major advantage.

    You’ve felt the pain.

    Elementary Classroom of Diverse Bright Children Listening Attentively to their Teacher Giving Lesson. Brilliant Young Kids in School Learning to Be Great Scientists, Doctors, Programmers, Astronauts, but not learning about personal finance, which is why they need Think and Talk Money.

    You know what it’s like to live paycheck to paycheck.

    Use that perspective to motivate yourself to make adjustments.

    Don’t blame yourself or feel ashamed. Like the ER doctor, personal finance education wasn’t something you knew you needed. Now you know better. Time is still on your side, if you get started today.

    Talking about money is not taboo.

    One of my other priorities with Think and Talk Money is to confront the negative money stereotypes that dominate society. To start with, I’m on a mission against the common refrain that it’s taboo to talk about money with our family and friends.

    Are we supposed to accept that it’s better to struggle alone?

    That we should isolate ourselves in a constant state of worry?

    That we are forbidden from seeking out help by talking to the people we trust the most?

    I refuse to accept any of that.

    Who even said talking about money is taboo in the first place?

    What does “taboo” even mean? Let’s look it up.

    Taboo: “Banned on grounds of morality or taste.”

    Morality or taste? What does that mean? Let’s look up “moral.”

    Moral: “of or relating to principles of right and wrong in behavior.”

    Ah, I see.

    With these definitions as context, let me try to define taboo in terms that actually make sense:

    Taboo means we shouldn’t do things that we know are wrong.

    OK, that I get.

    I’m flipping the script on what taboo means when it comes to money.

    And with that understanding in mind, I’m flipping the script on what taboo means when it comes to money.

    I can keep going all day. I think you get the point. Talking money is not taboo.

    Keep an eye out for posts about the current money conversations I’m having.

    In the spirit of convincing you that talking money is not taboo, we are introducing a new post series this week. In this continuing series, I will highlight the current money conversations that I’m having with my friends and family.

    In our first of these posts later this week, I’ll share how my wife and I recently talked through our decision to split our Later Money between emergency savings, college savings and mortgage debt.

    I’ll also share some of the empowering conversations I’ve had recently with Think and Talk Money readers. I learn so much from these conversations, whether they’re with my mesothelioma clients, my students, or my friends.

    Let’s flip the narrative together.

    Talking money is not taboo. The only thing that’s taboo is avoiding your personal finances.

    Have you had any beneficial money talks lately? How did it feel afterwards?

    Please continue to reach out in the comments or on socials with your responses and thoughts.

  • Q&A: Look for a Valuable Side Hustle

    Q&A: Look for a Valuable Side Hustle

    In this week’s Q&A, we talk about how the timing was right to launch Think and Talk Money, why you should consider a side hustle, and what comes next for the website.

    As always, please email your questions or leave a comment below or on socials.

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    You have a lot on your plate. Lawyer, teacher, landlord, young kids… why launch Think and Talk Money now?

    I had been thinking about writing a book or starting a website for a couple years. Over the holidays, my dad gave me the final push I needed.

    We were casually chatting while the kids played in the other room. Out of nowhere, he said, “Matt, you should do it.”

    Do what?

    “You should write a book.”

    Oh, no biggie.

    I didn’t expect him to say that. He went on to explain how you get to a certain age and you look back on life and wonder where it all went. You think about all the things that you wanted to do but never got around to doing.

    No regrets, blogging then book.

    He knew I had been thinking about writing a book for a while and didn’t want me to regret not doing it.

    I thought about it and realized he was right. I would never forgive myself if I didn’t take this chance.

    Now that I’ve thrown this out there, I have to do it, right?

    There’s never a perfect time in life. If I didn’t start Think and Talk Money now, I might never have gotten around to it. Something always comes up. It’s too easy to make excuses.

    It’s true we have a lot going on. Fortunately, I had a system already in place that gives me time to write thanks to Hal Elrod’s The Morning Miracle.

    I hesitate to say a certain book “changed my life.” This might be one of them.

