Thanks to Toys ‘R Us and its catchiest ad ever, I spent several years never wanting to grow up. Being a kid was easy, and being a grownup always seemed terrifying. It meant being financially responsible for everything and struggling to make ends meet while pursuing my goals.
Luckily, every single person on this planet can relate to that fear, and they are all trying to make it on their own, as well. So when I read the new book by Bobbi Rebell, award-winning TV anchor and former personal finance columnist at Reuters, entitled How to Be a Financial Grownup, I was immediately put at ease.
Rebell’s book is a compelling collection of stories from successful entrepreneurs and famous faces, detailing the moments they became financial grownups, and the wisdom they picked up along the way. Rebell brilliantly interweaves these powerful stories with her own expertise, and provides actionable steps to make your financial goals a reality. Here are the lessons on how to be a financial grownup that stuck with me the most.
1. Don’t compare your path to others
The third chapter of How to Be a Financial Grownup, titled “Careers Are for Making Money” is my absolute favorite section of the book. Fashion designer Cynthia Rowley, Betterment CEO Jon Stein, Macy’s Chairman and CEO Terry J. Lundgren, and others share their stories of how they made it big. All have extremely different paths to success, and some had significant bumps along the way. But you have your own unique background, which shapes your own unique goals. Follow them, and embrace the fact that you are putting yourself out there as someone new, hungry, and different from the rest.
2. Accept that failure is a given
You’re going to fail. You’re going to struggle. You’re going to get burned. It’s inevitable. And failure can come in many different forms, but none should deter you from chasing your goals. An extreme example of struggle is when Jim Cramer, host of Mad Money, shared his story with Rebell of being the target of multiple robberies while living in Los Angeles, and upon returning from a journalism assignment in San Diego, learned he was evicted from his L.A. apartment. Cramer was homeless, and his financial grownup moment came when he realized he never wanted to be that poor again. He switched from a career in journalism to finance.
The good thing about human beings is our incredible ability to adapt to our surroundings. So when you’re facing an epic financial or professional failure, you’ll still be able to get some clarity, pick yourself up, and try again the next day.
3. Allow yourself to splurge on those lattes, sometimes
Rebell fully acknowledges that gourmet, pricey lattes should not be an everyday occurrence. We’ve heard a million times before that expensive coffee is the reason we’re all broke, why we can’t buy houses, etc. Luckily, Rebell finds a healthy balance between overspending on and abstaining from your morning beverage of choice. Her two exceptions to the “never buy lattes” rule are as follows:
- “Buy coffee at a coffee shop if you’re going there for social reasons. Meeting friends at a coffee shop is going to be a lot cheaper than going out for a meal.”
- “If you’re using the coffee shop as an ad hoc office, by all means buy some coffee. Sitting at a coffee shop for a few hours to get some work done, or having a meeting, is a lot less expensive than paying rent on an office.”
See? It’s all about balance and moderation. Being a financial grownup shouldn’t mean setting restrictive limits on things you enjoy, so long as you don’t overdo it.
4. Push bad debt out of your way
According to Rebell, bad debt — most commonly credit card debt and student loan debt — is what’s standing in your way of becoming a financial grownup. You don’t need all of your bad debt to be paid off to before you become a financial grownup, though. The first step to reaching financial maturity is acknowledging the obstacles in front of you. Then you come up with a strategy to defeat them, including reasonable goals that you can meet on a flexible timeline. This process will never be as simple as, “Day 1: Add up bad debt, Day 2: Pay it all off,” unless you stumble upon a pile of cash. But coming up with a realistic plan that works will be immensely rewarding.
5. Nurture your relationship with credit
The thing about credit is that it’s not all bad. We all want to be careful about the way we spend money and manage bad debt, but credit is something to be built, embraced, and closely monitored. You need it, even if you’d rather avoid it altogether.
This is something millennials should work on. NerdWallet found that about a third of people ages 18 to 34 have never applied for a credit card. While it’s wise to have a healthy fear of how irresponsible spending with credit cards can ruin your life, you still need to build credit in order to eventually buy a car or house, and to do all the other things financial grownups do. Rebell suggests using only a small portion of the credit you have available, “ideally about 10 percent, and really try to use no more than 30 percent.”
6. Stop asking the wrong questions
When Rebell asked Kevin O’Leary, successful entrepreneur and star of Shark Tank, to share his financial grownup moment, he recalled a powerful conversation with his stepfather. O’Leary was in high school when his stepfather, George, asked him what he wanted to do with his life. O’Leary wanted to skip college and become a photographer. George told him that “‘to be or not to be’ isn’t the question. The question is: What are you willing to do in order to be what you want to be?”
That shift in mindset helped O’Leary realize he wasn’t willing to make the sacrifices involved in becoming a photographer. He wanted to make money, and in his business ventures he has made lots of it. That financial freedom has, in turn, allowed him to take up photography in his free time.
So when you think about each goal you set for yourself, you shouldn’t be asking what you want, but rather, how you’re going to get it, and strategize from there.