Farnoosh Torabi, editor at large at CNET, personal finance expert, and author, joined Morningstar’s Christine Benz and Jeff Ptak on The Long View podcast. Here are her top seven tips for financial success.
1. Prioritize your savings.
Torabi: I think that the best advice, the number one tip is nothing new and it’s something that I have been utilizing myself since the very beginning, and it goes back to prioritizing your savings as opposed to looking at savings as sort of the thing you do at the end of the month if there’s anything left over. Paying yourself first as soon as you get paid, whatever you can do, 5%, 10% automatically to a checking account or a savings account. There are also apps that weren’t around when I was starting out that I think this generation, the current generation, really has a benefit from, and things like. I believe it’s called Digit, for example, which looks – as a smart app it will hook up to your checking account and see how you’re getting – your cash flow is working. It will start to monitor your cash inflow, cash outflow, and every once in a while, it will text you, hey, Christine, hey, do you want to save $5 today? And who can’t say $5? Sure, let’s do it. And little by little, these incremental saving opportunities it finds you by the end of the month maybe you saved $200, and the app has saved users I think $5 billion or something over the course of its life, which is not even 10 years.
So, I think doing it automatically, making the decision once that you want to save and that you want to prioritize your savings and then committing to that and then going back to your life is we know like behaviorally it’s the best way. As human beings, we don’t like to save. It’s not something that we prefer to do. We prefer to spend because it’s more gratifying in the moment to spend. We get more enjoyment out of spending than saving. So, to make it as effortless and painless as possible, you automate it. And certainly, you can adjust this as you have fluctuations in pay. There might be months where you’re making less or more. So, being on top of that and adjusting that savings rate to better accommodate where you are in your life is really key.
2. As inflation soars, ask for financial help.
Torabi: I think also one thing that is important to remember, particularly in times when you may be experiencing – we have inflation and we also have wages not keeping up with inflation, that being your own advocate, your financial advocate is really important, speaking up whether that’s at work or with your billers. And if you need financial help, ask for financial help. It’s not going to just show up at your doorstep. And I’ll give you examples to it. Like, at work, it may mean that you talk to your employer about increasing your pay, asking for a raise. That’s not a short-term win. That’s not like an overnight win. But something to start having those conversations or looking for a job that will pay you more. I mean, one of the bright spots in the economy right now is still the employment market. I don’t know how long it’s going to last, but if you are not happy with your benefits and how much money you are making, and you have not been able to have a successful conversation with your boss about that, start looking around.
3. Make your billing dates work with your personal financial lifestyle.
Torabi: And I think, again, I don’t know how long it’s going to last, but I think the power is still tilting in the workers’ favor. We’re seeing more people unionizing, for example, more workforces unionizing. But then, I would say, on the consumer front, if you have loans, if you have bills, talking to your billers, these monthly recurring payments, whether it’s your credit card, your, for example, loan payments, talking to your lenders about reducing your interest rate or creating more amenable terms so that you can make those monthly payments. A lot of times consumers don’t even know that they can adjust their billing dates. So, if all of your bills are coming due on the 15th of the month, that’s hard no matter who you are. All of your money going out on one single day, especially if you’re a freelancer or a contractor and you’re getting paid not consistently, that can be very, very hard. So, you can sometimes just go on the website and change the due date for the bill. It still has to get paid within the month, but it doesn’t have to always be on the 15th, it could be on the 20th or 25th. So, there are certain things that you can adjust to give more wiggle room in your budget.
4. Don’t discount the power of discount shopping.
Torabi: I still also think that shopping around for a discount is always something you can do. And right now, there are so many sales, not just because we’re filming this around Labor Day, but because retailers are struggling, and department stores especially have a lot of excess. So, it does pay to research and shop around and comparison shop and use as many tools available to you to get those discounts, whether it’s an app or a lot of times we have those desktop widgets, like, at CNET we have seen CNET Shopping. I’m the Editor at Large at CNET Money. We have this app – or rather, it’s a desktop widget. You can add it to your browser, and whenever you’re shopping, it will tell you whether you’re getting the best deal on that site or where else you can get the better deal. I think that the common theme here is maybe leaning into technology, whether it’s an app or it’s an automation that you can take advantage of to create, to build more flexibility and accessibility in your financial life is always usually a good thing, I think.
5. Spend mindfully.
Ptak: Those all seem like prudent recommendations, really good hacks. I wanted to widen out a bit and talk about something that might be called mindful spending. You’ve been at the forefront of that movement, kind of, this idea of helping people align their spending with what matters to them. What exercises should people undertake, generally speaking, to help align their budgets with what matters in the here and now, and what they might like to achieve in the future? How can they ensure that their spending really aligns with those things that they would like to achieve in the future?
Torabi: It seems such a simple exercise. Like, of course, I want to only spend on the things that I care about, and we think we’re doing just that. But the I think the truth is, especially for young people that are coming out of the gate, whether that’s out of college or their parents’ house, and they quickly jump into a job and they quickly start to accumulate bills and then they realize like six months in, two years in like I have nothing to show for it. And what they really are saying is that I feel like I’m not building towards anything that’s meaningful to me. Like, I’m just going through the motions of financial adulting. I’m paying my bills. If I’m able to do that, I’m grateful. But above and beyond, I don’t feel like I’m building wealth, or I am able to take – have an experience or build the things that are important to me into my day-to-day life. Like, I used to go on vacations, or I used to paint, or I used to do all these things that I don’t do anymore and what’s going on. And I think that what was missing was really a moment where they didn’t stop and go, okay, I have this opportunity, I have a job now, I’m making money. I have, for the first time in my life, maybe this opportunity to design my life in a way that really speaks to me.
