I recently left a meeting with a young couple who just couldn’t seem to fathom the idea of saving money for short term needs. Both individuals were in their mid-thirties, well educated, and certainly not financially illiterate by any means. The question they continued to pose throughout our discussion was “I am just not saving enough money for retirement.” Their gross income covered their monthly costs and they had some extra cash flow left at the end of each month that needed to be allocated elsewhere. After reviewing their balance sheet, it appeared that they had no emergency fund or short-term liquid assets to offset any shortfall in the case of a job loss or large expense. With laser focus, all they wanted to know was whether they were socking away enough money into their IRAs to retire on time and not run out of money during retirement. While this is an extremely important aspect of a financial plan, it is by no means the only goal. Real life doesn’t happen the way a cash flow analysis or a Monte Carlo simulation suggests. This is because it is, well, real life. Cars break down, houses flood, and jobs get lost. To think that your income will go up consistently by 2% for the next 40 years, that you will buy a house, fund college costs for 1.5 children, and save for you retirement in that linear fashion is the most asinine concept on the planet. As John Lennon said, “life is what happens when you’re busy making other plans.” I am more of a Stones guy myself, but hey, he ain’t wrong. Saving for short term goals is as important as it is overlooked. In a country where the majority of the populous doesn’t have $400 dollars in a savings account to fund an unexpected expense, it is imperative to follow a few simple rules to save yourself from being a statistic.

1. Know Your Budget

The first piece of this puzzle is to know exactly how much you spend on a monthly basis. Too many people, even at the high net worth level, don’t have a clue as to what their current expenses look like. In my personal opinion, the budgeting apps currently available to individuals are great to aggregate the many different accounts a person may have, but they are terrible when it comes to tracking the actual money coming in and going out of your life. My advice is to put together a spreadsheet that highlights the three main parts of your monthly budget: 1) Your after-tax monthly income, 2) Your fixed expenses, and 3) Your variable expenses. Your income and your fixed costs will generally stay the same month to month. Your variable costs are what you need to keep track of. This doesn’t mean foregoing your morning coffee or a Friday night drink with your friends. Every think piece written about millennials spending less on coffee and instead buying a three-bedroom house makes me want to gouge my eyeballs out. You’re not going to overcome stagnating wages and rising housing costs by saying no to a Vanilla Frappuccino. It is just fundamentally impossible. What you need to focus on is simplifying your variable spending process by using one account. If you are more financially responsible, I would suggest getting a credit card with a good rewards program and paying it off at the end of each month. If not, use one debit card so you don’t get yourself into debt trouble. By using one card you will ACTUALLY know how much you’re spending outside of your inevitable fixed costs like rent, car payments, and insurance. After gaining a better understanding of what both your fixed and variable monthly costs, look at your net income and multiply it by .90 if you are struggling to save, and .80 if you are more comfortable. If your take home pay is $2,000, your total expenses should be around $1,600 as an example. Set a goal to keep your fixed and variable costs around 80% of your income. Simple as that. You now know how much you can spend, you are seeing the spending in one place, and are saving a necessary 10%-20% towards your goals.

2. Automate, Automate, Automate

Behavioral psychology continues to remind us that we are, in fact, our own worst enemies. Without automation we tend to revert back to our bad habits. This could be because of that lack of free time to follow through, or because we can’t seem to bring ourselves to do what is in our best interests. To overcome our blind spots, we must automate the savings process. I have found that viewing saving like an expense works best. Think of that 10%-20% savings goal like buying groceries or paying rent. No matter what happens in your life, that money will be out of your reach at the end of each month. The simplest way to achieve this is to have a system of accounts and automatic transfers in place. Think of the account that your current income checks are sent to as the “hub” of your savings process. Money will come into that account and you will set up monthly automatic transfers to outside accounts that help you achieve savings and investment goals. For short term money I would suggest opening a high-yield checking account that returns you close to 2-2.25% in a low risk environment just to park your cash there. Many savings accounts at traditional banks pay you nothing to hold your money. Look into the various high-yield accounts on the market and see which one best fits your needs. Saving in an account that grows at ~2% allows you to outpace the inflation costs that eat into the purchasing power of your hard-earned dollars. Set up an automatic monthly transfer from your “hub” checking account into this account for the 10-20% that you plan to save each month. It will leave the account just like a normal expense and allow you to start saving with a decent interest rate for emergencies or larger than normal expenses. Have your credit card paid monthly out of this hub account as well. At the end of each month this account should have very little left in it until your next paycheck. The rest of the money has gone to expenses, saving, and investment accounts. Simple.

