Getting Good With Money - The Summary

Getting Good with Money, by Tiffany Aliche

More likely than not, our understanding [and relationship] with our personal finances or just money in general has at some point been confusing. Personally, I have read a lot of personal finance books over time to gain a better understanding on various financial topics and also get a good grasp as money was not a topic taught or familiarized with in high school or college. Needless to say, of all the personal finance/self-help books I have read, Tiffany Aliche’s ‘Get Good with Money’ is the one book that has resonated the most. It is extremely detailed, informative and inspiring but also interactive, not overwhelming and most importantly, relatable with something for everyone regardless of where you are on your financial journey.

In the following pages, all of Aliche’s research and knowledge has been broken down and efficiently summarized so you too, can begin to fully Get Good with Money.

Key Takeaways:

Things cost money and choices we make have a direct impact on our quality of life
You could have expensive things but not really own expensive things
Things can turn around in the blink of an eye and that is life
Struggling with your finances at some point in life does not make you a failure or a bad person - it makes you human - so forgive yourself.

At any given point in time, we already possess all the skills we need to solve any dilemma
Your finance and life goals will evolve as you do
“When you teach, you learn twice”
Networking matters the most. There is nothing to be ashamed of in reaching out and asking for help. You never know who in your circle could really help you out.

Discomfort is a clear sign of growth. Hard times and obstacles prepare you for the better times ahead Add people to your network who are positive, ambitious, and also working toward elevating themselves financially. Faith over fear. Believe.

Money is like a hammer - it can build or destroy your financial house
Giving activates abundance. Share your time, energy, resources and knowledge with those not yet as equipped as you.

Regardless of how much is in your bank account, you need to get good with money and learn how to master the fundamentals. This involves taking a realistic picture of where you stand financially, making peace with that, setting a plan for how to do even better, and then actually taking action on said plan.
Financial fear is a phenomenon where you have a deep-rooted and irrational fear of losing all your money and becoming broke even if you might be earning even more than before. Luckily, this can be fixed with a strong foundation or as Aliche referred to it, “critical financial pillars”. That strong foundation can be built with less than you think: BECOMING FINANCIALLY WHOLE. To achieve this, there are some prerequisites:

➔ Unpacking your current attitude with money
➔ Gently questioning your behaviour with money
➔ Choosing not to dwell on mistakes or past financial decisions
➔ Learning from the mistakes
➔ Finding a solution instead
➔ Making thoughtful and better decisions
➔ Gratitude: always finding a reason to be grateful and positive
➔ Accountability [and accountability partners]

The 10 steps to financial wholeness.
1. Budget building
2. Save like a squirrel
3. Dig out of debt
4. Raise your credit
5. Learn to earn (Increase income) 6. Invest like an insider
7. Insurance
8. Increase your net worth
9. Have a money team
10. Leave a legacy (Estate planning)

1. Budget building

Budgets should not be restrictive - be active not passive when it comes to where your money is going out to on a regular basis.Get in the habit of seeing all your spending choices. Being mindful of your expenses helps you say Yes to your wildest dreams.
Most people’s issue with budgeting and money in general is that:

They do not make enough money (Income issue) They spend too much money (Spending issue) Both of the above.

Solutions include reducing your expenses, identifying ways to increase your income, and recalculating your current savings. Making meaningful cuts either in non-obligatory expenses or in bigger factors (refinancing mortgage, moving into a smaller or less expensive home, surrendering your car, deferring student loans). Automate and apply direct deposits to bill payments and subscriptions.

2. Save like a squirrel

Saving and investing bridge the gap from regular to wealthy. The goal should not be saving to spend money but rather saving to make money. Have different saving buckets - emergency fund, specific goals, etc.

Practise mindful spending: what you need > what you love > what you like > what you want. Find and fund the things that provide lasting joy to you, rather than choosing things just to ‘keep up appearances’
Life is unpredictable - saving sees you through tough times and gives you the ability to invest. Calculate your savings goal amount that meets a minimum of 3 to 6 months of essential expenses and then calculate how much to deposit into each category depending on the frequency of your choice. Prioritise and automate transfers to your savings account.

Make saving one of your recurring bills or expenses. Separate funds into different bank accounts as well as different banking institutions to help be disciplined. Putting your savings somewhere slightly more inconvenient for you to access while also earning a relatively higher return/APY and FDIC insured is recommended. There is such a thing as oversaving and over sacrificing.

