If procrastinators across the globe had a universal anthem, it would likely be “I’ll do it tomorrow.” And because it takes one to know one, I am guilty as charged: I’ve been a procrastinator all of my life. At 26, I’m only just now committing to improving my self-discipline so that I can live with intention. But for those who are delaying getting their financial lives in order, you simply cannot afford to wait.
To start off I want to share a personal win that inspired me to write this article, where the connection to money may not be immediately obvious. Since graduating college in 2015 I’ve been intending to teach myself computer programming. Somewhat for the intellectual pursuit, somewhat because I feel I need a “productive” hobby, and somewhat to expand my professional tool set. This is a goal I’ve had the intention to work on for nearly five years and I never made any progress.
Until recently. This weekend I’ve officially reached the halfway point in Harvard University’s CS50: Introduction to Computer Science course. Ever since I committed the time to sit down and watch that first lecture, continuing with the course has been an easy recurring habit. And since I’m now setting aside time every week for programming, I am positive that I will finish the course. (As a bonus frugal tip, this course and many others from top-tier institutions are completely free over at edX).
I think that there was a collection of reasons behind my procrastination. And I state these all because I think they apply perfectly to getting started on your personal finance journey as well:
- The “I’ll do it tomorrow” phenomenon. It’s so easy to say this every day, and before you know it weeks, months, or years have gone by and you’ve made no progress towards your goal.
- Attempting to research where the best place to start was, and getting analysis paralysis from the sheer amount of information out there. Every programmer seems to have a different opinion on whether one should start with this language or that language; this resource or that resource. Rather than just picking a reasonable starting point and getting going, some people including myself seem to have a tendency to get stuck in “research mode”, looking for the absolute perfect answer. In many cases, I think the benefits of just starting somewhere on a task and building some positively reinforcing habits outweighs spending hours and hours trying to find that optimal starting point right off the bat. Find that 80% solution, and optimize later.
- It can be almost a Herculean effort to find motivation to do productive tasks with the limited time left in our days after accomplishing all of the mandatory functions to keep a roof over your head and stay alive. After accounting for time spent at work, commuting, preparing food, household chores, caring for children or pets, exercising, and sleeping, some people may have just an hour of personal time left on an average weekday. Those with four to five hours per weekday to use however they wish are truly fortunate. In all cases, it’s much easier to spend that time relaxing with enjoyable, low-effort activities like watching television or playing video games. Dedicating your limited free time towards endeavors that require real focus and energy is a true hallmark of the disciplined.
Remember that personal finance is a topic that the vast majority of Americans (and I’d guess the rest of the world, too) receive little to no formal education on. To make matters worse most of it is based in math — which while it comes easily to those like me with an engineering degree, most people seem to struggle with. According to the NAEP, just 34% of American 8th graders who took their standardized test performed at the proficient level or above in math.
However, in an age of automated tools and freely available information this stuff doesn’t have to be hard. Creating a budget only requires addition and subtraction, which a free spreadsheet tool can abstract away for you. You don’t need to know how to calculate compound interest by hand since again, it can be done with a spreadsheet or one of the dozens of free calculators online. Just start, today. Now.
The best time to plant a tree was 20 years ago. The second best time is now.
Chinese Proverb
And now that I’ve gotten the cheesy quote out of my system, here are some ideas for small places to start today (and NOT tomorrow) if you are suffering from analysis paralysis when it comes to your finances. You only have to pick one for now. These are written roughly in the order that I’d accomplish them:
- If you don’t have a budget, make one. It doesn’t have to be perfect right off the bat. Start with a rough draft so you can get an idea of your monthly free cash flow. I’ve already written a post on how I developed my budget. If yours just looks like the draft in my first image, that’s a totally acceptable starting point! You can use a free spreadsheet program like LibreOffice Calc or Google Sheets.
- If you don’t have a basic emergency fund set up in a savings account yet, start one! Even if you’re not sure how much money you can afford to set aside, start small. Even $25 per week transferred to a savings account is better than nothing. And if you set up an automatic transfer, it prevents you from spending it on other things. Build those good habits and get used to the concept of saving. You can always increase it later.
- Commit to permanently reducing your monthly expenses by eliminating an unnecessary budget line item. If your spending towards discretionary items (vehicles, restaurants, coffee, expensive hobbies, etc) is hurting your ability to save as much as you’d like, it’s time to get disciplined and make some cuts. If you do make cuts, ensure that money gets saved and not put towards increased spending in another discretionary category.
- If you have high-interest debt (my rule is to pay down anything over 4% interest ASAP) and extra cash flow, go increase the amount you’re paying towards this debt to get rid of it faster. Your debt is compound interest working against you, instead of working for you!
- If you have a good amount of cash saved beyond an emergency fund but haven’t started investing, go open a Roth IRA. My preferred brokerage is Vanguard since they are fully owned by the shareholders of their funds (i.e. as an investor in several Vanguard funds, I actually own a tiny piece of the company). My preferred “default” investment for long-term wealth growth is the Vanguard Total World Equity Fund (VTWAX). This fund seeks to essentially track the performance of a basket of every publicly traded stock across the world, and as a results holds shares in over 8,000 companies. If you don’t have the $3,000 minimum to invest in the fund, they have an ETF version of the fund (the ticker is VT) of which individual shares can be purchased commission-free. At the time of writing this article, a share of VT is $70.41 which represents the minimum investment amount.
- If you have a 401k, go increase your contribution amount by 1%. You probably won’t even notice. When I was maxing out my 401k (I have recently scaled back to accommodate saving cash for a down payment) I used a similar strategy. I’d bump it up by 1% or 2% whenever I got a raise or felt there was extra cash flow in the budget. Before I knew it, I was maxing out my 401k contributions and saving nearly $20k per year automatically.