3. Save until the bucket is full

I suggested in the beginning of this piece that many people are overlooking their short-term financial goals and focusing solely on the larger picture of investing for retirement. The best way to view your overall savings goals is as a series of buckets. Once one bucket is full you can move onto the next. For young people that are still paying off debt, this where you would start. Focus on paying off your highest interest rate debt first, and then go from there. It may not be feasible to save 20% while you are paying off debt AND THAT IS OKAY. You need to tackle your debt first, and then you can look toward beginning to save. In debt free cases, your first stop is the emergency fund. Each individual’s life is going to look different, but the general rule of thumb is that one should have 3 to 6 months of total expenses saved in easily accessible cash. If you have not achieved these first two goals, you shouldn’t even be thinking of long-term investments. Using the automatic transfer strategy referenced in the last paragraph, save enough into that high-yield account to cover those 3 to 6 months of expenses. Once you have paid off debt and your emergency fund buckets are full, then you can begin to focus on medium- and long-term investment goals. Every dollar you save outside of your monthly expenses can then be automatically deferred from your paycheck into a 401(k) or transferred into an IRA or Roth IRA with an investment allocation that suits your longer-term goals. You now have money for a rainy day AND you’re saving towards retirement. Don’t run before you can walk, and don’t walk until you can claw yourself out of debt. When an unexpected expense happens and you have to dip into the emergency fund, begin allocating your extra savings back into that emergency fund account until it is filled up again. Then back to the long-term investments. See? It is just that easy. The follow through is the hardest part.

Conclusion

Every individual is going to have a different story and a unique way of tweaking this process. This is merely a blueprint to highlight where some people fall off course in the quest towards financial freedom. Finances can be extremely overwhelming, and that feeling tends to paralyze people from taking the necessary steps to move forward. Do not listen to the pundits who push garbage like “how I retired at 40” or “how tipping less can save you money every year.” This is your life and you should be able to indulge in the things that bring you joy without having to reduce yourself to peanut butter and jelly sandwiches for breakfast, lunch, and dinner. Set a goal, automate everything, and know your costs. From there you are already 10 steps ahead of the game.

The Psychology of Complexity

There is this inevitable moment that happens after years of working in finance. Your friends, who usually have no interest whatsoever in your day job, now find you credible enough to ask for investment advice. Every advisor in history has reached this milestone in their career. They’re making small talk with someone they know, and the person asks, “hey, you work in finance, what stocks should I buy?” Obviously, this person is expecting you to impart some sort of hail mary wisdom, so they can log into E*TRADE at the bar, dump some tiny dollar amount into a Malaysian tech IPO, and tell their boss to take this job and shove it because they have Kardashian money now. I have lived this nightmare conversation in bars, at barbecues, on airplanes, and in restrooms. The worst part is, I almost feel bad giving them a sound answer. You tell someone to focus on diversification, cost, risk tolerance, and goals, and they will look at you like you just ran over their cat. To them, it is as if you have the golden answer, but are withholding the good stuff. The need for instant gratification is rampant in our DNA. It is the mindset that keeps casinos packed, and hedge funds charging 2 and 20. It is why no one can decipher the similarities between aspiring to be an influencer and buying a lotto ticket. If the payoff requires discipline or time, the payoff no longer seems worth it.

Advising on the actual investment of assets is relatively straight forward unfortunately. I will be the first to tell you what we have under the hood, and it looks more like a Camry with a bulletproof transmission than a Ferrari. It is by no means “set it and forget it,” but a good advisor is much more interested in boring things like tax efficiency, cost, and long-term goals, than they are in picking the next Apple or Microsoft. If your advisor is selling you speculative pots of gold, it may be a good time to get a second opinion. This leads me to the single most important part of my job. Saving clients from their own behavioral biases. Essentially saving them from themselves. Behavioral bias effects all of us, no matter how smart you think you are. From the recency bias that inspires people to dump money into hot stocks at the top of the market, to those who sell their entire portfolios at the bottom because their neighbor told them the apocalypse was coming. Of course, there is so much more that goes into being a good wealth manager, but the most effective part of our jobs, is the piece that we will never get thanked for. This piece allows people to see past their behavioral blind spots and hold on for the ride they signed up for. Discipline pays dividends.

