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Do you have what it takes to be smart with money?
I know that the statistic in the title is shocking. But, that doesn’t make it any less true. For 15% of all NFL players to go bankrupt 12 years after retiring, we are doing something gravely wrong with our financial literacy.
In conducting research for this article, I learned of that statistic from a study on ScienceDirect called “The Psychology and Neuroscience of Financial Decision Making.” Yes, it’s a bit nerdy, but the thought of NFL players (who many of us aspired to be growing up) blowing millions of dollars because of a lack of basic financial knowledge is incredibly unnerving.
The thought that comes to my mind is this. If NFL players — and who knows maybe this is representative of many high paid athletes — can’t manage their retirement while earning millions, what chance is there for the rest of us to reach our coveted FIRE goals?
Well, I’m glad you asked. The truth is that you don’t need to make millions to retire early and live a great life. Like anything in life, it’s about doing the small (albeit important) things well. You know the things that aren’t fun, aren’t sexy, and aren’t what all the cool people are doing.
It’s about the grind and the hustle. You have to learn, implement, fail and correct course. Then, you have to repeat about a million times.
What you will probably find is that among the 85% of NFL players who aren’t bankrupt, some are on the brink of losing it all, some are mediocre at best, and some are killing it. Those that are killing it did something similar to what got them to the NFL in the first place. They figured out the process.
Yes, the infamous process. Indulge yourself in enough personal development and business jargon like I have and you hear it often: trust the process. The Philadelphia 76ers even used it as their motto as they were rebuilding their team between 2014 to 2017.
OK, so what is the process? Well, I’ll lay it out for you below.
But, I’m warning you: it’s not fun. And it’s nothing earth shattering. It’s pretty basic stuff.
How willing are you to commit to this process though? Sure, it may be basic, but living it is a different story. Let’s dive in.
** This post may contain affiliate links. **
The “Be Smart with Money” Process:
- Cultivate discipline and a growth mindset,
- Increase your financial literacy and money knowledge,
- Set up your budget,
- Jumpstart your savings,
- Get rid of your debt,
- Making more money,
- Money mistakes to avoid,
- Relationship between financial health and physical health,
- Reaching financial independence and retiring early, and
- Avoid becoming like the 15%
To be smart with money (or anything in life), you must cultivate discipline and a growth mindset.
How often does our lack of discipline and poor mindset hold us back?
Think about Christmas time right before New Year’s Eve. Everybody wants to start the new year off right and commit a resolution or two.
Then, gyms are packed during the first week in January. Seas of people just clogging up exercise machines and treadmills. After all, many of the New Year’s resolutions out there center on some form of dieting and exercise for weight loss.
However, in what has become a comical cliche each year, by weeks two and three what happens? Those same people that came rushing into kick their resolutions into gear are nowhere to be found.
Why is that?
In a recent study on New Years Resolutions, Statistic Brain surveyed over 1,500 people and found that only 9.2% felt they actually achieved their resolution. So, maybe that’s why people keep making the same resolutions every year. They never achieve them.
Personally, I know I’ve been trying to lose the same damn 20 pounds since I started running again in 2014. I went down from 225 and the lowest I ever made it was around 183 pounds. I wanted to get into the 160s and 170s, but I just didn’t have the discipline to do it. Today, I sit around the mid-190s. Not completely horrible, but I could do better. Again, it goes back to discipline and eating better.
What does all of this have to do with developing discipline?
As you can see by the New Year’s resolution example and my own personal anecdote, the mind is a powerful thing. In Think and Grow Rich, Napoleon Hill wrote, “Whatever the mind can conceive and believe, it can achieve.”
Truer words could never be spoken (or written). If you want to be smart with money, you discipline your mind. You must believe that being a better money manager is possible.
Further, you need to grow and mature as a person. You do that by prioritizing the things that truly matter in your life. Many people say it comes down to having a BIG WHY.
