Shannon McLay
Founder, The Financial Gym
Once a financial advisor at Merrill Lynch, Shannon McLay decided to dedicate her life to helping people achieve financial wellness by creating The Financial Gym. Here, she offers tips on how you can go from living paycheck-to-paycheck to being the millionaire next door.
What inspired you to create Financial Gym?
While working as a financial advisor at Merrill Lynch, I saw a huge need for people who didn’t have $250,000 in assets to speak with a human being about how they could best financially plan for their lives.
It felt unfair to me that all of the financial planning knowledge I gained at Merrill Lynch was reserved only for wealthy people. I wanted to create a place where people of all financial sizes could get trustworthy guidance that didn’t revolve around selling a product like a bank account, mutual fund, or life insurance.
What does being ‘financially fit’ mean to you?
Financially fit to me means the ability to afford the life you want to live without stress about money. 70 percent of Americans live paycheck-to-paycheck. This is no way to go through life. When you know that you can easily pay your bills, it’s not just your financial health that changes — your physical and mental health do as well.
On your recent interview with “The Today Show,” you speak about the five numbers required to be financially fit. Can you tell us what these numbers mean?
15 percent. Your minimum gross monthly savings. You should strive to automatically save this every month.
Six. The months of fixed expenses saved in an emergency savings account. Figure out what bills you have to pay every month (i.e., rent, student loans, credit card minimums), then multiply that number by six to give you your emergency fund target.
750. The minimum credit score. If you’re not there, it’s okay. Everything is fixable, you just have to put a plan together to fix it.
35 percent. The ideal debt-to-income ratio. This is the amount of your total monthly debt obligations divided by your gross monthly income. This tells you how much of your paycheck goes to bills you have to pay versus building a lifestyle you want to live. The lower this number, the more flexibility you have to save and plan for other life goals.
Two. The minimum number of investment accounts you should have: one taxable (brokerage), one non-taxable (i.e., IRA, 401k, SEP IRA). We want to see clients investing for life goals beyond retirement. If you’re not investing, then your money can’t keep up with inflation and it’s actually losing value.
What advice do you have for women who believe their paycheck is not big enough to incorporate the numbers necessary to become financially fit?
I always say that if the paycheck doesn’t feel big enough, then you need to negotiate for more money. The easiest way is negotiating in your current job. If that doesn’t work, you may need to look for a new job or add side hustles (jobs you can work on nights and weekends) to help get you to your goals faster.
What are the different ways women should be investing to become financially fit?
Women need to think about investing their funds beyond just retirement accounts. I’ve seen too many women sitting with cash in bank accounts that they don’t plan to use for years.
If your money is sitting in a bank account earning less than 1 percent when inflation is 2-3 percent, then you’re literally losing 1-2 percent of the value of your money every year. You need to determine what your life goals are, when you want to accomplish them, and invest for each of these life goals.
What advice do you give to clients looking to invest for the first time in their lives?
Like Nike says, “Just do it.” The easiest way to get comfortable with investing is to actually do it, and, thanks to apps and websites like Acorns, Betterment, and Wealthfront, people can start investing for less than the cost of lunch in some cases.
If you’re not completely comfortable, there are numerous resources available between books, blogs and podcasts to get you comfortable. Two that I would recommend include the book “The Simple Path to Wealth” by JL Collins, or the podcast “Be Wealthy and Smart” by Linda P. Jones. Remember that everything you do financially is fixable, but take investing in baby steps first until you get more comfortable.
What is the best financial advice you ever received? Who gave it to you?
A college professor of mine made me read the book “The Millionaire Next Door” when I was a senior in college. He said it was the most important book we would read about finances. At the time, I thought it was a cute story about frugal people.
Fast forward 20 years, and I know he’s right. Financial health isn’t about keeping up with the Joneses; it’s about being the millionaire next door.
When did financial wellness become a necessity in your own personal life?
When I was 35, I had the idea to build The Financial Gym. Up until this point, I just assumed I would constantly have six-figure jobs and make a bunch of money. Once I realized the financial sacrifices I would need to make the dream a reality, I became keenly aware of my financial life and how unhealthy it was, especially for sustaining the dream of building a business.
Do you feel that women learn about their finances too late in life? If so, at what age should financial management be introduced?
I feel like you’re never too old or too young to learn about finances. Financial wellness has to start in the home. We should be talking to our children from an early age about money, how it’s not scary, and best practices.
These teachings should be reinforced in high school and college, and then employers should provide ongoing financial literacy to their employees. They are the ones paying them, they should make it a priority to help them manage their money better.
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