    For almost 10 years now, I’ve been waking up at 5:30 a.m. to read, journal, and relax. It’s so beneficial to have that time for myself, especially now with kids, before the day gets away from me.

    To learn more about the benefits of a daily morning ritual, check out Elrod’s miracle morning website.

    Since launching Think and Talk Money, I use my mornings to blog instead of reading. I like teaching and writing about personal finance, so my mornings are still enjoyable.

    That being said, I may need to adjust the schedule to read the latest book in the Empryean series, Onyx Storm.

    How do you feel about side hustles?

    Short answer: I love side hustles.

    We’ll spend some time in a future post talking about all the advantages of having a side hustle.

    The obvious advantage is you can make more money. The important thing is what you do with that money to make the side hustle worth it. A side hustle is another time commitment, after all. If you’re going to take on the responsibility, make sure it counts.

    Before you consider a side hustle, have a plan in place for why you want additional money. Are you looking to pay down debt faster? Save for a wedding? Invest in your first rental property?

    One of my favorite experiences teaching personal finance to law students involved a side hustle. A couple of years ago, a student approached me during a break and told me about his credit card debt. It had been weighing heavily on him.

    After our discussion about side hustles, he committed himself to driving for DoorDash and using the income to pay off his credit card balance.

    Six months later he sought me out to share that the plan worked. His side hustle allowed him to pay off his credit card in less than six months. All while working a full-time job and attending law school par-time. I couldn’t have been happier.

    To help you think through why you might want a side hustle, check out these three posts:

    You Should Want to be Good with Money
    Part 1: How to Budget to Fix the Disappearing Dollar
    Why You Need to Fuel Your Savings

    BTW, you’re not too busy or important for a side hustle.

    Some people reading this will automatically think, “I’m way too busy to even think about another job.”

    In my personal finance class for law students, we spend a lot of time challenging that notion. Very few people- and I mean very few- are too important or too busy to take on a side hustle.

    You may think you’re one of those “too important” people. I would challenge you to assess whether you’re confusing “too important” with “too stressed.”

    Setting that conundrum aside, the ideal side hustle is something you enjoy doing that can earn you extra money at the same time. Some examples my students have come up with in class include:

    • Bartending. Entice your friends to come to your bar by offering cheap drinks. You get to hang out with them and get paid at the same time.
    • Fitness instructor. Instead of paying $48 for the spin class you love, become the instructor and get paid to lead the class.
    • Dog Walker. If you love dogs and don’t currently have one of your own, what better way to fill that void in your life while making money. The same applies to babysitting.
    • Home Baker. Make homemade treats with your kids and sell them to parents who don’t have the time.

    There is always a way to make more money.

    The point is there are always ways to make more money by doing things you like to do anyways. Even if you’re busy. You just have to exert some mental energy to figure out how.

    I’m reminded of another conversation my dad and I had when I was in high school.

    Growing up, my siblings and I were busy kids. Sports, clubs, performances, classes, you name it. I made a remark to my dad about it at one point.

    He responded that being busy wasn’t a bad thing because you don’t have time to fool around. When you have no choice other than to stay focused, you actually perform better in all facets of life.

    You’re not thrown off by distractions because you’re locked in on accomplishing your goals.

    Smiling female bartender talking with customers as her side hustle to make extra money learned on Think and Talk Money

    After launching Think and Talk Money, I feel a heightened sense of focus. It’s benefitting me in all of my pursuits. I take care of business as best I can, while prioritizing my family and my health.

    I can see your eye rolls through your screen.

    This guys is nuts. He’s a workaholic. He has no life.

    The people who know me best would beg to differ.

    They might just tell you that I’m striving to build a life where I spend my working hours doing what is meaningful to me.

    I spend my personal time with the people that are meaningful to me.

    Have you ever used a HELOC to invest in real estate?

    Yes, I’ve used HELOCs, which stands for Home Equity Lines of Credit, to scale my real estate portfolio.

    This question leads to so many concepts we need to discuss, from debt and credit to investing. We’ll come back to HELOCs more fully in a separate post.

