Do You Have A Bad Relationship With Money? With Money Expert Laura Adams

Should you save for retirement or your kids college? How can I learn about personal finance if I was never taught? These are questions we tackle on today’s episode with financial spokesperson and money expert Laura Adams. She’s an award-winning author who hosts the weekly, top-rated Money Girl podcast with over 40 million downloads and named one of Empower’s “Top 50 Women in Personal Finance” in 2018. 

In this episode we cover :

• The difference between a good and bad relationship with money 
• Efficient and easy habits you can adapt to your current finances to grow a savings
• How you can save for retirement and your kids college with a certain strategy 
• How to learn about personal finance when you were never taught
• Should you rent or buy?
• How saving early can lead to a cheaper retirement 

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Transcript

Laura Adams [00:00:00]:

I realize that you can be very smart, very well educated, and still struggle with your personal finances. We're not born knowing how to do this.

Aliza Freud [00:00:18]:

Welcome to the she Speaks podcast, a podcast created to elevate women's voices across diverse backgrounds on topics impacting women. I'm your host, Elisa Freud, founder and.

Aliza Freud [00:00:29]:

CEO of she Speaks.

Aliza Freud [00:00:31]:

Each week I have a conversation with a woman expert who shares her best how to advice on a topic so we can learn how to better do that one thing from a woman who's been there and done that. Our hope is that these conversations help you feel more inspired to speak up and be heard in your own life and work. Now, on to the episode.

Aliza Freud [00:00:52]:

Welcome back to the show. Hope you're all having a great week this very last week of August. I cannot believe how quickly this summer has flown by, but here we are last week of August, and we have.

Aliza Freud [00:01:02]:

A great episode for you as this.

Aliza Freud [00:01:04]:

Is the last episode of this season. We will be talking next week a little bit more about what's to come in our next season, which is really exciting. We've been recording some amazing guests for you, but this is our last episode of the season and we have on the wonderful Laura Adams. She is an author, a nationally recognized personal finance and business expert. She has written nine books, including Money Girls, Smart Moves to Grow Rich and Money smart Solopreneur, a personal finance system for freelancers entrepreneurs and side hustlers. It is something that I thought would be a really good topic for us to cover, to understand what does it mean to have a good relationship with money, and also to ensure that you are saving for the future. What do you need to do, especially as so many of us decide to partake in some sort of side hustle. So with that, I'm going to let you hear my conversation with Laura. I think we cover some great topics here on what to do in terms of how to divide your money up, in terms of savings, how to think about real estate, how to think about retirement. So with that, we're going to jump into it.

Aliza Freud [00:02:09]:

Here we go. Welcome to the show.

Laura Adams [00:02:13]:

Thank you so much, Lisa. It's great to be with you. I'm super excited about connecting and talking today.

Aliza Freud [00:02:20]:

You cover a topic that comes up so often. We've covered the topic of finance and money in the past, but it still seems to be this topic that we need to cover because it's important. But I want to start with understanding from your perspective, why is money a hard topic for women?

Laura Adams [00:02:44]:

Yeah, it is a hard topic because it's so personal. I think a lot of people judge themselves, keep score in their life by their money. Whether that's right or wrong, I don't know. But for many people, it just touches a nerve that they don't really want to expose. And I think whenever something isn't talked about, you have the ability to gain some emotion around it that doesn't get released. And so if that stays hidden or buried and you've got just some bad emotion tied to it that you just can't talk about, it can really fester. And so a lot of people have very good relationships with money in their life, but many people don't. And so it all starts with education, in my opinion. If we don't understand money, we can be very reluctant to talk about it because we don't understand the jargon or we feel maybe ignorant about it. And that can keep a lot of people from speaking up and just asking good questions in the first place.

Aliza Freud [00:03:47]:

Yeah. Well, what does it look like when someone has a bad relationship with money? What does that look like? And I don't mean just, oh, they're in terrible debt, but what are some of the things that women should be aware of in terms of those common things about money and having a bad relationship with it?

