Financial planning isn’t only for people who have a lot of money.
Regardless of the situation — asking for a raise, applying for a loan, reminding your flaky friend to put in their share for drinks last Friday — conversations about money are difficult and can activate all kinds of discomfort around how we live our lives.
But conversations about money or wealth can also be a terrible way of looking at the value of things because context like generational wealth and historical injustice is often missing. Lots of writing about money just pretends that things are easy, or it’s written for people who already have it.
I wanted to talk to our guest today, Paco de Leon, because her work addresses a lot of the things that are usually unsaid when it comes to finance — how it’s really emotional, and how even though we’re in 2022, our financial system is still rooted in racism and classism. Paco’s advice looks objectively at that, and also speaks to the emotional truths of our own habits around money.
Paco’s book is called Finance for the People: Getting a Grip on Your Finances, and I don’t even have it on my shelf anymore because I had to press it into the hands of a friend who needed it last week. It talks about things in language that is easy to understand, like we’re real people sometimes struggling to make rent and pay our student loans — not some hot shot investment gurus with hedge funds. The charts and illustrations in the book, also done by Paco, are extremely helpful when it comes to explaining how to face your finances head on.
We talk about how to start looking at your finances and the pros and cons of debt, and she gives real, actionable, practical advice for how to manage in an economy that can seem like it only works if you already have money.
This conversation has been edited for length and clarity. As always, there’s much more in the full podcast, so listen and follow Vox Conversations on Apple Podcasts, Google Podcasts, Spotify, Stitcher, or wherever you listen to podcasts.
I want to start off with a larger question, which is: Where do you think most people go wrong when it comes to managing their money?
I think the first thing that people do wrong is they let their fear paralyze them into doing nothing. Sometimes the nothingness can compound and get even more terrible than it already was. And for a lot of folks, when you finally do look, it’s oftentimes maybe not as terrible as you thought it was going to be. And the fear is much greater than the actual problem.
I’m definitely trying to help people who are stuck in their own heads or stuck in their own emotions. I want to first tell them, well, that’s completely normal. It’s called being a human being on planet Earth.
Why is money so hard to talk about and to think about, in your opinion?
I think that we could do like, many, many episodes about why it is. But if I were to sum it up, we live in a society where it’s just not okay to talk about money, and we’ve all internalized that idea. It’s something that we believe.
I feel like there’s a really big gap between what is polite and what is true. When you say people don’t want to talk about money, it’s true, intergenerationally, where people have different values around talking about money. What hides in those corners?
Oh, a lot of shame. I think a lot of people feel insecure in general. Or they feel a lack of safety, maybe because they grew up in a certain household. So money becomes a proxy for that kind of trauma. It is a very uncomfortable thing to look at and to sit with. And I think here in the US, we’re also confronting a lot of the things that make us uncomfortable about our history. I think, also, talking about money is becoming a lot less taboo.
You can’t bypass these bad feelings by going around them. You just have to confront them head-on. The only way through the forest is through the forest. And there’s a lot of different ways.
People can sit with their feelings and address their feelings. A really common way is talk therapy. Talk therapy played a vital role for me. We just gotta be nice to ourselves and take the time to realize that money feels weird. And especially being a creative freelancer or professional, I think that it’s really hard to untangle this idea of worth and your bank balance based on how much money you’re making.
Can you talk a little bit about the lessons that we learn from our families of origin, and how people can let go of the tough things that aren’t helping them?
We all grow up and we have caretakers and people that are surrounding us when we’re little creatures becoming bigger creatures. We watch things happen, and we create a narrative based on what we observe, and that creates our own understanding of how money works in the world.
We could look at a really extreme example. The example in the book is a woman who grew up with an abusive father who was an alcoholic, and this father would get his paycheck on payday and he would go to the bar and he would spend almost all of it, get really drunk, come home, and be physically abusive.
Not everybody who experiences this is going to create this connection, but this woman has grown up to equate getting paid with abuse. And so for many, many years she was underpaid. And for many, many years, she would try to educate herself about money and try to understand intellectually why that was. And for her, it took a really long time to understand this connection of “When money comes in, I experience pain.”
That’s a really extreme example of that. We could look at a more lighthearted example. Like, if you had grandparents who just instilled in you that “you gotta work hard, you gotta work hard. I came to this country and I worked hard.”
That messaging plays out over and over. And for a lot of us, we want to be accepted in our family. So we internalize that messaging, and then we grow up and we’re working hard. They think, well, wow. I followed my grandparents’ advice. I did as they did.
And somehow, inflation is really killing me and I can’t afford a house. I’m not on track for retirement. What’s going on? That’s another way that things that we observe, lessons and narrative stories, become beliefs about how we think money works in the world.
I suffer from that too. My parents were like, “Go and work for somebody else.” That’s what’s secure. It took me a really long time to unlearn that story and to realize that actually, security’s an illusion and for me, it’s actually more insecure to have one boss be in charge of my whole paycheck.