Bias is not something you can get rid of. Your emotions guide much of your decision making no matter how disciplined you think you are. You can focus on your diet, and end up with a mouth full of Big Mac. You can envision a plan to save money and end up with larger expenses than you had last month. I read a quote recently from Richard Thaler, one of the most famous behavioral psychologists of all time. When asked if his 50 years of research into the psychology of human behavior has allowed him to overcome his own bias, he said, and I am paraphrasing, “hard no.” If the guy that literally wrote the book on decision making bias can’t overcome it, do you think you can? I am going to go out on the limb here and say chances are pretty dismal. Our brains crave complexity, and we will pay double for a taste of it. My own father has worked in financial services for longer than I have been alive, and he still touts his high beta stock picks in startups and Beijing hotel companies like he’s a scratch race horse better. I don’t have the heart to tell him that the last ten years have statistically been the easiest time to be a do it yourself stock picker in history. If you lost money during this period of time, you must have really been trying. This fact alone makes it much more challenging to advise someone on investing in a portfolio that spreads risk across multiple asset classes and suits their income and retirement needs. If you’ve won, there’s no way you can lose right?

They say tragedy plus time equals comedy. If you can overcome the tragedy of volatility, and give your investments enough time to participate in the glory of the free market, you will be laughing all the way to the bank. Skip the media hype, the glorification of the next hot IPO, and stick to what you can control. Invest in a way that suits your life, stay the course, and remember that complexity is just a way to charge absurd fees and keep you in the dark. I dream that one day when I am asked the question “what stocks should I buy” at some barbecue I don’t want to be at, my answer resonates as exciting. Chances are low, and probably why I have a job in the first place.

I know what you’re thinking reading a sensational headline like that. Punk Rock didn’t bring you to finance, you just sold out. While this is an understandable conclusion, and one that I would have easily come to myself, I can assure you that there is much more to the story. To the untrained eye, these two ways of life run in distinct opposition, but without Bad Religion songs and perfecting my childhood mohawk, I wouldn’t be capable of helping people the way I do today.

For decades, the ethos that defines punk rock has been grossly misconstrued by television, 80’s Hallmark movies, and baby boomer parents. If one were to take a quick look an any punk portrayal since the 1970s, they would write off the subculture as dirty, nihilistic, and mostly clueless. This is easy to do when mainstream culture defines punk rock as dirty leather jackets, spiked hair, and kids angry at their dads. If you grew up listening to the music, hanging out in the dingy clubs, and idolizing the bands like I did, you would see that the angry and clueless narrative is at best laughable, and at worst offensive. Punk culture to those that lived it, or even admired it from afar, has very little to do with ripped clothing, and a hell of a lot to do with values, choices, and absolute preparation in every aspect of life.

So how did I transition from Doc Marten boots into helping clients plan for their futures? The answer is less of a jump than you may think. I was branded as a “millennial”. A dirty word that has become analogous with adjectives like lazy, entitled, and unprepared. The long-winded op-eds, news pieces, and television specials we have all endured have labeled myself, my friends, and my generation about as useless as the ragged punks lambasted in decades prior. We were conveniently written off as dumb and incapable the moment we tried to pull ourselves up by bootstraps.

As a 12-year-old learning about bands like the Clash and Minor Threat, it became very clear that these people had something very poignant to say, and I was eager to hear it. While the ideologies of punk heroes like Joe Strummer and Ian Mackaye would not be considered even remotely similar, the inherent philosophy of those I idolized was always consistent. “Read the fine print, prepare, question everything, and DO IT YOURSELF.” My world became a lot bigger because of people like Henry Rollins. I was introduced to writers, philosophers, and world views that were conveniently left out of my public-school curriculum. I devoured everything I could, and without coming off as completely cliché, learned to think for myself.

I firmly believe that if a historian were to judge millennials 100 years from now solely on magazine articles, the judgment would go something like this: “Their level of debt rivaled their level of education, they couldn’t hold a job longer than a year, and they all lived in houses made out of avocado toast.” While that may seem humorous now, this is the type of oversimplification that the preceding generations seem determined to brand us with like a bad tattoo. It is just easier to blame our shortcomings on vapidity, while conveniently overlooking the fact that our generation’s playing field looks dramatically different from the one that allowed our parents to buy houses on single-person middle-class incomes. We know it, they know it, and yet we’re still reprimanded for our supposedly poor choices like it was us who inflated the housing market and college tuition to epidemic proportions. Do not pass go, do not catch a god damn break. Punk rock will be remembered for its green hair more than its accomplishments, and I refuse to allow my peers to be remembered for expensive coffees and a lack of financial literacy.