Laura Adams [00:04:08]:

Yeah, for me, a relationship with anything, whether it's with your body, your diet, alcohol, money, it comes down to the habits around that thing. Do you have good, healthy habits, or are you engaged in unhealthy habits? So with money and all things in moderation, right? It's not that only people who are super frugal are, quote unquote, good with money. I don't think that's necessarily the case. I think it comes down to setting goals and being able to stick to them with some flexibility. Setting a budget that's reasonable, really having a balance between enjoying your money, that's really what it's for. Ultimately, it's a tool for our life and our happiness. But it's also balancing that short term gain with long term consequences. So if you're not balancing, let's say, saving for emergencies that happen a year, two years, kind of an unknown expense that might happen, and you're not saving for long term needs like retirement, that is probably what I would say is one of the biggest signals of an unhealthy relationship with money. Certainly can also be just ignoring red flags in your life, carrying too much credit card debt, or ignoring bills that you really don't want to see. There are certainly some pretty obvious warning signs. But in general, a bad relationship with money means that you're not consistently using good habits with your money. And a good relationship means you're doing things even if it's very small. Habits like just saving a little bit each week or each month toward the future and making sure that you're allowing for those goals within your budget. That's what I would call a good relationship with money.

Aliza Freud [00:05:58]:

Yeah. I want to delve a little bit into this notion about women as it relates to money, because I think that there isn't this added layer of complexity, which is things like, okay, what do I save for? Do I save for retirement or do I save for my kids college? Now, as a mom, let's say you want to feel like my child comes first, right? I am giving my child what they need for their future, whether that's college or something else that they want. But it's at the expense of, let's say, choosing to put that money towards your retirement. And I know I've heard this said before that you can borrow for college, but you can't borrow for retirement. That is just reality. How do you recommend that women kind of grapple with that pull of I know that in some ways, I guess we could become a burden to our kids if we haven't saved properly for retirement. I guess it's a trade off. But can you talk a little bit about how maybe you advise women to balance those two things, like putting their kid first or needing to make sure that they have money for themselves in the long run?

Laura Adams [00:07:16]:

Elisa this is a real dilemma, and it really happens to all parents. As you said, they want the best for their kids. The challenge with finances is prioritization. What do you prioritize and when? And for a lot of us, we need to be doing things simultaneously. So we need to be saving for retirement while we're saving for emergencies, maybe while we're also saving for kids education, and kind of allocating a little bit of our budget toward all of those things. However, I will advise people that if they're having a challenge saving for retirement, you probably don't have any business setting aside money for kids college. And that's a really hard thing for people to hear. It sounds cold to tell a parent not to put their kids first. And it doesn't mean that you can't help kids maybe a little later on, if you get your retirement in order and kids end up taking a student loan or two, maybe if you save enough, you can help them pay off that loan after graduation. Or one advice, that a piece of advice that I've given in one of my books, money Girl Smart Moves to Grow Rich is to think about it in threes, divide that into three kind of buckets of money. So maybe parents can save for a third of the child's education, maybe they take loans for a third of it, and maybe the child actually works while they're in school for a third of it. So trying to share the burden of that educational responsibility. And again, if the kid does take out a loan, parents can always help later on if things are in great shape. But yes, if you don't start saving for retirement early, and you say, Well, I'm just going to save for my kids, and then this is what often happens. I say, then when the kids are in school, then I'll start saving for my own retirement. By then, parents are middle aged and it becomes so much more difficult to catch up. You end up having to save double, triple the amount to reach your retirement goals per month than if you had started earlier when you could have really saved a fraction of that amount and gotten to the same goal with less out of pocket.

Aliza Freud [00:09:36]:

Yeah, I love that advice, too, about the dividing in three and two. Just thinking about what we're teaching our children and this lesson of needing to recognize that they're going to be on their own at some point, and understanding and teaching them good habits, financial good habits, is super important. And I think if you grow up feeling like I don't have to worry about any of this, then you're pushed out into the world and suddenly you're like, wait a second, I don't know how to do any how do I do this? How do I pay a bill? How do I balance a checkbook? Because I know kids these days don't use the checkbook. Some of the generations before them did. But it's probably a good lesson for them.

Laura Adams [00:10:21]:

Absolutely.

Aliza Freud [00:10:22]:

And a healthy lesson for them to have in life. Let's take a step back, if we can, and talk about how you got started in personal finance and doing this. How did this all start for you?

Laura Adams [00:10:37]:

