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There is a high number of financial privileges experienced in the personal finance community. We all have experienced some of these privileges to a varying degree. The mere fact that we have access to a lot of personal financial education, and are able to write about our growth and success on our various platforms is a testament to our privileges. Compared to the rest of the population, we are more privileged than we think we are, some more than others. Due to these privileges, people have been shamed, ridiculed, and silenced from sharing their financial journey and success. Why do we shame people for their privileges?

I have seen and read several articles about people who share their success stories, and then received criticisms regarding their accomplishments. When Bola Sokunbi of Clever Girl Finance had an interview with Money magazine, she was shamed for simply not having student loans. Yes, maybe not having student loans put her far ahead, however, it is definitely not an easy feat to save $100, 000 in 3 years. When I read people’s financial success stories, I get a little jealous (I’m human) and wish their accomplishments were mine. I also take a little lesson from their playbook to see how I can achieve my own feat giving my own privileges or lack thereof.

We all have our own Privileges

When talking about privilege, people picture a white, male person. While this account for the highest level of privilege in our society, it is sometimes not the case. In this community, I dare to say that married couples are privileged and more likely to build wealth faster than single people. People who earn six figures income are also more likely to build wealth faster, so do people who graduated from colleges without student loan. Despite this, it takes a level of grit and discipline to be better than the average, and they should be proud of their accomplishments without naysayers criticizing them.

I have a little bit of financial privilege myself. I call it “a little bit” because I am not a white male, and I do not come from a rich family. So what financial privilege (if I may even call it that) do I have? I am a twenty-something year old adult who lived with her parent after graduating from college. I recognize that this is a huge opportunity, and not a lot of people are able to do this. While living at home has afforded me the opportunity to be able to make  progress with my student loans of $50, 000, I know a lot of people who have this same opportunity and are not taking advantage of it. I’m incredibly grateful each day for this opportunity, and I’m glad that I used the opportunity wisely. I was able to pay a significant portion of the loan because I was disciplined to maximize the opportunity. I was not going out to eat everyday, and packed my own loan lunch while also contributing something to the household.  I also did not buy a new car like someone had advised me to. 

In the same vain that I think people should not be shamed for their privileges, I also think we should endeavor to be more transparent about our success. While it probably sounds better to tell us how you pay $100, 000 loans in less than two years, it is important to give people perspectives. Life is already hard enough, people should not have feel like failures because they could not accomplish the same things when they think the situation is the same. Let us remember that mental health is quite important.

For people with less privileges, understand that life is unfair. We are always going to be faced with people doing better than us or having more privilege than us. The  least you can do for yourself to be ahead is finding ways when to improve yourself. Let’s not shame people for the privilege that afford them to be far ahead than most. Remember, there are many who are more privileged than them, but squandered those privileges. Also check out Rockstar Finance for blogs or stories that apply to your particular situation.

For people with more privileges, acknowledge your privileges and own it. Also, be kinder to people. Not everyone can simply pull themselves by the bootstraps, poverty is real.

As this  instagram post from Farnoosh of SoMoney says, let us be more transparent, and also give people opportunity to be transparent.

So what say you? Do you think it takes a lot of discipline to succeed financially even with some privilege? Do you disagree, and think privileged people should not be proud of their journey to financial success?

What is Financial Planning? Financial Planning is the process of allocating money for the different goals set over a period of time. Several businesses engage in financial planning, and since I want you to think of your personal finances as a business, it is very important for you to have a financial plan too. I have seen several situations where improper financial planning have led people to make drastic and bad decisions on their personal finance. These are the reasons why it is not only necessary for you to set goals, you also need to plan for the future.

It helps you to prepare for future lifestyle goals: As a young adult, you are overwhelmed with a new job, and an increase in income. You have several needs allocations for your income. There is student loans, credit card debt, emergency fund, retirement savings etc, and you do not know where to start from. You also have other things to think about. Do you want to buy a home? Are you getting married soon? Have you been dreaming of your wedding day since you were a toddler? Knowing the answers to these questions will put you on a path to meeting those goals.

It helps you set a timeline for these goals: How soon do you need to achieve these goals? Do you want a house in the next five years? Are you planning to get married in the next three years? Having a timeline for your goals helps you to know what percentage of your income to allocate to the goals. You do not want to be maxing out your 401k every year when you have a dream of a goal of buying a house in the next two years without allocate any income to your housing expenses.

It gives room for flexibility when something goes wrong: When you lose your job or you are sick and could not work, you are still secured in your finances. A sudden change in your finances doesn’t change a lot at once.

It reduces your anxiety towards money: You will be calmer when you know you don’t need to worry about money. Your mind will be be at peace, and every other aspects of your life will run smoothly and be at ease.

Finally, having a financial plan gives you a better sense of control towards your finances. You are able to budget more, track your spending efficiently, remove excesses, and save and invest more. This is because it gives you an urgency towards meeting your goals.

Do you have a financial plan? Are you in your 20s or 30s? If you don’t, what better time to start other than now.

What exactly is a 401k?