    The bottom line is using HELOCs to scale your investment portfolio is a more advanced strategy that I would not recommend for everyone. I probably wouldn’t recommend it for most people, even experienced real estate investors.

    I say that for good reason. When you hear HELOC, think debt. For many of us, debt is problematic and leads to negative emotions.

    I experienced these negative emotions associated with debt. I only got comfortable with taking on debt as I learned to trust myself again with the responsibility.

    HELOCs are like credit cards, just in another form of debt.

    My advice: if you have proven to yourself that you can responsibly handle debt, using a HELOC may be a worthwhile strategy for you.

    By responsible with debt, I mean:

    If you satisfy all of the above, a HELOC may be useful to scale your real estate portfolio. If you’re thinking about using a HELOC in the near future and want to talk it out, please feel free to reach out.

    What’s it like being a blogger?

    It’s only been five weeks, but I’m happy I took the chance to launch Think and Talk Money.

    It’s been fun.

    And, it’s been hard.

    First, the fun stuff. I’ve enjoyed writing and talking about personal finance concepts that are important to me. I’ve especially enjoyed all the interactions with our readers.

    One unexpected element I’ve appreciated is the sense of accomplishment that comes with publishing every post. This is very different from my experience as a lawyer where we typically work on a case for years before its conclusion.

    I’ve also had fun writing in a new style. I haven’t ever blogged before. I haven’t done any writing other than legal writing since college. If you’ve ever had the pleasure of reading a legal brief or court opinion, first off, I’m sorry. Second, you understand how different legal writing is from blog writing.

    Even though the writing styles are different, there is certainly some overlap in the fundamentals. My aim in both styles of writing is to be clear, concise, and informative. I hope to be somewhat interesting, as well.

    As a blogger, I’m still finding my voice, as they say.

    It can be challenging to make core personal finance concepts- like budgeting and saving money- educational, simple, and entertaining. If I’m doing my job, then my personal finance content should also be relatable and understandable.

    Please let me know you have any feedback on what’s working (or not working for you)!

    So, what’s hard about blogging?

    Now, for the hard stuff.

    My wife and I launched Think and Talk Money with zero knowledge, skills, or experience in starting a website.

    Can you tell? Be nice.

    We have no tech background whatsoever. Two months ago, I had no idea what SEO, caching, or plugins were.

    We also have no design or marketing background. I didn’t even have social media (other than LinkedIn) until we launched. The fact that we have 129 Instagram followers (don’t laugh) seems like a small miracle to me.

    My first post on LinkedIn had more than 12,000 impressions in the first few days. I still have no idea what that means, but it’s exciting!

    If you’ve ever started a website, you know exactly what I mean. Creating the content is only the first step. So much more goes into it behind the scenes. We’re still only scratching the surface.

    To sum it up, the tech stuff has been challenging and time consuming. We’ve learned so much already but have so much more to learn.

    Thank you to everyone who has reached out with tips and suggestions!

    What’s the end game for Think and Talk Money?

    I completely understand why this is an important question to think about. The truth is we’re just getting started and haven’t thought about Think and Talk Money in terms of an end game.

    I’ve always liked to teach and write, and this lets me do more of both. For now, our mission is to introduce the most important concepts of personal finance through the blog.

    We post three times per week on Mondays, Wednesdays, and Fridays.

    Some of the posts cover core personal finance topics in depth. Other posts are more targeted and address specific strategies or lessons.

    A writer engrossed in their work at a desk overlooking a tranquil lake, finding inspiration in the natural surroundings to write about personal finance at Think and Talk Money.

    There’s an intentional order to the way we’ve been introducing concepts. The order is important and mirrors the curriculum in my personal finance class for new lawyers.

    We started with money mindset, then moved to budgeting, then moved to savings.

    These are core personal finance concepts that we will always revisit in the blog. If your mind is not in the right place, it doesn’t matter if you know the particulars of how to budget or save.

    We’ll soon move on to topics like debt and credit, investing, and real estate.