Yeah, I've always been very interested in finance and money and was always an avid reader and talking about checkbooks. I can remember when I was a preteen begging my parents for a checking account. Like, I wanted that checkbook. I wanted to be responsible for money. And money management just seemed so grown up and so important to me. And so my kind of fascination with everything related to money started really early. My parents were both entrepreneurs, and so they instilled in me that sense of independence and financial freedom. Although I will say they were not big teachers. They didn't sit me down and say, okay, we're going to talk about money and give me lessons. But as you mentioned, they were great role models for me. And even my grandparents were very entrepreneurial. They were great role models as well. And so when I got out of school, I just gravitated toward financial jobs. I had a liberal arts undergraduate education, but I really gravitated toward accounting and finance and worked in those fields for years. I eventually went back and got my MBA, and when I was there, I realized I was with a lot of very successful people. They were sea level executives in their companies. They had multiple graduate degrees, very educated, smart people. But they were really struggling with their personal finances. Often they were over their heads in debt. They were really almost getting their MBA as a way to like this drastic step to help get out of debt, hopefully get their finances in order. And I realized that you can be very smart, very well educated, and still struggle with your personal finances. We're not born knowing how to do this. And so a light bulb went off for me and I really just decided that I kind of had a natural aptitude for finance and realized that I was able to talk about it and deal with it in a pretty simple, basic way, maybe a relatable way. So when I got out of school, I started blogging and eventually podcasting about money and really trying to share tips and advice. And so that's how it all started for me. I really just come from an educational perspective. I don't hold licenses to sell securities. I don't sell any products related to finance or insurance. I really have really just been an advocate for consumers and love the education aspect of what I do. And so that podcasting led to opportunities with writing and eventually to being able to publish nine books now.

Aliza Freud [00:13:23]:

Unbelievable. Talk about prolific. I am curious because you mentioned that your parents were entrepreneurs and I will say my dad was an entrepreneur and I think it certainly opens your eyes to possibilities beyond working for a big company or working for any other company and just going forth in life that way, which is completely viable, but not necessarily for everyone. So I do think that there is something about the idea of growing up with entrepreneurs and understanding what it teaches you is this idea that it's scary. And also, I think, liberating for the right people, which is, oh my God, I don't necessarily have a paycheck, right? Because you don't know when you work at a big company or some other company, you pretty much know you're going to get your paycheck every two weeks or whatever that period of time is. Every week. However often you get paid, when you're an entrepreneur, you don't know like, am I going to get paid this week? I don't know. And certainly, depending on when you start your business, where your business is, and lots of what, nine out of ten businesses fail, small businesses fail. So it's not uncommon for a small business to fail. There is something about both terrifying because it's this, oh my gosh, I don't know, I don't have that security. But also, I think, very liberating because once you figure out how to make money, it's a very different and for me, as an entrepreneur, it opened my eyes. I spent half my career in corporate America and I was assured the paycheck. So I knew that I would get that paycheck. And then I started in the second half of my career, I've been doing my own business and there's pros and cons to each. But there's something really interesting about growing up, I think, with that entrepreneurship, how do we help our kids? Because I know one of your books focuses on solopreneurs and how you can learn how to do this on your own, making money on your own, right? As opposed to working for a company to do that? How do we switch our mindset there? What is required, do you think, for people to be able to develop that mindset of being reliant on themselves to make money?

Laura Adams [00:15:50]:

Yeah. And Money smart Solopreneur, which is my latest book. I cover everything about becoming an entrepreneur from A to Z. How to build a business, how to be productive, how to utilize self employed retirement accounts, et cetera. Every aspect of it, taxes. And I think it is very daunting for a lot of people who maybe didn't grow up with that entrepreneurial role model or exposure. And I got a lot of people asking questions about it and I think that's probably why I ended up writing that book. There was just a time where I seemed to be getting question after question about how do I save for taxes, do I need to incorporate? Do I need a business bank account? Just tons of really nitty gritty questions about building a business and I thought, these are getting in the way of people just going for it and getting started. And so I wanted to take away the mystery and maybe some of the drudgery of the accounting side of a business and really encourage people just to get started. I'm a big proponent of taking a side hustle full time, if you can. And I love that because it gives you the opportunity to hold on to your benefits at work, hold on to that paycheck while you're building your business, you're saving regularly. You're not jeopardizing your financial future by saying, okay, I'm just going to quit this job and go full time tomorrow in this unknown entrepreneurial venture. I think that can really backfire for a lot of people. But if you can test your idea, test the market, make sure it's something you want to do, just are you going to be happy if you end up doing this full time, doing a little testing and questioning yourself first, that's really what's most important. Then when you start making some money, then you can decide if it's time to incorporate, whether you need business insurance, whether you need to really do a lot of things to protect that business financially. But doing it in order and just really getting started slowly, I think is the best way for people now. That's unless you have some massive idea and you really have designs on building a large business and you want to hire employees and maybe you're looking for funding from venture capital firms, that sort of thing, that's a really different way to approach business. I really tend to relate to more of the solopreneur, the freelancer, the person that just gets started slowly and builds up over time.