Your “why” could be a better life for you and your family. It could be success in your career. Maybe it’s a beach home that you, your family, extended family, and friends can celebrate holidays in.
Whatever your why is, it can be the catalyst for growing as a person. That growth and ability to be smart with money comes down to fostering an overall sense of discipline, focus, and maturity. You will get there one day at a time and one step at a time through consistent effort and action.
Related to discipline and mindset:
If you really want to be smart with money, increase your financial literacy and money knowledge.
So, how do you increase your financial literacy? Well, the best way is to read and study. I know it’s not fun, but would you rather be the broke NFL retiree?
Check out the resources below and be in a better financial situation two decades from now then the guy you drafted for your fantasy team!
Books on money basics:
- The Total Money Makeover by Dave Ramsey
- Master Your Money: 7 Steps to Financial Freedom by Tony Robbins
- Broke Millennial: Stop Scraping By and Get Your Financial Life Together by Erin Lowry
- Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert Kiyosaki
- The Money Book for the Young, Fabulous & Broke by Suze Orman
- UNSCRIPTED: Life, Liberty, and the Pursuit of Entrepreneurship by MJ DeMarco
- The Minimalist Budget: A Practical Guide On How To Save Money, Spend Less And Live More With A Minimalist Lifestyle by Simeon Lindstrom
- The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham
Money management and budgeting software:
- Try Personal Capital to manage your money (it’s similar to Mint)
- Invest some money with Acorns
- Use Chime Bank to receive direct deposit of your paycheck or start a savings account
- Refinance your student loans or get a mortgage with SoFi.
Recommended courses on money management:
- Personal Finance 101
- Keys to Successful Money Management
- Where Does All My Money Go?
- Learn How to Start Your Own Business
Be smart with money and set up a budget.
What if I told you that two-thirds of Americans don’t prepare a budget? Would that surprise you or not?
Well, it’s true according to a 2013 Gallup poll. Are you part of the one-third that prepares a budget? If so, do you actually stick to the budget you prepare or is it more fluid each month?
If you’re like my wife and I, the importance of your budget varies throughout the year. Sometimes you’re all gung-ho about the budget — and other times it’s like you never heard the word before.
Like other Americans, one of the major culprits for us is food. Particularly, eating out. In fact, here’s another fun fact. We as a nation spend about 12.5% of our money on food and the higher our income — the higher the amount that goes to eating out!
I don’t know about you, but one of the biggest reasons we’ve been in debt is eating out. It’s one of our main sources of entertainment. And when we don’t watch it, it really gets out of hand!
The importance of a family’s household budget
Budgeting is not only important — it’s essential. As we’ve become parents, it’s actually taken on a whole other level of importance. We’ve spoken with other couples who also didn’t prioritize budgeting until after they became parents.
It must be that parental responsibility that kicks in and the desire to protect your offspring. Granted, we did a great job saving and cutting expenses before we got married so we could get our first house. But, right after we signed our lives away with the mortgage, we spent like crazy again.
After having our own financial setbacks again and again, we’ve learned how crucial budgeting is. And it’s not just getting all of our income and expenses written out or typed into the spreadsheet. It’s actually sticking to it.
Truth be told, the best way we’ve found to stick with the budget these days is with only getting out the amount of cash you need each week. It’s much easier to say “NO!” when you realize you won’t be able to eat later in the week if you go out to each too much in the beginning part of the week. OK, that might be stretching it a tad, but you get the idea.
Use the Budget Booster to be smart with money
I actually put together a great resource called the Budget Booster that can help you get started. It walks you through some important questions to ask yourself as you prepare your first budget. If you sign up for the Morning Run newsletter, you will actually get the Budget Booster and a Monthly Budget Spreadsheet that you can use in Google Sheets or Microsoft Excel.
So, give that a try and let’s begin to get your financial house in order!
Related to budgeting:
- 6 budgeting tips that will actually work for you
- 7 ways to master your money
- Money management for couples
Start saving money and factor that into your budget.