The truth is much different than the Wall Street Journal may imply. Millennials moved to cities, became entrepreneurs, and began changing the world. We did all of this while defying traditional roles AND eating overpriced avocado toast. Under the guise of failure, we continued to learn and actively prepared for opportunities that came our way. Personally, things like music and skateboarding were devices more than activities, and the catalyst for my world view in adulthood. These devices defined me. Punk rock taught me discipline that came without a coach or a court. It proved that if you stuck to something and gave it the right amount time, you could one day achieve success. As an adult that philosophy has helped me guide clients in their finances and plan for the years ahead. Friends and colleagues took the DIY mentality even further, using it to build booming companies and world-renowned brands. The nuclear family and white picket fence were still a goal for many, but we crawled to it in the cheapest apartments we could find.

My transition from punk to planner was seamless once I learned the difference between the world of independent advisory, and the broker most synonymous with managing money. The financial advisory business has long been defined as a snake oil sale in an expensive suit. A sleek way to rip off main street and line their own pockets. While this was true in the past, the independent advisory business has uprooted that dynamic and focused on providing transparency and tangible solutions for the communities in which we serve. This provides for a business model that is compensated on the quality of our advice, not transactions. We are no longer defined by the mutual fund kickbacks and asinine expense ratios brokers long used to fatten their paychecks. Through leaps in financial technology, the financial planning practice has been redefined as an industry that truly helps clients achieve their goals.

My job as an independent advisor has freed me from the product sales that have shackled advisors in the past. I am not conflicted by lofty sales goals that create a grey area when it comes to client fiduciary duty. My career now definitively consists of educating clients and empowering them to make the best possible financial decisions they can for themselves and their families. My choice to work with young people has also highlighted a disconnect in the financial services industry. Young people do not want to be told what to do, while my job is to give advice. This means that when I am offering solutions to my clients, I am doing so with a deep knowledge of their history, goals, and tolerance towards risk. This rarely means telling a client to “fund a Roth IRA” or “save 10% of every paycheck you receive.” Those rules are antiquated, and for some, not feasible. My job is to listen, learn, and give the best advice I can. It may mean simply educating a successful, young entrepreneur on what a retirement plan actually is. This is not because my clients are uneducated or apathetic. It usually means that the client has focused their entire being on becoming REALLY good at something they love. The thing they love has paid off, and now they have come to me to make sure the proceeds are not squandered. Dealing with my peers has taught me that they WANT to learn when offered. They have no interest in paying fees and going on financial autopilot. More times than not, when a young person sees the bigger picture, they will end up funding that Roth IRA. My job as an advisor is to articulate that bigger picture.

Looking at the example above, it is very easy to highlight the difference between how a young client, in comparison to an older client, will respond to suggested information. Both will fund their retirement accounts, taxable accounts, and savings accounts, but my young peers won’t leave the office without knowing the components of the plan presented, and WHY it should matter to them. This due diligence creates long term relationships with people who tend to hold steadfast in the face of market uncertainty. They knew their goals when they walked into my office, and they will stay the course until their lives necessitate adaptation. This is the key to understanding my generation, and one that creates a disparity between older advisors and younger clients. Young people don’t accept advice just because you have the credentials to give advice. Show them why it matters and you will gain their trust. Tell them why it matters and they will get up and leave. I have a strong feeling the musical countercultures many of us grew up tied to helped create a sense of healthy skepticism.

I’ve spent years watching my friends work day and night on projects that inspire them. I’ve watched my millennial counterparts go from being able to just barely pay their student loans, to being able to save the money necessary to build a future. This wasn’t luck, this was dedication and preparation. Inspired and in response to their tenacity, I was able to take the unspoken rules punk rock taught, and create a career serving those around me. It took years to learn the financial industry, build a business, and become a Certified Financial Planner. With my experience, I am now able to guide a generation completely written off by what seems like everyone. Mundane concepts like savings strategies, emergency funds, and Roth IRAs may not be the sexiest things in the world, but I can assure you that my clients who have helped redefined industries like fashion, music, and art, are more than receptive when it comes to their goals and hard-earned income and assets.

Don’t let those older generations write young people off. None of this came easy to us. The game has changed and the rules are no longer in our favor. As adults, we hustled our way to achieving things that were a walk in the park to the generations before us. Saddled with debt, we have begun to save. Burned by a financial crisis, we have entered the financial markets. Written off by previous generations, we have changed the world and financial services for the better. Put on a Misfits record, write down your goals, and diversify your portfolio.