A 401(k) is a retirement contribution savings account removed from an employees paycheck before tax and can only be withdrawn from after retirement. While the 401(k) is mostly popular, there are other iterations of this kind of retirement account. There is the 403(b) for non-profit employees, and the 457(b) for government employees. The current maximum contribution for this account is $18500, but if you can’t afford it, start with something.

If you are currently not contributing to one of this, allow me to tell you why you should.

Free money: A lot of employers have matching for a 401(k). This means that when you contribute a certain percentage of your income, the employer will contribute that percentage or a percentage. For example, my employer will contribute 4% if I contribute 5% of my income. This varies by companies, and you have to understand what you employer’s requirement is. In the example, that 5% will yield an automatic 80% return on that contribution.

Compound Interest: Many of us learned compound interest in school.  If you didn’t, allow me to tell you the benefit of compound interest.

For example, if you put $5000 into a savings account, with 5% interest, after the first year you get $250 interest. That interest will also earn interest with the principal, and after 10 years, the money would grow to over $8000. This is without doing anything extraordinary. Imagine the returns if you make monthly contributions over a long period of time with employee contributions. Time is of the essence in compound interest, so use the time you have now.

Lower taxes: Since a 401(k)/403(b)/457(b) is a contribution made before tax. It reduces your tax burden per year. I don’t know about you,but I don’t know anyone who likes seeing a large sum of their income go to the income. Contributing to this account could take you from a higher tax bracket to a lower tax bracket per year.

Forced savings: Making this contribution forces you to save. The percentage is taken directly from your paycheck before you see it. Since you don’t have access to it, you can’t make plans on money you don’t see. It is easier to save when it is automated than when you have access to the money first, even for a financially scrupulous person.

If you think you don’t make enough money to contribute to one of these account, start with as little as 1%, and you can adjust your contribution every quarter or however you feel comfortable. 

Do you have debt? What kind of debt do you have? Is it student loan, credit card debt, car loan, mortgage, medical debt etc.

When I start my debt repayment journey, I had student loan and credit card debt. My credit card was not a lot, but it was debt I had accumulated over a year when my card had the 0% introductory interest rate. The 0% introductory period was coming to an end, and I needed to pay it all quickly to avoid paying the 22% interest rate. I also had student loan with various interest rates. I had the Perkins loan with 5%, the federal subsidized and unsubsidized loan ranging from 3.4% to 6.8%, and a private loan from 9.5%-10.5%.

There are two types of debt repayment plan, the debt snowball and the avalanche method.

The debt snowball made popular by Dave Ramsey involve making minimum payment on your debt, and putting extra money towards paying down your lowest debt. The strategy gives you momentum and motivation quickly so that after you finish paying down that debt, you put the monthly payment towards the next lowest debt and so on.

The avalanche method entails paying down the debt with the highest interest rate first so as to save money in the long run.

In my case, I have both strategy, and am currently using the avalanche method. I paid off the credit card debt first to avoid the high interest rate coming up on the card. Then I paid off the Perkins loan next, it was a small amount of $1000. I figured that if I can get rid of that quickly and I did. It helped tremendously because it was one less account to sign into. After this, I focused on the private loan. I hated this loans because of the 10% interest rate attached to them. I shed a little tear every time I made a payment on this loan. I signed up for auto repayment to help reduce interest rate, but it only worked for few months. I think the fact that the variable high interest rate of 10% motivated me to pay it off quickly. Also it had a cosigner, and I disliked the idea of the loan company going  after the cosigner incase anything happened to me. I was so relieved when I paid it off, and have transferred the motivation to paying off  the federal loans.

While Dave Ramsey recommend the debt snowball, I think it is possible to combine both methods. In my case, I started with the debt snowball, and once I had a little motivation I switched to the avalanche method because I didn’t like seeing the growth on the  10% interest rate loan. I would suggest this method for other people paying off loans. I believe that you need the debt snowball motivation early on, but once you are motivated enough, it makes mathematical sense to switch to the avalanche method.

Are you currently paying down debt? What method are you using and why?

Before I got a job, I told my mom and my sister than when I start earning money, I would save a particular percentage of my income right away. They both looked at me, laughed at me, and though I was pretty naive. In their opinion, you can’t possibly save first when you have several bills to pay. The bills you pay is fixed, but the amount you save can be variable. I ignored them and was determined to do just that. That decision has helped me to build my emergency fund.

Although I consider myself a natural saver, I have set up systems that helped me to meet my savings goal, and you could to.

Automating my savings: When I started working, I signed up for direct deposit at work, and I made sure that I allocated a particular percentage that goes directly into my savings account and the rest into my checking account for paying bills. This strategy allows me to believe that the money in my checking count is the only thing in can spend before the next payday. Of course, it takes a great amount of discipline to not the savings account money, the first battle has been fought after the automated allocation.

I once read something interesting on twitter about saving. The person said that they do not have a spending problem, they just don’t make enough money (paraphrasing of course). I sincerely believe that it is possible to save regardless of how much money you make in general. Of course there are exceptions to the rule but make sure you ask yourself if you are the exception to the rule.

If saving right now is difficult for you, you can start from saving 1% of your income and then you can increase the percentage every month. You don’t have to be a natural saver to start saving, and you don’t have to make a lot. You just have to start from some where. So start today!