I want to talk a little bit about some of the first steps that you recommend for people to take control of their finances.
The very first thing that I recommend people do to get their financial lives in order is to set aside weekly finance time. I am so annoying about this. It’s really simple. It’s exactly what it sounds like. You find space on your calendar — I would say at least 20 minutes, if you were feeling ambitious, to an hour — and l set it up as a recurring meeting, and keep it sacred. By sacred, I mean guard that time and then just start showing up. You don’t have to create a spreadsheet right away.
I don’t want to scare anyone who’s maybe fearing spreadsheets. The first thing you could do is just wrangle those logins, figure out what your usernames and your passwords are. Then maybe the second week, I would say log in and look at what happened in the last week. How did you spend your money? How much money came in? Just start looking. Is anything in your financial life on fire? What are the steps here, to go from it being completely on fire to putting it out?
Basically, if you don’t have any emergencies or little fires that you need to put out, definitely make a spending plan.
Okay. I can feel my cortisol levels rising. A spending plan. Okay.
So I would say, let’s all just take a deep breath, listen to Beyonce’s new album, whatever you need to do. Scream into your pillow, if that’s what’s going to help calm your nervous system before making your spending plan. But it’s important to understand how much money you need to earn in order to try to live the life that you want to live.
But my approach to a spending plan and to budgeting is to not do it.
Let me give you the caveats here. First, if you’re not earning enough money or you’re just making enough money to meet your needs and to pay your bills, and there’s not a lot left over for fun and all that stuff, you’re gonna have to budget.
That is the harsh reality. And I’m so sorry that you’re there, and it sucks, but you need to do that in order to really get a grip on your money going out.
If you’re privileged, and you’re earning more where you have a lot more money to play with, then you can kind of create a spending plan in the way that I do it. I set up one checking account called my bills and life checking account. And I have another checking account called my fun and BS checking. And whenever I pay myself, I put money into my bills and life account to take care of all of my necessary expenses.
Then I put money into future things like savings. Whatever’s left over can go into my fun and BS account. It kind of flips the script. Instead of saying, “can I afford it?” it goes, “how do I get to spend this money?”
One thing that I really loved in your writing was how much you highlighted the larger racist and classist underpinnings of these systems. Can you walk me through that a little bit?
The more I dug in, the more I kept asking, like, okay, how the hell did we get here? The great thing about America is that if you do have an idea and you do want to make money, it’s pretty easy to do it here. You know, there’s not a lot of restrictions.
Almost anyone can set up a company, even if you’re not from here, you can set up a company and you can make money and that’s amazing, but there’s a huge downfall to that, right? There’s a proliferation of scams happening. And even legit companies are not always doing the best thing for the consumer.
And that’s because things are loose here. So I wanted to address these things because I want to invite people who have felt like they were excluded from learning about money, which feels crazy to say, but there’s a whole bunch of people who have felt that way: “Investing is not for me. Financial planning is not for me. Knowing about the system, not for me.”
I’m gonna lift up the curtain and just say, this is how it’s all going down. We’re gonna be in power soon.
What needs to change about these systems?
We need to look at the root of why so many people are in credit card debt and try to address that issue. We need to have a better system where we don’t have to prove creditworthiness based on an equation. That’s not nuanced. And that doesn’t take things into context, because if you have a really bad credit score, that doesn’t really tell us why. It doesn’t say somebody in your family got cancer and you had to figure things out. I think that there’s better ways. It would be cool if you couldn’t go into an infinite amount of debt because of something that’s outside of your control, like getting sick.
If people could access education, become skilled, not go into debt, and then turn around and make a contribution, things would be better.. And I understand why, because people can make money off of the school system. And that’s why it is the way it is. But it’s ultimately gonna cost us more as a society.
Let’s say I don’t have a lot of money. I have a lot of student debt, which is the case for a lot of people in the United States.
Let’s say I’m having to choose between paying my rent and paying my student loans. What should I do? How do I address the simple fact of not having enough money and needing to pay rent and student loans?
So, this is the hardest part of the job. You have to talk to people who are struggling to make the two ends meet and it’s not a great answer.
One answer I give is pay the rent, get on an income-based repayment plan with your student loans, and hope for the best.
The other answer I give is to maybe focus your energies on how to drastically increase your income to eliminate that problem, right? Focus on the problem of earning enough money, instead of focusing on the problem of allocating scarce resources. I hate those answers, and this is the hardest part of the job. You have to really look at if you can move back in with your parents or find another roommate.
I want to be sensitive to the fact that that’s a reality for people. It’s not something to be ashamed of. Or you can try to go the other way, and just look at it as fire-hosing the problem, by just trying to make enough money so that you have a new set of problems.
Wages are really lagging, and that is something that a lot of people across sectors and across age groups are talking about. How do you recommend thinking about that?
I think you have to understand how a company works. You have to understand the culture of your organization and what’s even possible there. First of all, because if you’re working as a warehouse worker at Amazon, you’re gonna max out at a certain wage or hourly rate, and they’re gonna abuse the hell out of you.