    So, what comes next for Think and Talk Money?

    My wife and I are thinking about all the options: podcast, online courses, personal coaching, speaking events, and a book.

    Of all these options, the book might be the surest thing. I’ve wanted to write a book for a long time.

    Whatever happens, we’ll do our best to continue creating valuable content and listen to what our audience wants.

    Let us know if you have any thoughts or ideas on what should come next!

  • Why You Need to Track Your Net Worth

    Why You Need to Track Your Net Worth

    On the first of every month, I wake up at 5:15 a.m., brush my teeth, and put on my robe.

    I walk downstairs, pour a cup of coffee, and head to my favorite chair in the living room.

    I then power on my laptop and open an Excel file called “Adair Family Balance Sheet.” Using this basic spreadsheet, my wife and I have been tracking and discussing our net worth for years.

    It takes me about 20 minutes to update our family balance sheet each month. The hardest part is remembering all the passwords for our accounts.

    When I finish entering the new account values, I study the spreadsheet for about two minutes.

    I hope to see that our money efforts that month resulted in our assets increasing in value and our debts decreasing.

    When I’m finished with the updates, my wife grabs her coffee and sits with me. She will likewise study the family balance sheet for about two minutes.

    We’ll then spend about three minutes talking about the changes from the previous month.

    And, that’s it.

    It takes us less than 30 minutes each month to track and discuss what I consider the most important metric in personal finance.

    That’s all the time it takes to know if we are progressing towards our most important goals. By tracking our net worth, we can quickly see if we are making good money decisions or need to make adjustments.

    I recommend everybody, no matter where you are in your financial journey, track your net worth.

    Just like budgeting with two simple numbers, tracking your net worth is the best, and easiest, way to measure your money progress.

    There’s no better way to learn how much money you’re keeping after a month of making money.

    In this post, we’ll talk about what “net worth” means, how to track it, and why it’s so important.

    Let’s start with what net worth means.

    Going into hiding straight from a London pub.

    One night when I was studying abroad in London years ago, my good friend, Kais, and I were talking in a pub. I don’t remember what we were talking about when he offered:

    “If I was in trouble and needed to go into hiding, I could sell everything that I own, pay all my debts, put the leftover money in the bank, and be fine for a couple of years.”

    Uhh, OK…

    At the time, I had no idea what he was talking about.

    Still, I had to admit that it seemed pretty cool that he had that kind of financial flexibility. I knew I couldn’t survive for a couple of weeks, let alone a couple of years.

    People in an english pub talking about their net worth as learned on Think and Talk Money.
    Photo by Luca Bravo on Unsplash

    Looking back years later, I now realize that he was talking about his net worth.

    Kais, if you’re reading this, drop me a line to let me know you’re not hiding.

    So, what is net worth?

    Your net worth is simply all of your assets less all of your liabilities.

    Net Worth = Assets – Liabilities

    Yup, you only need those two numbers to calculate your net worth, the most important number in personal finance.

    There’s no complicated math involved. Just addition and subtraction, which couldn’t be easier in a basic balance sheet (or spreadsheet).

    Let’s start with understanding what counts as an asset.

    What are assets?

    An asset is anything that has economic value and can be owned or controlled.

    In even simpler terms, an asset is just about anything you can think of that could be exchanged for money.

    My family’s current assets include:

    • Retirement accounts for both me and my wife
    • College savings accounts for each kid
    • Health savings account (my favorite account… we’ll revisit)
    • Checking accounts
    • Savings accounts
    • Cars
    • Jewelry
    • Properties
    • Cash on hand

    Other common examples of assets include:

    • Collectibles (artwork, coins, designer bags)
    • Furniture
    • Household goods (TVs, appliances, rugs, etc.)
    • Clothes
    • Tools
    • Recreational gear (bicycles, golf clubs, boats)
    • Toys

    It’s up to you to decide what assets to include in your balance sheet. There is no strict science to it. That said, there’s no point in overstating (or understating) your assets. You (and your family) are the only ones who will be reviewing your balance sheet.