Saving money needs to be a line item in your budget. There, I said it. It just does.
If you neglect your savings and don’t make it a priority in your budget, what’s the point of earning money at all? What’s the point of slaving away at a job for days, weeks, months, and years on end?
Saving money can’t just be something you hope to do at the end of each month. Truthfully (and I’m not on my soap box here because I fail here too), it should be the first thing you do.
You may have heard from personal finance gurus like Robert Kiyosaki to “pay yourself first.” Well, subscribing to that mantra isn’t the worst idea in the world.
It is your money after all. You work for it. You’re trying to provide for your family. Quite frankly, you deserve to enjoy the fruits of your labor for years to come — and especially in retirement!
Are you saving any money?
Allow me to throw another stat your way. In 2016, GOBankingRates surveyed 7,000 people asking about their savings habit. They found that almost 70% of Americans have less than $1,000 in their savings account. Less than $1,000!
What shocked me even more was that 34% of all those surveyed had a big fat goose egg saved. That’s right — nothing. Zip, zilch, nada. Zero!
Let’s be honest. Saving money is hard. Life is expensive. Married life is expensive. Married life with kids added is even more expensive. And life will just get that much more expensive down the road.
Yes, I get it. But, you must figure out how to save something.
If you’re this, I know deep down somewhere you care. You want to do what’s best for your family. You’re an intelligent person who is trying hard to make their way in this world.
Do yourself a favor and make the effort to save. Start with small amount — say $5 or $10 — and increase it each month. We can all begin to make a small change in our lives that can snowball into a larger change.
It does get easier. You just take that first step and commit to the next.
Related to saving money:
- How do your savings compare to those in your age group?
- Are emergencies factored into your budget?
- Mobile apps that will help you save money
Debt reduction is an important factor in learning how to be smart with money.
OK, I’ll say it. Debt sucks. It just flat out sucks.
I hate being debt. Any kind. Any amount. For any reason. I just hate it. It’s the worst feeling in the world knowing the money I work so damn hard to earn has to go the door to somebody else.
I’ve been in student loan debt to the tune of $20,000. Sure, I know the average is higher now and people are leaving graduate school, med school, or law school with loan bills north of $100,000. But, $20,000 was average for an undergraduate entering the job market back in 2006.
It’s tough trying to dig your way out of a debt hole. You’re deep in the money pit with hardly anything to bail you out.
With student loans, you could consider something like SoFi to refinance your loans. That way, you’re at least getting a lower interest rate as you being the payoff process.
Make debt reduction part of the plan to be smart with money
From there, you need to develop a plan. Again, it’s a great idea to make debt reduction a line item in your budget. It all goes back to the budget with me, you see?
Seriously, though, make the repayment of student loans a line item in your budget. Then, it’s there. That way you know it’s something you do each month. If you’re a salaried employee, the extra checks go on the loans. Overtime checks and bonus checks are for debt repayment only!
Another way to do it or one to incorporate into your plan already is paying off a smaller debt first. The psychology behind the debt snowball is no secret and it’s a method Dave Ramsey has preached for years. Having a small debt payoff victory helps build momentum to tackle the next smallest debt and so forth. I can attest that it works as it’s the method my wife and I used to pay off $60,000.
I never said trying to be smart with money would be fun. But, it’s what has to happen to climb your way out of the debt pit. I’ve been there and so have others.
To inspire yourself, take a look at some of the great debt repayment victories below. It can be your story too. If you succeed (and I firmly believe you will), please email me at RunTheMoneyBlog@gmail.com and tell me your story. I would be happy to feature you. Also, feel free to ask any questions if you’re feeling stuck.
Related to getting out of debt:
- 9 ways I paid off $60,000 in debt
- How I paid off $20,000 in student loan debt
- Danielle paid off $47,000 of her $73,000 debt
- How Jodi paid off $67,000 in debt
- Is there a difference between good debt and bad debt?
