Money Under 30 creator David Weliver doesn’t care of you are 30 or 100 years old — he wants to help you. Doling out advice for the past 5 years on his Money Under 30 blog, David decided it was high time to take what the 800+ posts were saying and compact it into a workbook.
David Weliver was kind enough to answer some questions we had about his new bootcamp, Richer By The Week. You can sigh up for Richer By The Week by visiting his blog Money Under 30.
1. What inspired you to create Richer By The Week?
I’ve wanted to create a workbook for my readers for a while, something they could download and use interactively to help them with their finances. I think 90% of blog readers scan articles while procrastinating at their desks and say “hmm, that’s a good idea” and then never do anything with what they read. If I’m truly going to help people turn their money lives around like I did, I need to get them to get off their butts and actually do something. The workbook is one way to do that.
2. What is the biggest misconception about budgeting?
The biggest misconception about budgeting is that it’s easy. All these financial experts say “just create a budget and stick to it and you’ll be all set.” That’s crazy! For most people, sticking to a budget day-in and day-out is as hard as dieting.
Our human nature gets the best of us every time. We forget to track our spending or we justify and off-budget purchase with an excuse (“just this month” or “I deserve it”). Even worse, we drastically underestimate our spending. When we set a monthly budget, we forget about expenses that only come up a few times a year, like car repairs or holiday gifts. And if we’re not tracking our spending to the penny, we’ll estimate that we spend far less than we actually do. For example, we’ll think that we can get by on $200 of groceries a month when we’ve been buying $400 of groceries a month for years.
The bottom line is budgeting is difficult. Successfully becoming a budgeter requires multiple habit changes. If you’ve ever resolved to start exercising or quit a vice, you know that habit changes are not easy. So whatever your financial goals, you need to find ways to make accomplishing them easy. For me, that comes from technology. Using a credit card for all my purchases and a tool like Mint.com to track and categories them. Using recurring online bank transfers to set aside money for my goals every paycheck. Using technology to put your money on autopilot is far easier than old-school budgeting.
3. What kind of habits will bring about the most success with your program?
The one habit I hope people will develop after this program is regularly setting and reviewing financial goals. Just like budgeting, any new habit isn’t easy, but we’re talking about something you do maybe once a month rather than every day, so it’s more realistic.
When you set small, specific goals and then achieve them, it’s amazing what it does for your motivation. That’s why the workbook is aimed at helping you figure out what ONE goal is most important right now, and then seeing how far you can get towards that goal in six months or less.
4. On the opposite end of the spectrum: what kind of habits will most likely end up in failure?
Budgeting, spending 30% less, saving money or putting more money towards debt without a specific goal and/or a financial autopilot system.
Reaching financial goals takes a long time. In many ways, it’s harder to save money than lose weight, because if you slip on a diet and eat a double cheeseburger chased with chocolate cake, you don’t bounce back up to your starting weight overnight. But if you go on a single spending binge you can erase all of your saving progress! So any goal that requires constant willpower is going to be harder to achieve. So if you want to cut spending, start small. Don’t deprive yourself, because that’s what leads to binges. If you want to save more, set a specific goal and a recurring electronic transfer so you don’t have to think about it. Create an environment that makes it difficult to fail.
5. Your writing is very conversational, a refreshing change to financial writing, have you found that this helps readers relate to you and stick to goals?
I hope so! The conversational tone helps readers relate for sure. I began my career working for SmartMoney magazine, so when I started blogging, I wrote like I was writing a snarky magazine article. I probably wrote like that on my blog for three years. Later, another successful blogger was critiquing my site and he called me out on it. I’ve since become much more personal and conversational, and it’s helped me attract a lot more loyal readers.
Can this approach help people reach their goals? I don’t know, but at least I think readers feel connected to me and that they can shoot me an email or reach out for help if they need it, and that may be helpful for sure.
6. Most of the plans include brainstorming and listing out goals, with very few complicated mathematical equations to reach these goals. Can you elaborate more on why you chose a more psychological approach vs. mathematical?
Because I majored in sociology, not math. I’m kidding, but only sort of.
I believe that our struggles or successes with money have far more to do with psychology than math.
For example: at 22, I was a smart kid graduating from a top college. I understood the concept of compounding interest. I understood that if you spend more than you have, you go into debt, and that debt costs a lot of money. But I continued to dig myself into a hole for years and live in absolute denial about how bad my finances were.
Now, some people aren’t as fortunate to have had the education I had—there is work to be done educating them about basic personal finance (what happens when you don’t pay your credit card in full and why it’s important to invest). But for most people, that’s not enough.
I have friends who have been saving since their first dollar of allowance and others who can’t hold onto a dollar no matter what they try. I don’t know whether we’re born with these spending dispositions or we learn them, but what I’ve observed is that they’re difficult to change. And I’m not just talking about teaching spendthrifts to save; many lifelong tightwads have a very difficult time spending money, even if they have plenty.
If you don’t understand both the internal (psychological) and external (social and cultural) factors that put pressure on us to live a certain way and spend a certain way, it’s very easy to make poor financial decisions even when you “know better”.
To me, this angle is not only more interesting, it’s more relevant. We are not computers; we are human. To assume that we can make financial decisions without being influenced by emotional, social, and cultural factors is just ridiculous.
7. When budgeting yourself, what helps stay on track?
Regularly reviewing what I actually spend. I rarely use cash so that I have an electronic record of 95% of my purchases. Then I look at Mint.com or download them into a spreadsheet so I can see what I spent in a month and for the year to date. I take my average monthly spending for the last 12 months as a baseline. So if I want to spend less, I know the areas in which I need to cut and how I can realistically go about doing so.
8. What are your feelings on using bank reviews and other user-based sharing tools when making financial decisions?
Clearly, the availability of user reviews on the Web is a good thing for all of us as banking customers. If you are choosing between two local banks, for example, you should be able to find out what other people like and don’t like about those two banks. How are the rates? Is one bank open more often? How are their online banking tools?
I’m also optimistic that online feedback from banking customers will be able to influence big banking policies more and more. We’ve seen examples already like Bank of America® rescinding its proposed $5 a month fee for using their debit card. I’m not sure that would’ve happened without the ability for customer complaints to spread so rapidly on the Web.
That said, we have a long way to go. Big banks are still banks, and they will continue to treat customers poorly because they can get away with it. They get away with it because people don’t switch banks. Think about it–if you went to a diner every week for lunch and then the diner raised its prices and began to give terrible service, would you keep going? Probably not. You’d find somewhere else to eat. With banks, however, we the perceived pain in switching (changing bills and direct deposits) keeps us at our current banks. But if you’re truly unhappy with the way your bank is treating you, the ONLY thing you can do is leave that bank. If enough people start doing that, they’ll get the message, which will lead to better banking for everybody.