Unfuck Your Finances

A cheat sheet for personal finance

Part of unfucking your life is getting your finances in order, and that means having a basic knowledge of what personal finance is. Don't worry, this isn't scary or super complicated - the financial industry bases its entire existence around the concept of "this is too hard for you, you need to pay an expert to handle it." But that's bullshit. 

Harold Pollack, a professor at the University of Chicago, once quipped that "the best financial advice for most people would fit on an index card." Then, asked for details, he published said index card. I take a bit of issue with the exact specifics he noted down, but the broad point stands: probably 90% of what you need to know about personal finance is very simple. The other 10% would fill a library, but the vast majority of us don't need to care about that stuff - it's super complicated topics like how to trade options and futures, how to evaluate individual bonds, and such that most people just don't need. 

This isn't intended to be a personal finance newsletter. It won't be. There are plenty of those out there that do a much more thorough job of it than I can. But I want to give a basic overview - a cheat sheet, if you will - that will lay out the most important principles and that you can refer to in order to have a solid foundation for managing your financial life. And if you want more detailed info, there are some great resources available out there if you want to dive deeper.

My core principle here is that this should be easy.

We all have busy lives, none of us want to spend hours and hours a week on this stuff. So with that in mind, here are my Easy Principles of Unfucking Your Financial Life:

1. Spend less than you earn (otherwise you're just digging yourself further and further into debt). Obvious, right? But you don't need a detailed ledger or spreadsheet in which you enter all of your expenses - you can connect all of your financial accounts to a free service like Mint or Empower and they will track all of this for you, which makes it super, super easy to know how you're doing. Easy!

2. If you're spending too much, time to make that equation balance out. Once you know where your money is going, you can figure out if the things you're spending it on are truly important to you. Are they aligned with your resources, or are you spending outside of your means? Do they make your life meaningfully better? Do they bring you joy? This is the single hardest principle, in part because there's no one-size-fits-all guide to how you should spend your money - it's a personal decision. But once you know where your money is going, you need to sit down and figure out if that's how you want it to be. 

   1. By the way...for most people the big stuff is the most important stuff. Despite what you see in the news, most people aren't struggling because they want a latte or some avocado toast once in a while. Yes, small expenses add up, but for most of us it's the big stuff that really determines our financial success - it's stuff like housing costs and cars. 

3. Save some money. 57% of Americans can't afford a $1,000 emergency expense. That means when something unexpected comes up, that expense goes on the credit card, where it accumulates interest and can send you into a death debt spiral that can be awfully hard to dig out of. Common financial wisdom says to have 3-6 months of expenses sitting in a savings account as an emergency fund. That can be a lot. Try just starting small here, build it up over time, and make sure you only tap into it in a real emergency. Oh, and make sure it's in a savings account that pays you some interest (as I write this you can get about 5% interest from plenty of places - Everbank is my personal preference, but you can check Bankrate for where the best spots are). 

4. Speaking of debt...be really really fucking wary over it. Debt is crippling. There are some types of debt that are hard to avoid, primarily a mortgage if you want to buy a house and, for most folks, student loans if you want to go to college. Outside of that, my single best piece of advice is to run from debt like it's the plague. Don't buy stuff you can't actually pay for. It's fine to use a credit card to pay for things if you want to get reward points for it - that's actually an awesome way to get free money - but ONLY if you can pay it off in full. Every month. No exceptions. 

   1. Note there wasn't anything about auto loans there? I would very, very strongly advise against taking out a loan to buy a car. We live in a car culture, cars are status symbols, and so most of us spend way, way too much on cars. Look, if you love cars and you have the money for it, no sweat. You do you. But the average cost of a new car is about $48,000....That's more than the majority of Americans make in a YEAR (before taxes!). And the average American keeps their car for about 8 years. If you do the math, that means most people are spending WAY too much money on cars. My advice: unless you really, really need to, don't take out a loan for a car. Buy whatever car you can afford to buy in cash. Then, keep it for a long time. This is an example of just getting the big stuff right and how much impact it will have on your life (my wife and I drive a 2010 Nissan Sentra and a 2011 Nissan Rogue. We could afford more, but those cars are fine and we have no plans to replace either). 

5. Ok, you're spending less than you earn and you have an emergency fund. Now invest some money! This is where people tend to think it gets complicated...what do I invest in? There are so many choices! I need someone to help me! No, you don't. Again, this is the bullshit that the financial industry feeds us to justify their own existence. I don't want to make this overly long so I'll include some links to support these assertions at the end if you want to research further - but the short version here is that until you reach really significant levels of net worth, all you can really need is a simple index fund for your investments. The easiest answer in the world here is go to Vanguard, open an account, and buy their fund labeled VTSAX - this is a fund that essentially invests in just about all the major companies of the U.S. stock market (all major providers like Fidelity, Schwab, etc. offer very similar products - Vanguard’s great, but any of them are totally fine). By buying this, you're basically saying "I don't want to spend a bunch of time and effort here, I just want to earn a decent return over time with a really low level of effort." If you're younger (say, under 40) that's a good option. If you're older and closer to retirement, you may want to consider a Vanguard "target retirement" fund - just find the one that has a date around when you turn 65. Target retirement funds are nice because they automatically adjust the mix of stocks and bonds in the fund as the target date gets closer (bonds generally earn less than stocks, but are lower risk, and as you get closer to retirement you generally want to focus more on safety and less on maximizing your possible returns). The best way to do this is to just set up an automatic contribution so you don't have to think about it. Figure out how much of each paycheck you want to invest, and just have an automated transfer on each pay date. Once again, easy! Remember: the act OF investing is more important than WHAT you invest in.

   1. Oh, and invest first in workplace retirement plans, especially if you get any kind of company match. Most companies will offer you free money in order to invest in your 401k and save for your retirement. You like free money, don't you? At the very least, invest enough to get whatever match (free money) your company offers. Do that before investing in your own personal accounts. 

That's it. 5 main principles with a couple of addendums. This stuff doesn't have to be hard, people. Is there more to the world of personal finance? Of course - like I said earlier, the rest of what you can learn about this stuff could fill a library. But you don't NEED it. Simplify your life, make this stuff easy and automatic so you don't have to spend a bunch of time and effort thinking about it. 

UPDATE! I’ve expanded on some of these principles in a series of further posts, and to make this a “hub” from which it’s easy to find them, here are the direct links:

Part One - Tracking spending

Part Two - Budgeting & saving

Part Three - Debt

Part Four - Investing

P.S. - as I noted earlier, if you really want to dive deeper, here are more in-depth sites and blogs focused on personal finance:

Bankrate: a great data aggregator for things like savings account rates, credit card bonuses, mortgage rates, and more.

The Penny Hoarder: if you're struggling with the "spend less than you earn" principle, this is a great resource - it's mainly about how to budget and save. 

Money Under 30: if you're, well, under 30 (or like to pretend that you are), this site focuses on financial topics that are generally most relevant to the younger generation.

Financial Samurai: an "advanced" personal finance site with more sophisticated topics and advice that will primarily benefit higher net-worth individuals.

Mr. Money Mustache: a site focused on the concept of "FIRE," or "financial independence & retiring early."

The Motley Fool: a site focused on investing in stocks. If you really want to dive into stock market investing, they’re a good resource.