Making more money never hurts.
I’ve always been a huge fan of entrepreneurship and having multiple income streams. Having a way to bring in money outside of a normal job is a benefit for any household.
In different posts on this blog, I’ve discussed things like starting your own blog, selling products online and taking surveys. Bringing in extra income does wonders for the budget and savings — and can expedite the debt reduction process.
Outside of starting your own business or other online opportunities, you can get another job. I know that doesn’t sound like a ton of fun, but hear me out.
I’ve worked mainly as an auditor and accountant my entire career, but I was also a real estate agent part-time. I became an agent with Century 21 for a brief period, but the bulk of my real estate career involved my wife and I growing our own real estate company within Keller Williams Real Estate.
In that part-time capacity, I worked with clients, maintained our database of clients, prepared the paperwork (which can daunting at times), did all of the marketing, and built our websites. That was all things I taught myself outside of my normal day job. All very different, mind you, from my accounting experience.
What did the part-time job do for me? It gave me additional skills that made me more well-rounded and marketable. So, not only did it help us bring in more money, it gave me a resume boost that I can use as leverage for better, high-paying positions in the future.
Make more money while honing additional skills
The best thing is too that I didn’t only hone these skills in part-time job capacity. I also self-taught myself a lot of these things while starting other websites. I learned coding, WordPress blog design, marketing, social media, advertising, copy writing, and just became a better writer overall.
The point is to find ways to make more money for yourself and family. But, it’s also important to do things that can enhance your value to your employer and the market.
Do you need more money and want to get better at speaking with others? Become a bartender or waitress. You speak with people every day.
Are you good with building WordPress websites or social media marketing? Start pitching your services to local businesses in the area. With my social media knowledge, I managed the social media accounts for a few businesses back where we used to live. Brought in some extra spending money for the family.
There are opportunities to make more money all over the place. You just need to find them, see what’s a fit for you, and get on it.
It’s not impossible. You just haven’t found the right way yet.
Related to making money:
- Start a blog with WordPress using SiteGround or Bluehost
- Taking surveys to bring in extra income for the family
- How Mark made £150,000 in 18 months online
To be smart with money, you need to avoid making stupid mistakes with your money.
We all do dumb things with our money. It’s human nature. Dave Ramsey calls it the “stupid tax.”
Well, my wife and I did some pretty stupid things with our money over the years. The biggest one was purchasing too much house. The mortgage payment was way more than we could comfortably afford.
On two salaries, we were able to cover it up. But, on just one? It was an absolute disaster — and one that drove us into debt when my wife wanted to stay at home with our son.
Today, we’re much better off financially, live in a cheaper area in a cheaper home, and are working toward being more frugal on our budget. It’s hard though. I’m not going to deny that.
Could we have done better? Absolutely. But, some things in life need to experienced by some of us.
Stupid money mistakes happen
As I alluded to earlier, we’re not immune to making stupid mistakes with our hard-earned money. However, since we work so damn hard to make it, maybe it’s time we all devote some energy toward preserving what little wealth we do have.
How can we avoid stupid money mistakes?
By making a plan and sticking to the plan. Don’t overspend on your home, your kids, vacations, and eating out. Learn from your past mistakes and others who have screwed up.
You’re NOT a failure if you make mistakes with your money. But, you do need to learn from them and resolve to continue doing better each day.
Related to avoiding stupid money mistakes:
There’s a correlation between financial health and physical health, which plays a part in being smart with money.
Have you ever considered the implications of your financial situation on your physical health? Worrying about paying your bills can cause mental anguish and stomach ulcers. I’m sure we all realize that if we’re having some money troubles.
I know my wife and I definitely get stressed out with debt and living on one salary. It’s not easy and your physical health can suffer.