    I personally don’t include all of our household items, but you are certainly welcome to. For me, it’s not worth the time and effort to determine how much I could earn by selling my TV or snowboard.

    a closet that is organized and neatly arranged with clothes, shoes, and accessories, illustrating items that could count as assets learned on Think and Talk Money.

    It’s perfectly acceptable if you want to tally up the value of your items. I think it makes sense to do so if you have a lot of nice things. If you choose to do so, aim for estimates, rather than precise values, to make your life easier.

    Why it is so important to acquire assets.

    Assets can, but don’t always, appreciate (increase in value) over time. For example, a property may appreciate over the long term, but a typical car will do the opposite and depreciate (lose value over time).

    Assets can also generate income, but don’t always. A good rental property should generate monthly cashflow. A stock portfolio can generate dividends (payments from companies to investors).

    On the other hand, a designer bag won’t generate income, unless you charge people to borrow it. Even so, a designer bag is still considered an asset because you could exchange it for money.

    To state the obvious, owning assets is a very good idea. Especially assets that appreciate and assets that generate income.

    When you own these types of assets, your net worth will increase over time without much extra effort on your part. You don’t have to specifically trade your time for money with these types of assets.

    Think of it like this: the best way to achieve financial independence is to own assets that increase in value over time and generate income.

    By tracking your net worth each month, you’ll know how your assets are doing.

    Does my home count as an asset?

    Some people, like personal finance legend Robert Kiyosaki, don’t think you should count your home as an asset. The argument goes something like, “You can’t really sell your home because then you wouldn’t have anywhere to live. So, you shouldn’t count it as an asset.”

    I couldn’t possibly disagree more.

    For many of us, our homes are our most important purchase in our lives. Over the long run, most of our homes will appreciate in value, even if not as much as we hoped.

    We spend years working to make money so we can pay down the mortgage. Each payment we make reduces our debt and increases our equity in the home, thereby improving our net worth.

    Don’t overcomplicate it. Include your home as part of your net worth. Just don’t forget to include the mortgage as a liability (we’ll discuss below).

    How do you determine the value of your home for purposes of tracking your net worth?

    Make it easy on yourself. The goal is to obtain a reasonable estimate. If you’ve worked with a real estate broker, ask her for the current value of your home. She will use recent “comps”, meaning similar comparable properties in the area, to come up with a fair value.

    You can also make a decent estimate of the value of your home by studying comps yourself. Platforms like Redfin or Zillow make it easy to see what homes have sold in your neighborhood.

    Look for homes as similar to yours as you can find. Focus on size, the number of bedrooms and bathrooms, and the quality of the finishes.

    Remember, this is not an exact science. We’re aiming for an estimate of your home value only for the purpose of measuring your net worth.

    On our family balance sheet, I only update the estimated value of our properties once per year. That’s good enough for me, and all you really need to do.

    Now that we know what assets are, we need to figure out what liabilities are to calculate our net worth.

    What are liabilities?

    A liability is any debt or obligation that you owe to someone else. Liabilities are most commonly found in the form of loans.

    Unlike assets, liabilities diminish your overall net worth.

    To speed up your path to financial independence, focus on reducing or eliminating liabilities.

    Closeup image of a woman holding and choosing credit card to use, which she knows counts as liabilities from Think and Talk Money.

    My family’s current liabilities include:

    • Lines of credit
    • Mortgages

    Other common examples of liabilities include:

    • Credit card debt
    • Student loan debt
    • Auto loans
    • Personal Loans
    • Consumer loans

    When you are beginning your career, it’s common for your liabilities to be greater than your assets. This is usually because of student loan balances.

    Remember our real life, really lost boy? He had a negative net worth for years.

    Don’t let that discourage you from tracking your net worth. Even if you’re in negative territory, each month is a chance to shrink that negative number, which means your net worth is increasing.

    Whether you are paying down debt, or adding to your savings or investments, the result is the same: your net worth increases.

