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BEFORE THE PANDEMIC, my father and I would go out for coffee every Saturday morning. I would order a venti mocha Frappuccino with soymilk, which would cost $6, while he would opt for a tall dark roast, black, price $2.50.
As I ordered, my dad would joke, “You millennials and your avocado toast.” In fact, my dad had the same reaction to many of my spending habits. “You spent $50 on a shirt?” he’d ask me, wide-eyed and clutching his chest for dramatic effect.
I often dismissed his banter, chalking it up to his inability to stay abreast of ever-rising consumer prices. I assumed he was out of touch and, in some ways, he was. After paying off his house and retiring several years ago, he held the belief that it was still possible to find a good starter home in Colorado for under $100,000.
Now that I’m a bit older, however, I realize he wasn’t quite so out of touch.
I recently started a career in data analytics. The sudden influx of money, coupled with the expense of living on my own, were a shock to the system. After sticking to a relatively disciplined budget in college—one built on scholarships and part-time jobs—I started my new career by spending as if I were making up for lost time.
I had moved for the job and decided that I was in the market for some new home furnishings, along with a new iPhone, laptop upgrade and new clothes—all bought within a few short months. I blame this spending spree partly on online shopping, which makes it easier to dissociate the items purchased from the money being spent. But I also blame myself.
I went through everything I had in savings. Even worse, I started paying for purchases with credit. I had been approved for a second credit card, an American Express Gold charge card with virtually no spending limit. My first payment on the card almost made me nauseous.
Beyond my dad’s occasional chiding, personal finance wasn’t a topic that was much discussed when I was growing up. Even as an economics major in college, I never took a personal finance class. I believe this is one of the greatest failings of our education system. I was quickly falling into the trap of credit-induced opulence. I was well aware that living beyond my means was unsustainable and yet, at the same time, I was enjoying spending my newfound wealth.
Clearly, I needed an education. I started reading personal finance blogs and watching YouTube videos. The more I learned, the more interested I became. I read The Little Book of Common Sense Investing by John C. Bogle and A Random Walk Down Wall Street by Burton Malkiel. I absorbed personal finance books and podcasts like a sponge, and I reached out to former professors for personal financial advice.
I also posted questions on internet forums about increasing my credit limit—apparently a charge card was a mistake—and would solicit advice from anyone who’d talk to me about personal finance. I had been raised to believe money wasn’t a suitable topic for polite conversation, but people appeared eager to discuss it. My research led me to four key ideas:
All this, however, is easier said than done. The trap of lifestyle inflation is real. Even after consciously deciding that I’d make smart decisions that would pave the way to financial freedom, I found it hard to give up the luxuries I’d already started awarding myself. After enjoying several months of takeout, cooking at home felt time-consuming and my food tasted a little bland.
I’m not a natural saver. Spending makes me happy. I still find myself purchasing little luxuries that I wouldn’t have even entertained while in college. Paying $40 for a delivery from Uber Eats? Sure, that sounds reasonable.
Some days, I question whether I was simply born without the self-control needed for delayed gratification. I think that’s one of my greatest hurdles. But as I continue to work at this, I also find I’m becoming more disciplined. As I write this, my credit cards are paid off, I’ve created a loose budget, my savings account is slowly growing and I’ve opened a Roth IRA.
Still, it’s a balancing act. I want to enjoy life. I don’t want to penny-pinch in a way that leaves me with an uncomfortable lifestyle. At the same time, coffee made at home tastes just fine. I’m consciously forgoing the avocado toast delivery in hopes that, one day, I’ll be able to afford the whole enchilada.
Mariah Davis is a recent economics graduate beginning a career in data analytics. She enjoys sailing and is eager to learn more about personal finance. Mariah is working to expand her financial knowledge with dreams of retiring early, preferably to life on a sailboat.
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I can relate to your fathers point of view. I’m him in a big way. I doubt you were born without self-control, but you are a victim of your generation that has little frame of reference when it comes to money. There was a time where most Americans were frugal by today’s standards.