According to the Wall Street Journal, it’s becoming such an issue in the U.S. that “59% of employers say they are very likely to focus on improving the financial well-being of their workers this year in ways that extend beyond retirement decisions …” They’re pitching the idea of “financial wellness” to their employees because, as the article explains, employers are beginning to see the connection between financial health and physical health.
What does this mean for you and me? Frankly, it means that we need to get our financial shit together because our physical health is suffering. It means that budgeting is as crucial to our overall well-being as lacing up the running shoes and going for a jog.
What does wealth mean to you?
What’s so interesting about all of this is that we actually value our physical health more versus our financial health. In a recent survey of 1,000 Americans, Charles Schwab asked people what wealth means to them. A whopping 65% said “having good physical health”, while 35% said “having a lot of money.”
Seeing those results, isn’t it sad that our lack of money causes so many health problems?
I don’t know about you, but I think it’s horrible. That’s why I hope you take the first step and begin your financial education. From there, take care of your body by exercising and eating better. After all, what good is having money and retiring early if your in poor physical condition and can’t enjoy the fruits of your labor?
Related to financial and physical health:
Reaching financial independence and retiring early doesn’t have to be impossible and can happen. But, you need to be smart with money.
You can reach financial independence. And you can retire early. You can get to FIRE!
That’s been my dream for a long time now. I created Run The Money to help me fulfill that dream — and bring you with me.
In my article on reaching FIRE in your 30s, I discuss making good financial choices and being vigilant. We discussed a lot of issues in this article you’re reading right now. If reaching financial independence is your goal, you need to know that it doesn’t come to fruition without a financial plan.
Reaching FIRE requires you to be smart with money
You can’t wish early retirement into existence. It doesn’t happen automatically while you play video games, watch sports, or go out drinking. FIRE happens in the grind of every day life. It happens in doing boring, mundane, and repetitive tasks consistently and doing them well. You need to be smart with money.
What are those tasks? Well, I take it you skipped ahead to this section and didn’t read the previous few thousand words! Budget, save, invest, make more money, and stop being a financial moron.
Sorry, there’s no secret sauce. There’s only consistent, purposeful action.
Be diligent about your financial situation and the monetary rewards will come. That’s the beauty of compound interest. Yes, I mean in a financial sense, but also in a knowledge sense.
Your money will earn interest, but you also earn interest on the time you invest learning about money. It more than pays for itself and the dividends automatically re-invest.
Related to early retirement:
The moral of the story is that you can be smart with money — and avoid the same fate as 15% of the NFL players retiring out there. It comes down to your ability to increase your financial literacy, make the necessary sacrifices, and do the hard work.
Look, I get that money can be overwhelming. I know it can be stressful. And yes it sucks spending your Friday night trying to work out a budget because that damn credit card bill keeps showing you and stealing half your paycheck.
That’s why I’m doing this. I’ve had (and still have) those thoughts and worries. It’s not easy raising a family on one income.
The truth is that we can all avoid becoming like the 15% of NFL retired players. We absolutely can.
Well, instead of blowing our money and having no plan, we will save it, invest it, and write out our financial plans. To be smart with money, we will focus on having our money work for us, increasing it through compound interest, and strengthening our financial knowledge.
Stop making excuses … and just be smart with money already!
There’s no excuse any longer for you to not understand money or not be smart with money. Even if this is the first article you read about bettering your financial situation, I’ve given you plenty of resources to check out to understand at least the basics.
But, I can only do so much for you. The heavy lifting and difficult decisions are on you.
Please don’t shortchange yourself. Don’t file this article away or click out of your browser window without doing something!
Buy one book, download one app, or read one of the other articles I linked to. Do something.
And, if you need any advice or encouragement, please contact me. Shoot me an email at RunTheMoneyBlog@gmail.com and I’ll be happy to response. Make smart financial decisions and good luck!
How’s your financial health? What can you do more of to be smart with money? Did that stat on 15% of retired NFL players shock you? Please share your thoughts with us below in the comments.
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