March 25, 2021

5 Reasons Why Personal Finance is More Complicated Than You Think

CNBC Select’s editorial team works independently to review financial products and write articles we think…

CNBC Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

In late 2015, I logged onto my then-boyfriend’s laptop to watch Netflix since my computer was dead. What followed was about as cliché as you might expect.

I pulled up the internet browser, and there it was: a secret email exchange between my boyfriend (let’s call him C) and a webcam model. C had asked the model how much she charged for video chats, and she had given him a list of rates and services, ranging from late-night text access to simple email chatting to other arrangements.

C and I were not in an open relationship, nor did I know about his ongoing inquiries. (Though, in hindsight, can I truthfully say I was surprised?) I remember staring at his MacBook Air, wanting to smash its thin metal frame against the coffee table. Yet, even though my hands shook in anger, I withheld. MacBooks are expensive. Rage pumped through my veins, but I still knew that smashing a $1,200 laptop was just not something you do.

The event, as painful as it was, caused a chain reaction that sent me, in a roundabout way, here, to my current job as a money reporter. After my breakup with C, my long-time college boyfriend, I needed financial stability — and fast. The year before, I’d quit my job to go back to grad school, and C agreed to support me while I started freelancing as a yoga and writing teacher.

Without C as my financial safety net, I scrambled to pick up part-time work teaching reading at a local elementary school. Eventually, I leveraged that experience into two years teaching full-time at independent schools, then I started freelance writing again (after finishing up my master’s program in creative writing).

See? Not exactly linear. I started writing about money in 2019 while trying to decide whether to stay in my new career as an independent school teacher. I pitched an article about how I made the decision to leave, and voila — here I am. I’ve learned so much writing about money that I can hardly believe it was just two years ago that I published my first personal finance story.

Now I spend my days speaking to experts, researching and writing about topics like debt, budgeting and credit cards, and I’m glad to say I’m a little wiser than when I agreed to throw caution to the wind and trust C to support me. But I’m also committed to remaining humble, since money is really, really complicated.

Oftentimes, I’m struck by how many experts out there are quick to argue that personal finance is really quite easy. All you need to do is follow the rules and wealth and happiness will come your way. But anyone who’s ever struggled to make ends meet or made an impulse purchase when they’re sad (or happy) or fought with a partner over a credit card bill, knows that money is anything but easy.

Ahead, I offer a list of five reasons why managing your money isn’t simple — and they have nothing to do with understanding compound interest or your credit score. You probably have a few of your own to add to this list.

Reason #1: Life is unpredictable

When C and I broke up, I asked him for one month’s rent. It took about two days of furious texting to convince him to give it to me, but he ultimately did. He moved out, and I had 30 days to formulate a game plan. I had been writing a curriculum for my first six-week yoga-and-writing workshop, which I expected would bring in some money after marketing costs. I was paying for my car, health insurance and all my business costs with student loans, and now that C was out of the picture I had to cover rent, utilities and food, too.

I made a budget worksheet in Excel (my first), and I looked at the various financial resources I had to my name: a $4,000 line of credit that a teller at my bank convinced me to take out in college, about $2,000 in savings, a credit card with an $8,000 limit. I was waiting on the check for $1,500 for my upcoming 6-week series, and I got paid $21 per hour to teach a 1.5 hour weekly yoga class at the YMCA, which I had to commute 30 minutes each way on the highway in order to teach (you do the math).

It would be tight, but I could hold myself over for two to three months while I searched for a permanent job. If I needed to, I could go into debt, I told myself. It wasn’t ideal, but I would survive. My biggest disappointment was that I had to put my dreams of being a business owner on hold and settle for any old job to pay the bills, a feeling I’m sure many of us know.

I took a seasonal job as a parking attendant. I signed up on Care.com and took babysitting gigs. I earned enough cash that I could cover rent without touching my savings. But then, the clutch on my car broke, a $1,500 repair.

One of my friends let me borrow her car while mine was in the shop. On the night I got my car back, a teenager driving his parents’ Cadillac Escalade side-swiped both cars parked outside my apartment. Then, we discovered that a mouse was living underneath the passenger seat of my friend’s car, which didn’t really have a financial impact. The point of the mouse is, simply, that life is insanely random.