So understanding the culture of the organization you’re at is gonna help you determine what your play is. So if it’s a bad organization that does not invest in workers, you need to understand that your time at that organization is gonna be short-lived.
In order to earn more money, you’re gonna have to figure out a way to sidestep or work at another company. Do something else. I left the workforce and I started working for myself because I could not fathom my employer paying me enough so that I wasn’t having to ride my bike to work every day or have a garden to save $2 on lettuce every week.
I just couldn’t see that. That could have been my lack of imagination or my limiting beliefs. My own idea of unworthiness, but also combined with the reality that I was cheap labor. I was young, a woman of color, queer, all these things are working against me and it’s the reality of the situation.
So I went around the problem, and I think so many people in our generation are forced to see that reality, right? How can we come up with ways to survive and thrive, given the fact that this is not working for us? Right after the Great rRcession, we saw the gig economy blow up. That was a direct response to, “Oh crap. This isn’t working.” So now we’ll have a weird version of communism where we like to stay in other people’s houses and people drive us around in their cars, okay, great. Let’s do it.
The stock market is just gambling for rich people, right? Like that’s my personal understanding of the stock market.
Yeah, what you’re doing is you’re taking money that you don’t need today, which is another way of saying you’re a rich person, right? Because maybe you never need it. You’re just letting your shit grow. Or you just need it in 10, 20, 30, 40 years. It’s putting money into companies that you think are gonna do well, and then you get rewarded. You just give them money. It’s really weird, but kind of cool. I don’t know.
Actually I think the cool thing about it is that ostensibly, you can learn how to participate in that system.
Yes. It’s no longer surrounded by walled gardens anymore. We have these apps where any person could do it. You don’t need a guy and you don’t need $10,000. You could have $25 with some of these platforms and you can get started and understand, like holy crap. All I did was sit around and watch Netflix and I earned a penny. It’s a way to make your money work for you.
How does somebody with not a ton of money get involved in the stock market?
Before you start investing, it’s important to have some money saved in an emergency fund. You want to have cash on hand. The most common way a lot of Americans are going to get into investing is through an employer-sponsored retirement plan, like a 401(k), or if you work for a nonprofit.
If you don’t have that available, you can open up a retirement account called an individual retirement account, an IRA, and you can start putting money into that. There’s different investing platforms that you can use. This is very exciting stuff.
You can use Betterment, which is what I personally use. You can use a classic, like Fidelity or Vanguard. Those are some pretty common players, and that’s how most people get started with investing. Most people, when they invest in a retirement account, they’re going to invest in something called a target date fund.
Disclaimer, you know, I’m not an investment adviser. This is just infotainment for all of you. Please don’t sue me.
A lot of people don’t have extra money to spend. Even a three-month emergency fund feels unattainable to them. What do you say to folks who are in that moment?
I say that it’s just important to start where you are. Just put a little bit away right now and get into the habit and see what happens and how you feel when you start to see that balance grow. And you might feel frustrated because it’s not growing fast enough, and that’s okay to feel frustrated. I’ve been there before, where I could only put $25 a month and it was embarrassing almost, especially because I had a finance degree, but sometimes that’s the reality. It doesn’t mean that your circumstances today are gonna be your circumstances tomorrow. Life is crazy and weird stuff happens that you don’t think is gonna happen. You’re gonna have to use your emergency funds sometimes. And that’s okay.
When you start to heal and address your relationship with money, inevitably you start to heal and address your relationship with yourself.
I have one final question, which is, you talk in your book about fucking up the equation. What does that mean?
So the equation I’m referring to is the personal finance equation, and you can arrange it however you want, but however much money you make is gonna be equal to how much you spend and how much you save. There’s a lot of ways you can balance that equation.You can try to cut expenses as much as you possibly can, but there’s always gonna be a floor for your expenses.
You’re always gonna have to feed yourself. You’re always gonna have to have shelter. There’s just a floor for expenses. And for me, when I realized that riding my bike and growing a lettuce garden was the best that I could do, I had this kind of epiphany and this awakening that I needed to fuck up the equation, not just kind of move the needle by doing these little things that could cut $50 here and there.
I needed to fuck up the income side. If I was ever going to get out of this cycle of debt, if I was ever going to be able to be in a position where I could help other people. That’s what I mean by fucking up the equation.
This is not about you not getting avocado toast or about you not spending your money on lattes. There are moments where you need to just blow up the whole thing.
Totally. And there’s a lot of people who are gonna feel really resistant to that, and I invite you to feel whatever you’re feeling. If you’re feeling like this is degrading, why double-click on that? And why is that a problem for you? What deep ingrained messaging belief, narrative, or cognitive bias do you have about making enough money to go beyond just survival and into thriving?
To hear the rest of the conversation, click here, and be sure to subscribe to Vox Conversations on Apple Podcasts, Google Podcasts, Spotify, Stitcher, or wherever you listen to podcasts.
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