The following was written by Luke Miller for his new column series, “Few Minute Finance”.
According to a 2019 survey by Charles Schwab, 59 percent of Americans live paycheck to paycheck, nearly six out of every 10 people. About 44 percent usually carry a credit card balance, and most people spend an average of almost $500 per month on “nonessential” items. Only 38 percent of Americans have an emergency fund.
Despite these obstacles, this type of living doesn’t have to define the rest of your life. Whether you make $20,000 or $200,000 per year, the principles for good financial stewardship are the same. My aim is to show you how and why.
One of my highest ambitions is helping folks find financial freedom and security. My wife and I have lived on the Plateau for almost three years in our first home, though my family history in the Puget Sound area stretches back generations to Swedish immigrants who settled near Seattle over 100 years ago. I was born and raised in the Pacific Northwest, have always desired small-town life and community, and we truly enjoy calling Enumclaw home. I am passionate about my faith, my family, flying airplanes, getting outside, and home-roasted fresh black coffee.
Why is personal finance so important? Constantly stressing out about our money and living paycheck to paycheck with no margin for the unexpected negatively impacts every other area of our lives. Good, healthy money management frees up important mental resources and energy that often allows those other areas of our lives to flourish: faith, family, relationships, careers, goals, and more. To be sure, money is not the end-all, be-all. But having control over your finances will change the way you look at the world and your future.
What was your “aha” moment with money? Or have you had one yet? My “light bulb” moment was during junior high as I watched some extended family defy all logic and understanding, damaging many family relationships because of money drama and poor asset management. I avowed my future family would never, ever allow money to create such division. Another defining moment for me was moving out on my own in college and finding myself responsible for a host of new expenditures. It was then I decided “I need a budget”.
But it wasn’t until my mid-20s I truly began to understand the whole financial picture. Sure, I learned how to live within my means and put some money into a savings account. Then someone brought to my attention the critical importance of saving for retirement beginning at my post-college age, even though I worked a very low-paying job. He told me I would thank him later (and I did!).
I also learned how the interest rate paid by most savings accounts can’t even keep pace with the rate of inflation, meaning my money was losing value over time despite earning interest. For example, U.S. Bureau of Labor Statistics inflation calculator demonstrates how $100 in January 2019 would need to be worth $102.49 in January 2020 simply to buy the same goods and services. According to BankRate.com, the national average interest for saving accounts is only 0.1 percent, meaning $100 only earns 10¢ interest yearly. Therefore, the savings accounts of many Americans who only save and do not invest are actually declining in value year-over-year.
I have a minor in economics from Central Washington University, but after college, personal finance became my new, personal education, and I was committed. I’ve devoted countless hours of study and sought advice from folks wiser than I, all likely enough to fill another college degree!
Finance isn’t about blaming the system for your fiscal problems. It’s all about education, education, education, and taking 100 percent personal responsibility for your life and your money. This is especially relevant in our country’s current environment! I’m not here to browbeat you about your financial decisions, irresponsible or not. We all have struggles, and we all “don’t know what we don’t know”. Many people were not raised with any financial coaching at all and didn’t learn about it in school. I’m here to extend a helping hand by showing you a world of financial freedom you might not know exists and to offer knowledge and tools to help you navigate it. I’m also here to destroy some myths floating around American culture today. While I have an abundance of practical finance experience, I will also reference different money management experts I find articulate the topic well, because I want to ensure you are getting the most reliable and accurate information available.
In future columns, I plan to cover topics such as how to create a budget, how much emergency cash to have on hand, financial fallacies in American culture today, how to create a brokerage account and invest for retirement, some tax implications, and more.
My high school math teacher had a banner on his wall that said “YOUGOTTAWANNA”. During college, as a flight instructor, I provided my students with the tools and knowledge they needed to succeed in learning how to fly. If they didn’t study and put forth the effort, their performance suffered heavily. The students eager to learn and willing to work always succeeded, no matter their obstacles. Financial literacy is no different. There are many folks in my life I desperately want to succeed, yet they keep making poor decisions financially. I can’t want it more than they do. Yougottawanna.
Evaluating how we’re managing our money is particularly timely post-COVID-19. In 2019, a GOBankingRates annual savings survey concluded 69 percent of Americans have less than $1,000 in savings.. Therefore, many Americans are a handful of paychecks away from foreclosure or bankruptcy. When the economy is booming and the paychecks roll in, it’s tempting to believe we can keep doing what we’ve always done. But when the music stops, many are desperately wishing they had gotten their finances in order and saved some emergency cash to weather the pandemic before it hit. No matter what your personal situation, there is never a better time to act or improve than right now. My top priority is simply to help educate and see people succeed. So let’s get to learning.
Luke Miller is passionate about helping others succeed in their finances, careers, and lives. A fourth-generation aviator, he is a pilot for a Seattle-based major airline. Luke and his wife live locally in Enumclaw. This article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice.