Joel Larsgaard and Matt Altmix, co-hosts of the podcast How to Money, talk about their efforts to make it easier for people to have conversations about their finances.
How are you helping people talk about their money?
Joel Larsgaard: As a society, we don’t like to talk about money. One survey found that less than 40 percent of couples talk about money on a monthly basis. And when money conversations do happen, it often ends in a fight.
I saw this firsthand growing up. My parents didn’t handle money very well in the early years of their marriage and that led to significant financial problems in addition to difficult family dynamics. Ultimately, car repossession and bankruptcy became part of our family money story. Experiencing that as a 12-year-old left an indelible impression, and it’s probably why I’m so fascinated (some might say obsessed) with the art of handling money well as an adult.
So Matt and I are on a mission to end the stigma of money conversations. We’ve seen just how hard a lack of financial knowledge and a willingness to face financial problems head on can be. Whether you are single, married, or in a long-term partnership, starting a money dialogue gets the ball rolling and initiates progress.
Matt Altmix: And if the conversations get the personal finance ball rolling, then having financial goals are what keep that ball rolling. On the podcast, we call this the “Why Behind Your Money.” It’s so important for each individual person or family to identify this “why” early on, because if you don’t have any sort of long-term goal that you’re striving after, you’re going to lose steam. Before you know it, you’re back to your old, sloppy spending habits. So figuring out your “why” is crucial.
For some it’s the ability to buy their first home, or maybe the option to leave a high-stress work environment in favor of launching their own business. For others, it’s the desire to stay at home once there’s a baby on the scene. But it’s important to know what you want your life to look like and allow your money decisions to flow from that.
Nietzsche said that “He who has a why to live for, can bear almost any how.” This is certainly the case for how we approach our personal finances.
What do you see as the must-know financial basics”?
JL: Most people shudder when they hear the word budget. I know I used to! Most financial gurus talk about budgets in draconian terms that remove any appeal. To have a budget, it would seem, is an act of self harm.
Naturally, people opt out of budgeting altogether because it feels like a soul-sucking task, but let’s change that narrative. Budgets aren’t drudgery. Your budget is a tool that will help you achieve your most important financial goals. It’s not there to prevent you from any fun you want to have — it’s there to direct your dollars into the areas of your life that produce the most joy.
Having a budget that works in your life starts with tracking where your money is currently going. And then comparing your spending to the “why” that Matt mentioned earlier. Do they line up? If how you’re spending money doesn’t jive with the priorities you have outlined, it’s time to make some changes.
MA: Exactly! A budget is simply a plan for your money. When a contractor begins building a house, they don’t just show up and start nailing boards together based on what they feel like building that day. That would be dumb and irresponsible. They have blueprints and a plan because constructing a house is a complicated endeavor, and in the same way we shouldn’t drift through life spending money based on our emotions.
We all need a plan for our money. So once you have your budget in place, something else that is often neglected is funding a basic emergency fund of $2,467. Data from the Federal Reserve shows that 40 percent of Americans couldn’t afford a $400 emergency without relying on debt, and that should be a wake-up call. We have to establish and maintain some basic financial margin in our lives.
And we didn’t pick that incredibly specific number out of thin air. Research by economists shows that every dollar you can funnel into your emergency fund as you work toward the goal of $2,467 dramatically reduces your chances of falling into financial hardship. After you crush that goal, additional money saved will continue to help achieve other goals and provide additional peace of mind — but that initial sum has the largest impact. So the first thing you need to do is set aside that $2,467 for that inevitable rainy day.
What advice do you have for trying to alleviate debt, especially after the holidays?
MA: Well first, don’t beat yourself up about it. I think a lot of individuals may have spent more than they typically would have over the holidays simply because COVID and social distancing dramatically altered the holidays for all of us. I’ve seen folks spending more when they couldn’t physically be together.
