You and I (and everyone we know) are more likely to make poor decisions when we’re financially stressed. We’re more susceptible to temptations and ethical compromises. Financial stress is a significant distraction from doing your best work. It’s a kind of bondage. A friend says “Heroin addicts and people with steady paychecks have things in common.” I’ve known people who were compelled to stay in toxic work situations because they absolutely needed the next paycheck. I’ve seen a friend need to declare bankruptcy when he was laid off and couldn’t get another job for 8 months.
I’m all in on being responsible and caring for your family, even if you have to suffer somewhat. I’m challenging bondage because of avoidable financial straits.
I wasted money when I was younger. I chased the expectations of a particular lifestyle as my income grew. I didn’t make any huge mistakes, but wise up before I did!
My specific advice, especially now that we’re living in a period of high inflation:
- Build and maintain an emergency fund of 6 months living costs. You’ll be well-prepared for a layoff. You’ll be able to walk away from a toxic job. You won’t panic when the car needs repairs or the appliance dies or when insurance won’t cover all the roof damage from the storm.
- Save money early for retirement, college funds, and life goals – let compounding interest be your friend. $50/month in your twenties can be more powerful than $500/month in your late forties.
- Get everything you can from company benefits – especially 401K match, insurance options, scholarships, and EAP help.
- Get life insurance. I was twice astounded to learn of widows with children being left with little but debts because their husbands didn’t arrange for life insurance. Term coverage is available and cheap. Whole life coverage could be a good part of your overall financial plan.
- Don’t run up credit card debt on little stuff. Debt is a useful tool in the right hands, for the right reasons.
- The most likely debt crises will be from car and house obligations. Live below your means. Don’t compare yourself to others. Yeah, the other guy has a gorgeous new car and brags about pricey vacations, but you can sleep better.
- Teach your children about good financial practices.
You’ll be a better leader and person if you’re financially free.