It’s these moments that separate the financially solvent folks from the financial stable. I may have had enough cash to cover rent, but I was nowhere near stable enough to weather all these setbacks. Bad luck comes in threes, I remember my mom telling me once, which is never good news when you only have enough cash to get by.

My friend and I agreed that we wouldn’t file a claim with the teenager’s insurance if he would pay us in cash what his deductible would have cost him. His parents were relieved — they didn’t want a formal claim to increase their monthly premium. My friend asked for $30, since her car was a clunker anyway and all it needed was a new side-view mirror from eBay. I asked for $500, or one-third the cost of my new clutch. I didn’t have the cosmetic damage repaired (it was quoted at approximately $1,700), because my car was still drivable.

I met the teenager in the parking lot of a Trader Joe’s, and he handed me a wad of cash and said thank you — his parents were happy with our compromise. I felt a little weird meeting a teenager in a parking lot to retrieve an envelope of cash, but at the end of the day, I had my clutch repaired and even added on a new timing belt with the goal of increasing my car’s resale value.

A few months later, I sold the car for $4,200, recouping the remaining costs of the clutch repair (which I’d charged with my credit card) and earning me just the tiniest amount of cash to relocate from North Carolina to California, where I accepted a position teaching at a private school with annual tuition that cost more than I’d ever made in a year.

I look back on this period of my life with both amazement and anxiety. On one hand, I’m impressed with how resilient I was in handling life’s sudden blows. People who live paycheck-to-paycheck understand how to problem solve. We come up with creative solutions and make something out of nothing almost every day of the year. 

In hindsight, it was also funny; I’ll always remember my Worst Month Ever, when the mouse crawled out from under the seat of that Toyota Camry. How I shrieked when I flung my door open in the auto mechanic’s parking lot. How a nearby car salesman heard my distress and swiftly ushered me inside to show me the latest models.

I’ve got to hand it to the car salesman who saw me freaking out about the mouse. The man saw a golden opportunity; if anyone was primed to make an emotional decision about money that day, it was me. I don’t blame him for trying to make an easy sale.

But when I told him I downright couldn’t afford a new car, and he replied with, “Don’t worry, a car loan will boost your credit score,” my eyebrow raised at his argument. I realized that, no matter how funny my misadventures in car repairs were, I was vulnerable in that moment, and learning about credit was the best remedy.

Reason #2: Families shape our money values, for better and worse

When I was a high school senior, I dropped down to part-time enrollment to work as a patient service representative at a local urgent care clinic. One of my parents was an addict, and the other worked multiple jobs to keep us afloat.

My parents had set me up with a few good financial habits, namely encouraging me to save and build my credit score early, but we had a complicated relationship. I fought hard to become independent, thinking that making my own money would be my ticket to freedom since accepting help from an addict can be tricky business (anyone who loves an addict will understand this).

Though my parents and I bumped heads, I got through undergrad with only a few thousand dollars in student loan debt (less than many of my peers) thanks to my parents’ ability to scrimp and save. They covered my rent, in-state tuition, car and insurance. I covered my textbooks, food, utilities and other living costs. But because my parents were so frugal, I inherited one consistent message: Don’t do things that cost money.

What if I wanted to study abroad? Don’t. What if I wanted to do a yoga teacher training? Don’t. What if I wanted to pick a creative profession such as journalism? Don’t.

They didn’t mean to be so negative. They were focused on surviving. They were always looking for ways to save, and for them, it worked. They encouraged me to take the ASVAB military aptitude test (which I aced) because enlisting in the Army came with a cheaper price tag than my dreams of studying linguistics in South America. Anyone who knows me would laugh at the idea of me in the military, but I could travel that way, my parents said. And technically, they weren’t wrong.

But the more my parents tried to steer my ambition toward a practical career path like nursing or teaching (or nuclear ballistics), the more I rebelled. And that credit card I got when I was 19 with a $20,000 limit? Well, I used it more than I’m willing to admit on road trips, yoga training and a summer-long language intensive in Valparaíso, Chile — and that’s on me, not my parents.

Years later, I realize that many of my mistakes would have been preventable if someone had taught me how to align my money with my goals. Too often, our introduction to personal finance is a set of dogmatic guidelines with little room to personalize your decisions around what actually makes you happy. Families focused on survival know this well, because surviving is a different skill set than thriving. Save 25% of your paycheck. Don’t buy things you don’t need. Don’t go on vacations. Only eat food you buy on sale. Wear clothes until they have holes, then learn to sew and mend the holes. Wait for the other shoe to drop, because it always does.