Aliza Freud [00:18:22]:

Yeah. And I think that it's such great advice because part of the trick, I think with entrepreneurship and forming any business is learning how to make money in that business, whether it's just you like doing it yourself and it's your labor okay, how do I charge for this, how do I charge appropriately? Or you're creating a product and you have to figure out, okay, what are my costs and how do I make money off of this thing? So that is great advice in terms of taking that baby step into it to still have somewhat of a fallback in terms of the money, because it could take time to learn how to build that up, to have a business that makes money. I want to shift a little bit because you have this amazing weekly podcast that you've been doing for years before it was cool to podcast. You were an innovator and doing it for a while. The Money Girls quick and Dirty tips for a richer life. The format, I listened to a couple of your episodes and I love it. It's such a great format, I think, for women, for people to absorb the concept of what it is that the information you're conveying in that episode, and they're relatively quick in terms of listening to it. Can you talk about what questions you get the most frequently from your audience? What do they want to know?

Laura Adams [00:19:49]:

Yeah, and it does change depending on what's going on with the economy. And I've been doing the show since 2008, so when I started this show, we were in the recession that happened in 2007, 2008. So there was a lot of questions about even like FDIC insurance. There were some bank failures going on at the time, there was a lot of uncertainty. And I thought, gosh, is this the right time to be starting a finance podcast? But it was really the perfect time because people needed the answers to their questions and I got a lot of great feedback and over time, those questions have definitely shifted. Right now I'm getting a lot of questions about real estate, a lot of questions about people wondering, should I rent, should I buy? Even about retirement. There have been a lot of retirement account rule changes that have started in 2023. Some are going out to 2024 and beyond. And so helping people understand retirement accounts, I find is an evergreen topic because there's always slight changes coming and the rules for those accounts can be quite confusing. And if you don't understand them, you can be intimidated by them and maybe not want to use them. In fact, I can totally relate to that. When I started working, when I was in my twenty s, I did not participate in my company's 401 for a couple of years because I truly didn't understand the account. Nobody ever sat down and said, okay, this is how the account works, and if you leave the company, you're going to be able to take the money with you, et cetera. It was very mysterious and I always think, what if I had started that four hundred and one K a little bit earlier? Like, how much farther ahead would I be today. So that uncertainty, just that misunderstanding, all of that can hold people back from saving and investing. So those are the types of questions I love to help clarify for people. And then all of a sudden I hear, oh my gosh, I started my account, or Now I'm participating and I've got this nice balance and I'm feeling secure and that just feels great.

Aliza Freud [00:21:58]:

Yeah. I want to talk about the two topics you just mentioned. So let me ask you now, if someone says to you, with real estate, should I rent or should I buy? What's your advice?

Laura Adams [00:22:10]:

It really does depend on a lot of different things. First off, your lifestyle. Are you ready to put down some roots? At least three to five years. And a lot of young people today really are thinking about moving around. They want to have the flexibility to relocate or to go live in Europe and work for a little while. So if you're really not sure about staying in one place, it's probably not a great idea. That may change for you. You may decide later in life to put down some routes. It's also going to depend on where you want to live. In many cities like San Francisco, New York, even Austin, Texas, the rents are going to be high, but they're going to still be less than buying something. If you want to be downtown, you want to be in the middle of great restaurants and that sort of thing. So renting really does depend on not only your financial goals, but where you want to be. And it certainly also depends as well on the amenities. So for some people, they really like the idea of having a home and having space and their own swimming pool or whatever it is they're having a garden, those sorts of amenities, if that really means a lot to you and having that extra space is important, or that extra storage, are you buying an affordable property? Maybe on the outskirts of an expensive city might be the right thing to do. Looking at comparing what is this home going to cost versus what would it cost me to rent this home? Really looking at that, kind of trying to compare that as best you can, apples to apples, that should give you some indication about what's right for you. And yes, you are going to be building equity, buying a property. But it does take a while. When you first start paying off a mortgage, you're paying mainly interest, heavily weighted toward interest in those mortgage payments each month. So it takes a while to build equity. And it's something that is getting more expensive, obviously, as interest rates have gone up and home prices have gone up. So understanding what you truly can afford a lot of people fall in love with a home before they really understand what they can afford. So take it slowly and really understand a what you can afford. If you are thinking you want to buy, working with a mortgage lender to understand is your credit in good shape? Maybe if you waited a little bit, would your credit be better and your rate a little bit lower? There's a lot of moving parts to all of this. So my advice is always to get advice. Work with a local real estate agent, work with a mortgage broker or a lender and get their advice. It's free. They're not going to charge you to give you their advice about the best rate or maybe the best move for your situation.

Aliza Freud [00:24:59]:

So do you have some great just tips for anybody who's listening for how we can handle our finances in a better way?