But at the same time, it is really important to knock out some of that pesky consumer debt as quickly as possible to limit how much you’re paying in interest. One of the ways to immediately curb your spending in order to eliminate that debt is by cutting food delivery from your life. Those apps can balloon your takeout order by making it 40 percent more expensive. We’re all about supporting our favorite local restaurants, but we hate the idea of turning to food delivery apps into a crutch for not wanting to eat leftovers or cook at home. That’s a change you can make today and you’ll start to realize immediate savings.
After you have some small wins under your belt, you can look to secure some bigger wins that will consistently save you money month after month. I’m talking about things like switching cell phone providers or shopping your auto and homeowners insurance. It can often feel like we’re in a committed long-term relationship with our cell phone provider and we don’t even consider switching to a new provider. But with plenty of Mobile Virtual Network Operators out there offering identical coverage for a fraction of the price, you should seriously consider a MVNO.
Check out Mint Mobile if you like T-Mobile or look into Visible if you’re a fan of Verizon’s network. That switch alone could easily save you $500 a year. And if you’ve been with the same auto insurer for at least two years, there’s a good chance you’re overpaying for that as well! Shop your insurance with an aggregator site like Policygenius or with a local independent agent. These are both instances where blind loyalty can cost you a lot of money.
JL: Yes, and if you find yourself mired in more severe levels of debt, it’s time to take more drastic action. If your debt load is keeping you up at night, you need to move beyond belt-tightening and into a whole new set of britches, and that means making larger lifestyle moves that will provide you with a greater ability to pay off that debt more quickly.
The tiny house movement became popular for a few reasons, but one major reason that people chose to leave their normal-sized dwellings for a home on wheels was to pay off their debt far more quickly. Take a page out of that book and consider living in a smaller and less expensive space. If you own your own home and can’t easily move, consider renting out a room in your home on sites like Airbnb or FurnishedFinder. There’s no shame in that game and it will revolutionize your ability to eliminate your debt in a much shorter time period.
Other bigger cost-cutting options worth considering to accelerate your debt payoff include starting a side hustle or ditching a vehicle. Let’s quickly discuss the latter: Many American families could get by with one fewer vehicle — especially in the new era where many of us are working from home. Stats show that our cars are sitting idle 95 percent of the time. Most people will find that hopping on a bike more often and using the occasional rideshare will allow them to do this while cutting a huge expense from their monthly budgets. My family recently downsized from two cars to one and it’s a freeing feeling!
And if your debt load is too much to bear, it’s time to talk to someone who can offer help on a more significant level. The best place to turn is to contact a non-profit debt counseling service, like your local affiliate of the National Foundation for Credit Counseling or Money Management International.
What are some of the best things you can do now to financially plan for the long term?
MA: If you could have $1 million today or 1 penny that doubled every day for a month, which would you choose? A million sounds like an impressive amount of money, and as human beings, we have a difficult time understanding the power of compounding interest. However, if you were to take a penny and double that amount for a month, on day 15 you would only have $163.84, but by day 25 you’d have $167,772.16, and by the end of the month, you would have a grand total of $5,368,709.12!
The point here is that it is easy to get discouraged and to feel like you’re not making much progress if you’ve recently started investing. One-hundred, sixty-three dollars by day 15 isn’t anything to write home about, but it’s in those final several days you really get to see the amazing ability of compounding interest shine through. Start investing for your future now, even if it’s only $20 a month — it’s not going to feel like much in the moment, but over the decades, you can have a massive amount of wealth saved and invested.
JL: There’s also an important mental change that takes place when you get started investing, even if it’s just 1 percent of your paycheck. You have now become an investor! That small shift from investing nothing to investing something catalyzes something in us from a psychological perspective.
I remember when my 1-year-old son started walking. Taking that first step was a huge accomplishment. And in just a few days, he stopped crawling altogether. That’s kind of how things work for us as we put one foot in front of the other by taking small, positive money actions. We’re creating a behavioral change leading to a mindset shift that reinforces our ability to do hard things and positively direct our own financial future.