I was lucky because ultimately, my friends, teachers and mentors, plus years of therapy, helped me see that the ambitions I had for myself were good, even though I’d formed so many negative, stressful associations around wanting anything more than the basics. But imagine if I had known how to align my money and my values all along? Had I known I was allowed to go to South America, I probably would have started saving for it ahead of time. Yo-yo dieting proves that the more we deny ourselves the food we want, the more food starts to take over our lives. It’s the same with money. You can’t deny yourself happiness. It’s better, instead, to work toward what you actually want.

Reason #3: People want different things

Of course, people want different things.

A few months before college graduation, I figured I’d better start thinking about what to do about my credit card debt. I cracked open a Dave Ramsey book at the local used book store. Coincidentally, I learned shortly after that Ramsey would be speaking at my college graduation ceremony (we share the same alma mater, the University of Tennessee). In Knoxville, billboards of Ramsey were everywhere, and reading his followers’ testimonies of living debt-free was enough to convince me that they all knew the big secret I was missing.

But I learned quickly that I’m way too complicated for Dave Ramsey. I’m actually okay with the concept of debt, but I’m not okay with working jobs I hate just to pay off my credit card. I never felt like I had to put my life on hold just to pay off my student loans. In fact, I’m grateful that my student loans gave me a few years to find my ideal career path, and that I took on this risk while I was young, had low living costs and no children to support.

I’ve learned from talking to hundreds of people about their money that personal finance is very nuanced. Some people have high debt tolerance, others are more geared toward long-term savings. Some people love a good bargain, while others are motivated by luxury.

Yet, with very few voices informing my understanding of money (just my parents and Dave Ramsey), I thought that having a few thousand in credit card debt meant I’d done something terribly, shamefully wrong. I graduated college at age 21, in just four years like my parents asked me to. I had an A- GPA, a Spanish Honor Society nomination and a 200-hour yoga teaching certification. I was bilingual, healthy and totally capable of pursuing my dreams — but it didn’t feel that way.

Having that lingering credit card debt made me fell like I was living with a dark, depressing secret for years until I began talking to people from all walks of life who figured out how to do money on their own terms. Now that I have the vocabulary to talk about what I actually want out of my financial decisions, I feel energized and motivated for the future.

Reason #4: We all have and make different amounts of money

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Reason #5: Money is boring, and you’re not

If you’ve made it this far into my life story, hopefully that means I’m not boring you. Maybe you’ve had your heart broken, too, or perhaps you’ve had to set emotional or financial boundaries with the people you love in your life. For some reason, maybe you connect with some shared aspect of what I’m saying.

People aren’t boring. We’re fascinating. As much as I love writing about money, it’s rather dull in comparison. But when you can learn about personal finance habits in the context of real people’s stories, you make a dry topic come alive. And in the best case scenarios, you can apply these lessons to your own money.

I’ve interviewed hundreds of experts, including a handful of millionaires and maybe a billionaire or two. Through this, I’ve learned that the people who are most successful with money stick to routine habits that operate independently from their emotional highs and lows. No matter what’s going on in their life, they contribute to their retirement fund. They make on-time payments. They calculate the interest rate on their mortgage and tighten up their credit score before applying for any kind of loan.

In other words, they do the boring stuff, even when it’s not so thrilling.

Case in point: A 31-year-old with a $500,000 net worth auto-deposits $3,000 per month into his investment accounts, rain or shine. A 35-year-old paid off $81,000 of debt and reached financial freedom in part by walking dogs. A Forbes 30 Under 30 honoree brought up budgeting on her first date with her now-husband, even though it wasn’t the grand romantic gesture we see in movies.

Luckily, these “boring” financial habits unlock doors that we get to walk through, which lead to exciting milestones. We just have to see these habits as the key to the kingdom, and not confuse them with the kingdom itself.

At the end of the day, we only have so much control over our finances. We don’t have much say over who our parents are, the color of our skin, our gender, our immigration status or any number of other factors that influence our financial situations. That’s what makes personal finance so complicated.

But, on the bright side, the things you can control are simple. And by opening up these money conversations, we start moving the needle in the right direction, so we can one day hope that personal finance will actually be easy for all.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.