One question to help new grads have a better relationship with money
The only piece of maybe-universal financial advice I’ll ever offer
It’s graduation season. As recent grads leave high school and college, many will navigate the financial realities of adulthood for the first time — finding and keeping jobs, securing housing, paying for a life without the support of parents, repaying student debt, taking on mortgages and credit cards.
The majority will do it without any formal financial education to reference or a strong network of financially literate adults to guide them — because we somehow live in a culture that birthed the phrase “The world runs on money” but do very little to spread useful information about money.
Many will struggle with money or live in constant fear because of the uncertainty and inequity in our economy. But they’ll blame themselves, because everyone else is blaming them, and they won’t know it’s not their fault because they never learned.
So as this year’s new grads take their first steps into the foreign world of adult money management, I’ll try to break through the cacophony of financial advice being hurled at them and share the one thing I believe can change their relationship with money.
My only universal financial advice for new grads (and everyone)
As I made the rounds these past several months talking to everyone who would listen about You Don’t Need a Budget, one super basic question that often came up was: “What’s one piece of advice for people who want to start living without a budget?”
That sounds like a softball question, but of course it’s not, because I way overthink everything. And because the whole point of divesting from budget culture as a financial educator is realizing there’s no one piece of advice that can be helpful for everybody.
I can suggest different approaches to experiment with, because I think it’s important to hear a variety of ideas. But those ideas might be terrible for you. So when an interviewer would ask me, “What’s the one thing…?” I stumbled for a long time to find a useful answer, despite having just spent two years writing an entire book on this topic.
What I finally realized was this: The book is not 300+ pages of alternative advice to the budget culture approach to personal money management. The book is 300+ pages of reasons and ways to question the budget culture approach.
So, aside from “read my book and dive into the questions I pose there” (shameless), my No. 1 piece of advice for people who want to divest from budget culture and have a better relationship with money is this:
Instead of asking, “What should I do?” ask, “How does this work?”
Stop asking ‘What should I do?’
Nearly all of personal finance media and education are dedicated to answering readers who are asking, “What should I do?”
What’s the best college major to get a job?
How much house can I buy?
How much should I have saved for retirement by now?
What’s the best way to pay down my debt?
Where should I invest my money?
How much should I save in an emergency fund?
All of these questions beg for the thing budget culture is great at delivering: One right answer.
Budget culture can give you the list of sought after low-cost college degrees. It can produce a formula for how much of your income should be spent on a monthly mortgage payment. It can spit out charts of ideal retirement savings no one is attaining. It can offer at least three distinct winter-themed methods to eliminate debt. It has endless tips on where and when to invest. It will tell you exactly how many months’ worth of income to save in your emergency fund.
The problem? None of these answers is right for everyone. And the edges are often so smoothed over in an attempt to universalize the answers that they’re right for no one.
Learning about money management, our economy and our financial systems is incredibly important. I support efforts to increase access to financial education, and I encourage everyone to follow their curiosities and seek information on their own.
But the bulk of existing financial education and media does a very bad job of teaching you about money. Instead, it spends a lot of time telling you what you should be doing with your money.
But the bulk of existing financial education and media does a very bad job of teaching you about money. Instead, it spends a lot of time telling you what you should be doing with your money.
That’s not the same thing — and, I argue, it’s not serving us individually or as a culture.
When you ask, “What should I do?,” the answers don’t help you get better at making financial decisions. They give you a set of rules to follow — usually arbitrary, usually out of reach for all but a few people in particularly ideal, tidy situations. And they set you up to feel guilty and ashamed when you can’t do what you’re told you should do.
So stop asking this question.
Start asking ‘How does this work?’
Instead of seeking that one right answer from budget culture, start asking, “How does this work?”
What’s the connection between getting a college degree and getting a job?
How do mortgages work?
How do retirement funds work, and why do employers offer them?
What are the fees, interest, due dates, minimum payments and other details associated with my debt products?
How do people make money investing? (And who makes the most?)
What purpose can savings serve in my life?
When you learn how something works, you learn how to make financial decisions for yourself, rather than learning the decision someone else thinks you should make (and having no context to show you why).
When you learn how something works, you learn how to make financial decisions for yourself, rather than learning the decision someone else thinks you should make.
Creators of financial media and education have to do much more explaining how our financial products and systems work and much less telling readers what to do with their money. That’ll require these industries to make a pretty hefty shift away from prescriptive budget culture.
In the meantime, you can protect yourself from the blame and shame all this bad advice lobs at you by adjusting what you’re looking for. Stop worrying about what financial gurus and educators think you should do. Sift through the information they share for the nuggets you can really use.
Learning how things work can help you put your financial circumstances into the context of our financial products and systems and choose your next move based on what makes sense for your unique situation.
Knowing how credit cards work, for example, might help you make peace with credit card debt without squeezing your monthly resources dry to make payments every month.
Knowing the parameters of your financial commitments like rent and bills might help you prioritize payments when you don’t have enough resources to make them all on time.
Knowing what buying a house looks like for different people might help you decide when to buy and how much to spend better than an arbitrary calculator.
Knowing how your workplace 401(k) works might convince you it’s not in your best interest to contribute right now.
None of this is advice you’ll get from financial media or education if you ask what you should do. But it might be the best way forward for you. You can only know that when you know how things work, so you know how these moves fit into your circumstances.
I love this! Knowing how things work is so important and it helps people understand that managing money isn't some scary monolith, it is a nested set of games, each with their own rules.
I feel like most financial advice is punitive and focused on habits not the bigger picture.