Financially Fearless

The F Word

Why, hello there. I’ve got some good news. You’ve just taken the first step toward getting your finances in check.

Wait, come back here! I know what you’re thinking. What finances? Does this meek retirement account really need managing? Or: Here it comes; she’s about to tell me to never go on vacation. Or: Give me a break, I don’t have time to even think past lunch, let alone calculate interest compounding for thirty years.

If you think financial planning isn’t for you, think again. Financial planning is not just for the 1 percent. Everyone deserves the peace of mind that comes with having a good financial plan.

It doesn’t matter how much money you do or don’t have. Financial planning is not about getting rich; it’s about enriching your life. While money doesn’t buy happiness, it does buy security, stability, and the freedom to do the things that make life worth living, whether that means going back to school, starting a restaurant, buying a beach home, having a baby, going on a safari, or leaving a crappy relationship. Money is our lifeline.

When I first started writing this book, I wanted to call it The F Word. Why? Because talking about finances is still a massive taboo. We talk openly about everything else, from sex to diets to politics, yet when is the last time you spoke with your friends about money?

Well, in this book you better believe we’re going to talk money, over and over again, from all different angles. We’re going to take a hard, honest look at your spending and saving habits, and we’re going to take a fine-tooth comb through your bank accounts and your wallet. We’re going to make money an issue, so it becomes a nonissue.

In this book I’m going to put you through the financial planning program I’ve developed in my years founding and running LearnVest one of the leading online personal finance companies in the United States, and LearnVest Program, a registered investment adviser that provides personal financial planning services. This is a Program designed to help you earn better, save better, and spend better, so you can achieve the peace of mind that comes with knowing you are in real control of your finances. And a key component of the Program is openness--with others and with yourself.

By the time we’re done here, you’ll create a detailed, personalized financial plan tailored to how you actually live your life. In the process you’ll get a clearer picture not only of what your money situation looks like now but also of where you’ll be financially in twelve months, in five years, even thirty years from now.

I want to give you that feeling of relief that comes with getting in control of your money--the relief that comes from not having to lie awake at night worrying about bills or credit-card payments, the relief that comes with knowing you have enough saved for tomorrow without having to sacrifice the things that bring you joy today.



Why Not Having a Plan Is a Plan--a Bad One

If this is the first time you’re thinking about this stuff seriously, you might think you don’t yet have a financial plan, but guess what? Not having a plan is a plan--just a really, really bad one. When you play it by ear, you’re throwing away money that you could be spending on the things in life that really matter. Worse, by not making financial decisions you are in fact making decisions--ones that leave you vulnerable to scary blind spots that will hurt you down the line, like not having proper insurance. Winging it is no way to build the future of your dreams.

When I started out in personal finance, I believed I was the only one with oodles of “stupid” money questions. Then I realized that some of the smartest, most educated people I knew had similar questions. Despite all the books that have been written on the topic and all the financial experts out there touting their services, most people have no idea how to wade through the endless stream of conflicting and confusing advice online and on television, and who can blame us?

Most high schools and colleges and grad schools across the country do not teach you anything about it. I had a top-notch education and graduated having been taught diddly-squat about managing my money. How are we supposed to get off on the right foot when literally no one shows us how?

Not to mention that there’s an endless amount of financial “stuff” to wade through--401(k)s, APRs, 529s, et cetera. It’s easy to see why our nation has been struggling financially. How the heck is a normal person supposed to stay up to speed on all this stuff?

And with this confusion comes anxiety. Since founding LearnVest I have looked deep into the American financial psyche, and what I’ve found there is worry. Loads of it. I’m in the unique position of reading confessional e‑mails from tens of thousands of LearnVest users on our free site. So I know what I’m talking about when I tell you that most people worry about money. Most people have doubts. Even those earning what the majority of Americans would consider to be a perfectly livable or even much more than livable salary are up at night worrying about money.

In poring through mountains of research, one thing I’ve found is that whether we’re single or married, rich or poor, making $13 an hour or $300,000 a year, we all have the exact same questions about money: Am I spending on the right things? Am I saving enough for my future? Am I making the best money decisions for me?

The consequences of being in the dark about our finances are pretty scary: according to the American Payroll Association, more than two thirds of Americans are living paycheck to paycheck.1 And I’m not just talking about people earning minimum wage. Three in ten Americans make more than $100,000 a year and still live paycheck to paycheck.2 Clearly, having money doesn’t mean you’re immune to money stress. Not for nothing did Notorious B.I.G. coin “Mo Money Mo Problems.”

And it’s a vicious cycle: The less we know about money, the more stressed we feel about it. So we avoid dealing with it. And the more we avoid dealing with it, the more stressed we get, and so on into an infinity of sleepless nights.

But the good news is that no matter how much or how little money you have, you can manage it more strategically and put it to work for you. We all deserve that sense of freedom and power. We all can make progress.

I believe that financial literacy is a fundamental human right. That’s why I started LearnVest: to give everyone the information and tools to take control of our financial futures, so we can finally stop feeling so alone and anxious about money. Before we get started, let me tell you more about why I got into the financial planning field in the first place and why I have devoted my life to blowing the lid off the money taboo.



Here’s Why I Care So Much

When I was fourteen years old, my father passed away in an accident. I returned home from a fun summer night at the movies with friends to the worst news of my entire life. My mom, who was forty-eight at the time, was completely blindsided. In her twenty-five years of a very happy marriage she had never once imagined that she would find herself suddenly alone, caring for three children.

Not surprisingly, in the days that followed, we were all in paralyzing shock. Through the haze, I overheard my mom on the phone trying to better understand exactly where we had our financial accounts. On top of dealing with the most heart-wrenching, soul-shaking news she’d ever received, she also had to face another challenge: she would need to start dealing with our finances for the first time in her life.