They grew up during or were raised by parents who experienced the Great Depression and rationing during WWII. Credit spending was rare, you saved before you spent AND you had a lot less to spend on and a lot less stuff accumulated.
Your four key ideas are what most middle class Americans lived by until about the 1970s. $6.50 for coffee? No way, I’m with Dad. Oh, one more thing, please don’t tell us you can’t pay your student loans. 😁
“Oh, one more thing, please don’t tell us you can’t pay your student loans.”
Right? Not to throw this excellent post off track by getting political, but if that initiative somehow passes and those loans are forgiven, it’s a huge slap to everyone who worked hard to pay theirs off – as well as all the plumbers, electricians, welders, construction crews, nursing aids, janitors and others who pay taxes and support families without a pricey degree.
Balancing act is a good way to describe personal finance. I found that consciously deciding where to splurge helped. I love live theatre, so pre-pandemic I splurged on season tickets in the two cities near me, along with restaurant and hotel reservations for show days. My theatre schedule and recent programs are pinned to office and home kitchen bulletin boards, reminding me why I pack my coffee and lunch. Deciding on my favorite splurge let me save money elsewhere, so I’ll enjoy a comfortable retirement.
I like that philosophy, thanks Ginger!
Your article reminded me of Zoey. She is a character from the book “The Latte Factor.” I would suggest this book to you. You might find that you are very similar to Zoey.
After reading Anika Hedstrom’s piece last week, I read the Psychology of Money by Morgan Housel and recommend it highly. I think you’ll especially enjoy the Postscript.
I’ll second that; it is an excellent book. I learned about it from listening to Rick Ferri’s podcast with Morgan, but didn’t read it until Anika mentioned it.
https://rickferri.com/podcast/episode-26-bogleheads-on-investing-guest-morgan-housel-host-rick-ferri/
I applaud you for taking steps to learn about personal finance. I’m a natural saver thanks to my parents. My wife takes care of the spending side, but we make it work. I got a green Amex charge card on my college campus in the mid 80’s and I found it to be one of the best things I did starting out. I knew I had to pay it off every month so I was very careful about what I charged and it was mainly to establish a credit history. I purposely by-passed the “credit” card companies so I wouldn’t have to deal with possibly carrying a balance. I try not to make judgments, but I do shake my head at some of the things my adult kids buy sometimes. But they probably say the same thing about me. As Ginger said, it is a balancing act.
I congratulate you on your recognition of the importance of good financial habits and your efforts to overcome the materialistic mindset that is the norm in our society. Your understanding of importance of saving and investing in index funds puts you well ahead of the vast majority of Americans, regardless of age. There is also nothing wrong with enjoying some little luxeries. In fact, just as people who lose weight with strict diets almost always relapse, I think you are more likely to continue saving and investing if you allow yourself to buy some things that you enjoy–even if it is an occasional $6.50 coffee or avocado toast.
On your point #3, the point was driven even more home to me after I read Morgan Housel’s take on small things compounded over a long-enough period of time:
https://www.collaborativefund.com/blog/the-freakishly-strong-base/
Good luck!
Mariah,
A quick suggestion that worked for my wife and me — Pay yourself first. Direct deposit 10% to 15% to your 401(k) or IRA. Then put a little in an emergency fund. You don’t know what will break or when, but you know something will. Then spend the rest with much less stress, knowing you have taken care of your savings for the pay period or month. The first few months will hurt a little, but soon you won’t notice it. And in 5 – 10 years you’ll look up in wonderment at how much you’ve saved.
Saving and investing is about 75% to 80% discipline and just 20% to 25% financial knowledge — maybe less.
Good luck.
Evan Press CFP(R)
“I believe this is one of the greatest failings of our education system.”
Sorry but this is another example of what is work with Mariah’s generation. Why do you expect that is someone else’s job to educate you on how to manage your money? Your money is just like any other asset your life – yours to nurture and grow into something even more valuable over time, or to squander in the short-term. Its up to you, and I resent the notion that if people like Mariah waste their money on $6.50 coffees, that is somehow society’s fault.