6. Ask yourself about your financial goals, make it meaningful, and don’t forget about retirement.
Torabi: The questions that you really need to ask yourself before you start spending is where do I want to be this time next year? What are my goals? What’s actually important to me? If I could think about when I was younger and the things that brought joy to my life or made me happy, what were those things? And are there ways that I can re incorporate them into my life? Sometimes they don’t cost anything, sometimes they do. But really, mapping it out and creating this sort of, I don’t want to call it like your bucket list, but just really, like, what make you feel fulfilled in your life? And what are some of the goals that you want to achieve short, medium and long term so that you can really put your money to work with those priorities in mind? And long term, maybe that’s, I want to make sure I have enough for myself in retirement. So, that means you contribute to the 401(k). Medium term, maybe you want to buy a house. But that’s not for another 10 years. So, maybe you could put a little bit of money in a brokerage account or in an investment portfolio and take a little bit of more risk with that medium-term savings. And then, short term, maybe it is that you want to build in some vacations, or you want to invest in another degree, or a skill set that you want to learn. What do you want to invite into your life that would help you feel like – help you feel not just successful on paper, but really successful inside, that you feel like you’re really – you’re doing you, And that’s the exercise – like, what does it mean to afford doing you and not what your friends are doing or what your parents told you is important necessarily, or what you’re seeing on social media.
Again, we think it’s so easy, but it’s not because life is so distracting, and life moves so quickly. It’s very hard to make decisions. We also have so many choices that we can feel overwhelmed by the choices. So, it’s really about reining it in, and this is meant to be mainly a solo exercise. And of course, if you have a partner, invite them into this exercise. But this is not something where you’re inviting your college friends and your parents and everybody to give an opinion on, and not, I think, also where we – not to our faults – we think it’s the right thing to do maybe because we want to assess and we want to weigh all these opinions, but that can create more confusion. So, really, it’s about taking a moment for yourself and figuring out what’s important to you, your values reflecting too on what may not have been working for you over the last few years. What are the pain points, and how can you maybe course correct going forward and what is that going to cost? I always say that money is meaningless without goals, but goals carry price tags, remember. So, it’s important, as you’re thinking about what brings you fulfillment and what your goals are, to understand the costs associated with them. But the good news is, is that you’re seeing this, and it’s a plan in the future. So, what can you do now to engineer those goals coming true?
Benz: So much of personal finance seems focused on urging people to save for retirement, but I think we all know how hard it is to talk to 25-year-olds about saving for their 65-year-old selves. Do you think we need a different pitch to young people to get them to save for the future that maybe the conversation should be refocused on financial freedom more than retirement or maybe saving for those, sort of, shorter and intermediate-term goals first and foremost before you try to get them focused on saving for retirement?
Torabi: I think you’re on to something there. I definitely think that words like retirement and all that goes with that like Social Security and pension, I think that that certainly served my parents’ generation and even my generation, I would say, to an extent. But I do think that the rising generation and talking more like the younger millennials and Gen Z, they have a different financial love language. They’re not super excited about retirement because, yes, it is abstract – and they are in touch with reality. They know that maybe you’re not going to retire at 65 because you graduated in a recession, or you have student loan debt and that’s going to keep you behind for some time, and that goalpost of retiring at 65 is not necessarily what’s in your cards. But that doesn’t mean that they don’t want to save or should save or invest for their future.
7. Afford yourself options in the future.
Torabi: So, I do think that the better message, what really resonates with them and me, frankly, is this idea of affording yourself options in the future. Who doesn’t want options and who doesn’t want to have money in the future to afford those options? And I think that there is some merit to refocusing the message and maybe using the words that really hit this demographic where it means something. I see on social media a lot of times the terms like affording your freedom, financial freedom. For women, sometimes, too, I know what really resonates with them is this concept of having financial agency and power and anything that – money for them is a tool to ultimately break through barriers. And while there may be some systems and laws that don’t work in your favor as a woman, as a person of color, money, while it doesn’t solve all the problems and doesn’t get rid of all the isms in the world, it certainly can be a tool for your advancement, your protection, your power, your ability to get out of bad situations. And these are the words, these are the terms that I think really feel more realistic to the current generation.
I mean, if you’re a marketer, like a financial company, I think these are the – you need to be paying attention to that because that’s how I see a lot of the, we call them, fin-fluencers, the financial influencers, online are connecting to their audience. They’re talking about quitting their jobs and retiring on their own terms and this idea of FIRE, right, financial independence, retire early, which has many meanings to many people, I’ve learned. It’s not just like you have to have all of the money saved by 40 and then you’re sitting on a beach. No. It could just mean that – it could even mean that you’re working for an employer, but you have so much money of your own that you could quit if you wanted to, you could take two years off if you wanted to. You have suddenly this financial license to do what you want to do that you helped to afford for yourself, that is, there’s a lot of power to that. And I think that you’re right, that message is resonating, and I think it would benefit anyone who wants to help advance this generation to a place of more financial dependence and wealth – those are the words to use.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.