Laura Adams [00:25:07]:

The best tip I can give is automate everything possible. I find that when you've got to think about something, you've got to make a move. Whether it's on a weekly basis, a monthly basis, it can fall through the cracks. So what can you automate? And this is why 401 KS or 403 B's at work are so successful. It's because they're automatically taking money from your paycheck. They have to work that way. It's a requirement. They're taking it and you don't even see the money. So if you're self employed, you can do the same thing by setting up a recurring transfer from your checking into, let's say, an IRA or a Sep IRA, or a solo 401K, some of these various accounts for the self employed. Or if you don't have a retirement plan at work, that's not a problem. You can set up your own IRA, which stands for Individual Retirement Account. You can set that up as a bank transfer to happen automatically once a month or every other week. That really is the secret. I find that kind of letting it just happen in the background of your life is successful. All of a sudden you look up and it's, oh wow, I've got this nice balance in this account and I didn't really even have to think about it or I didn't have to consciously make a sacrifice in order to make it happen. So if you can automate even, let's say from work, you could have a portion of each paycheck put into a savings account to help build up your emergency fund or a vacation fund or a holiday fund, whatever you're saving for, automate it whenever possible.

Aliza Freud [00:26:48]:

I love that advice.

Aliza Freud [00:26:50]:

And it's interesting because I was thinking.

Aliza Freud [00:26:53]:

About the flip side of that, which is when I automate things for payment, I realized that I had no idea what I was really spending on Amazon as an example, because most of us tie a credit card to it and then you just pay your credit card bill. Anything you put on that's like a recurring payment for the things that your rent or your mortgage or things like you have to pay that's one thing because then it's just taken care of, but things that you just don't remember, oh, wait, I am paying for that thing. I don't even know what that bill is. Think about that element of what a lot of us do, where we set up payments to go directly to our credit card or to directly come out of our accounts. You almost don't think about them in the same way you do when you're presented with a bill every month and you go, oh, I have to pay this bill. Right. It's that same psychology, but the flip.

Laura Adams [00:27:53]:

Side of it, absolutely, yes. And so making sure you are reviewing everything that's coming out of those credit cards. And I love to use a software like QuickBooks or Quicken because it's aggregating all of your transactions. So from all of your credit cards, from all of your bank accounts and centralizing it in one place. And from there you can look at reports, you can set budgets, you can really monitor, as you said, all of these things that are happening in a lot of cases without you knowing, and then reviewing that and making adjustments, saying, you know what, I've got a lot of subscription services right now. Do I really need all of these? Where can I cut back? And instead take that little chunk of money and increase my emergency savings or increase retirement savings and it will go a long way toward creating a more secure future.

Aliza Freud [00:28:48]:

Yeah, it's interesting to think about how much of these issues really are psychological, right, how we think about them. So a question I love to ask everyone, Laura, is what do you wish you could tell your younger self that was just starting out?

Laura Adams [00:29:06]:

Yeah, I would say, and I alluded to this earlier, start saving earlier. The earlier you save, the cheaper retirement is, the less you have to literally take out of your bank account and save, because you're getting the effects of compounding over time. And compounding only works over long periods of time where your interest is gaining interest. And so as that account balance builds, the interest is getting calculated on a bigger and bigger balance and it ends up being exponential. So if you can start early, I encourage everybody, the minute you begin earning an income, to begin saving for the future. That's really difficult for a lot of young people who can't imagine themselves as a retiree. They can't envision themselves being older. But I think just realizing that is hopefully we will all be old enough to retire and live a long life. And it's going to take money to do that. Social Security is there, but it's not enough for people to live uncomfortably. You want to think about that as truly your safety net. And so the earlier that my younger self could have started saving, the better. I would have given her a big nudge to get moving on that.

Aliza Freud [00:30:24]:

Laura Adams this has been so helpful. I love the advice. That you've shared, and I think it's very tangible. If people want to follow you and continue to hear some of your great insights, what is the best way for them to do that?

Laura Adams [00:30:38]:

Yeah, they can follow me on Twitter. I'm at Laura Adams there. They can follow the Money Girl podcast. There's just a variety of ways they can certainly reach out to me on email. If they go to my website@lauradams.com, I've got a contact page. Most of the questions that I get do come from my contact page there, so would love to hear from anybody who's got a money question or maybe even a topic suggestion for a future podcast.

Aliza Freud [00:31:05]:

Thank you so much for spending this.

Laura Adams [00:31:07]:

Time with us, Elisa. Thank you for having me.

Aliza Freud [00:31:10]:

My pleasure.