It wasn’t that my mom was incapable; far from it, actually. It was just that when my parents had originally split the household tasks (like most of America for the last century, I might add),3 they had decided that my mom would manage the household budget and my dad the investments and long-term planning. As a result, there was my mom in the wake of his death also stressing over handling our money.

And that was when I vowed I would never, ever, let that happen to me. I made an unbreakable commitment to myself to learn everything I possibly could about my money. And I did. Upon graduating from College, I read every personal finance resource I could find, but nothing spoke to me--a smart person eager to establish a solid, 360-degree financial foundation. In the course of talking to my friends over the years and doing months of research, I realized I was not alone.

After a job in finance, I went back to Harvard for business school. Meanwhile, my business plan for LearnVest won a start‑up competition, and after a lot of careful consideration, I took a leave of absence from business school to pursue my dream of helping millions of people with their money. My timing could not have been crazier: we were in the heart of the worst recession in eighty-one years and the world seemed to be crumbling around me. But I knew people were in need of money guidance more than ever.

In just four years, LearnVest, has become a game-changer in the personal finance space. We’ve raised over $40 million in funding from investors who fundamentally believe in our mission. (They also backed Facebook, Etsy, and Kayak.) We’ve grown to be not only an award-winning website but also a financial planning company: the LearnVest Program has Certified Financial Planners™ and thousands and thousands of clients working together nationwide.

Today LearnVest, is a vast, ever-growing community of smart, savvy people relying on our wealth of content and using our free Money Center tool (and super cool mobile app) to track their daily spending. Through the LearnVest Program, they are working with our experts to answer their money questions. We’re making getting a financial plan as easy as getting a gym membership. All of our planners (myself included) carry the CFP® designation, which means they have loads of financial knowledge and experience. (I passed this test, too. It’s a ten-hour, two-day exam.) We take this incredibly seriously and only work with the best. All in all, the LearnVest Program has been built for people who are taking charge of their finances and making their dreams reality. And by picking up this book, you’ve become one of them. Welcome!



How the LearnVest Program Works

At LearnVest, our motto is “Where Life Gets Richer,” and I couldn’t be more serious about these four little words. But we all have our own idea of what “rich” is. It’s called personal finance for a reason; our relationships and our emotions are such a huge part of how and why we make and spend money. That’s why when you’re dealing with your money, it pays to ask yourself some very personal and sometimes uncomfortable questions, like: Are you intimidated by money? Do you like money? What is the worst-case money scenario that runs through your mind at 4:00 a.m.? How does money function in your relationships with other people?

That’s why this book begins by walking you through a financial and psychological self-inventory; think of it as a therapy session for your finances. And it’s why, along this journey, I’ll share some inspiring stories and mortifying confessions that other brave people have shared with me. I want to show you that you’re not alone in this and that there’s strength in talking openly and honestly about money.

There’s no reason we shouldn’t add finances to the list of things we talk about over dinner with friends, or Gchat about with coworkers. I’m not saying you should host a “let’s reveal our salaries and credit-card debt” party. What I am saying is that we need to talk to one another--our partners, our parents, and our kids--about money. That’s why I want you to share this book. Read it alongside a spouse or pal, and make becoming financially fearless a thing to do together. At the end of the book you’ll find tips on how you can form a LearnVest Club (which is like a book club, but more productive and powerful than discussing yet another historical novel).

Also, I realize that you may still have some questions when you’re done with this book. That’s why I’m making it possible for you to actually talk to a LearnVest Program expert if you want to. Keep track of your questions. (There are spaces in each section for you to write them down.) If there are any we don’t answer in these pages, call us and we’ll answer them on the phone. That’s how serious I am about getting you a plan that works!

This book will walk you through the LearnVest Program, and you’ll come out on the other side with what I think is one of the greatest gifts we can give ourselves: a simple, easy-to-follow financial plan that can change your life.

It’s a three-part process:



First we’re going to figure out where you are right now, financially and psychologically. We’re going to dive into your money mind-set. This isn’t a fluffy exercise. We’ll tell you why the way you think about your money matters and what role your past, present, and future play in your financial success and security (or lack thereof).

Next I’m going to introduce our favorite money-managing principle: the 50/20/30 rule. Those numbers refer to the percentage breakdown of how your take-home pay should be spent each month.4 The 50 is for essentials: it includes your mortgage or rent payments, utilities, transportation to work, and groceries (not eating out). Essentials are the things you literally need to survive: a roof over your head, light and heat, a way of getting to work so you can earn an income, and food. The 20 is for the future, or your financial priorities: paying off debt (student loans, credit cards, etc.), building up an emergency savings fund, and saving for retirement. The remaining 30 is the fun part: lifestyle. That means all of the spending choices you make on a regular basis: eating out, taking vacations, going to the movies, and so on.



1. Jim Forsyth, “More Than Two-Thirds in U.S. Live Paycheck to Paycheck—Survey,” Reuters, September 19, 2012, www.reuters.com/article/2012/09/19/usa-survey-paycheck-idUSL1E8KJAZV20120919.

2. Joseph Pisani, “More Upper-Income Workers Living Paycheck to Paycheck,” CNBC.com, September 16, 2009, www.cnbc.com/id/32862851/More_UpperIncome_Workers_Living_Paycheck_to_Paycheck.

3. Carrie Yodanis and Sean Lauer, “Managing Money in Marriage: Multilevel and Cross--National Effects of the Breadwinner Role,” Journal of Marriage & Family 69, no. 5 (December 2007): 1307–25.

4. This budget division appeared in Elizabeth Warren and Amelia Warren Tyagi’s book All Your Worth: The Ultimate Lifetime Money Plan (New York: Free Press, 2006).