    The reason for tracking your net worth also remains the same: individual progress, over time.

    Now that we know what assets and liabilities are, we can create our balance sheet and determine our net worth.

    Creating your own net worth balance sheet is very easy.

    I’m happy to share the spreadsheet I currently use to track my net worth. Subscribe to our weekly email newsletter, and send me a reply to the next email asking for my net worth spreadsheet.

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    Name

    On the top of my family’s net worth spreadsheet, each row represents an asset, or something we own.

    On the bottom of the spreadsheet, the rows represent the debts we owe.

    Each of the 12 columns (one column for each month) in the spreadsheet indicates the value of each asset at the end of the month.

    The reason I add a new column for each month, instead of just updating the values in a single column, is so I can easily see how our net worth has changed over time.

    Once all 12 months for the year are filled in, I start a new sheet and repeat the process. This helps us track how our net worth has changed over the long run.

    Since your balance sheet is for your eyes only (or your family’s eyes), feel free to design it however you want.

    On our family spreadsheet, I use different colors to illustrate the different types of assets we own and liabilities we owe:

    Turquoise for securities (stocks and bonds). Orange for checking accounts. Purple for savings and objects (like cars and jewelry). Green for properties.

    I like color coding because it helps me quickly visualize what we own or owe in each broad category.

    Here’s what a simple balance sheet looks like:

    If you want to create your own balance sheet, here’s what it might look like:

    AssetsJanuaryFebruaryMarch
    401(k)
    Roth IRA
    529 College
    HSA
    Checking
    Savings
    Car
    Home
    Rental Properties
    Total
    LiabilitiesJanuaryFebruaryMarch
    Credit Cards
    Mortgage
    Student Loan
    Auto Loan
    Total

    Once you input the amounts for each cell in the appropriate column, use the “sum” function to total your assets and separately total your liabilities.

    Then, all you need to do calculate your net worth is create one final row labeled “Net Worth”.

    In the “Net Worth” cell, simply use the “sum” function again to subtract the liabilities total from the assets total.

    JanuaryFebruaryMarch
    NET WORTH

    That’s all there is to it. Now, you know your net worth.

    Tracking your net worth is the best way to measure your personal financial progress.

    By now, you should be thinking that it’s not too difficult to track your net worth.

    It takes my wife and I less than 30 minutes each month to track and talk about the most important number in personal finance.

    How can we spend so little time on the most important number in personal finance?

    Because we’re only looking for progress compared to what our net worth was previously.

    We’re not interested in anyone else’s numbers. We only care about making personal improvements for our family.

    If our net worth is increasing over time, it means we are heading in the right direction.

    It means that we are continuing to fuel our Later Money goals. We’re paying down debt. We’re letting our investments do their thing.

    If our net worth is decreasing, it means we need to consider making adjustments.

    Sometimes our net worth decreases because the markets are heading down. If that’s the case, we don’t do anything. At this stage in our lives, we can afford to wait for the markets to tick back up.

    If the issue is that our debt is increasing, or we haven’t fueled our investments that month, we make adjustments.

    By studying our net worth each month, we can catch these setbacks before they become a continuous problem.

    That’s all there is to it.

    All before the kids wake up.

    Do you currently track your net worth?

    Have you found it useful to measure your overall financial health.

  • How to Best Optimize your Savings

    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.

    Man protected from the crisis because he has 3 to 6 months of emergency savings thanks to think and talk money.

    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.

    Happy wedding photography of bride and groom at wedding ceremony paid for with savings learned on Think and Talk Money

    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.

    Happy young couple making savings transfer online in computer app and feeling an emotional high thanks to Think and Talk Money

    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?

  • Why You Need to Fuel Your Savings

    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.

    Seats of a passenger car in a European train with 1 of 3 people sitting on it not able to pay their bills for one month if they lost their jobs.

    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.

    Father and daughter buying apples in grocery store as part of rising cost of living nationally

    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.

    Close up of baby girl wrapped in a security blanket symbolizing an emergency savings account learned on Think and Talk Money.

    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?