3. Dig out of debt

Your mindset is extremely important so shift the way you think and talk about debt - debt is not a place you are stuck in (“I’m in debt”) but rather simply something you have to pay off.
Being free of debt does not equate to being wealthy.

Plan for digging out of debt:

Identify all of your debt - exact amount owed, minimum payment due, interest rate
Restructure your debt - negotiate a lower interest rate, refinancing, transferring balance to an account with lower rate and no transfer fee, take a personal loan to consolidate all debt into one
Choose a paydown plan and technique - snowball vs. avalanche technique
Automate your paydown plan. Check in to know when balance has been paid off

Snowball technique: prioritises paying off your balances from smallest to largest regardless of the interest rates. This method sets you up for early success. Avalanche technique: prioritises paying off debt with the highest interest rate first, regardless of the amount. This method pays off the expensive debt first.

Credit card debt is very expensive debt. Do not pay just the minimum on your credit cards - you will be paying it off forever!
There are statute of limitations on some debt (colloquially referred to as ‘zombie debt’) which vary on types of debt as well as the state you reside in.

Paying down your debt is also an investment - you will no longer have additional interest fees.

4. Raise your credit

Your credit is more than just a number - it affects jobs, home ownership, renting apartments, borrowing money, getting a car, access to better interest rates, more negotiating power, lower security deposits, lower insurance rates, and more!

Get your credit fixed and to where you want it to be now so it is beneficial to you when you really need it. Make a list of the factors impacting your score and come up with a game plan to increase your score. Aim for a credit goal of 740 and higher. There are multiple scoring and rating models but the FICO score is used in the majority of decisions.

Payment history (35%) Credit utilisation (30%) Credit inquiries (10%) Credit history (15%) Credit mix (10%)

Check for accuracies in your credit report/history: account ownership, personal information, age of negative history (7 years).

Aliche recommends paying after the statement closing date but before the due date so activity reflects on your statement while also being paid off month to month with no balance being carried over. Aim to not use more than a third of the limit on your account - keep utilisation low.

You can try writing and mailing a goodwill letter to the credit bureaus regarding negative credit points specifying unexpected life events etcetera.

Cosigning on a loan makes you the borrower as well as equally liable.
To help raise or initially build your score you can apply for a secured card .

Aliche’s ‘Jump like Jordan’ tip: Auto-pay off a small debt monthly. Bring one of your cards’ balances to $0 EVERY month. Put your lowest bill to be automatically charged on your zero-balance card after the statement closing date. This bill should be the ONLY thing this card is used for. This creates a payment loop effect.

Do not close older credit cards - shows relative long-term credit history. You have to be patient as credit history builds. Ensure you are maintaining excellent payment history, excellent utilisation, and not adding too much new credit or allowing excessive hard inquiries.

5. Learn to earn (Increase income)

“What good is more money if you are too tired to enjoy it.”

When it comes to increasing income, one should be strategic and not suffering. You do not want to create higher hurdles to get to the richer life you want to be living. Make a plan to start earning more intentionally.

It is highly recommended to have more than one source of income (in New York City for example, it is almost impossible to live off of one source of income alone, especially very early in your career.) We all have income-earning potential (skills that can easily be transferred to side hustles)

The Plan:
1. Maximise your current earning potential
2. Assess your skills
3. Decide which skills to monetize
4. Calculate/estimate your income potential from said skills

Asking for a raise: Everyone should have a brag book, which is where you record your wins, how you improved the workflow, helped lower budgets, and basically any benefits or value-add you have brought to your team and company since being employed. Using money, not emotions, raises your chance of getting the raise. In addition, actively undergoing professional development, attending a conference, taking a class, or getting a higher degree makes you even more qualified and increases your salary potential.

Negotiate. You never know if you do not ask. Know your worth.

Take an inventory of your skills - what things do you know how to do well? You can ask your family and friends for an external assessment.

Opportunities often present themselves in random, strange ways. Keep an open mind and be open to receiving.

There is a difference between your business looking like a business and actually being a business. Looking like a business means having the website, office space, stationery, etc but you are not making any money. Being a business is when you are actually getting paid for your product or service.

When starting out, you should focus on a clear and direct return on your money. You want to give yourself a budget - that is, a number you are willing to invest and willing to lose in case your side hustle does not work out.

6. Invest like an insider

Retirement

Retirement is the gift of choice. Imagine the future version of you that you are saving for. “It is your younger self’s job to look after your older self.”
People usually do not start saving for retirement in advance because of ignorance or lack of knowledge, they think they are too young, they think they do not have enough money, or they simply have no role model to advise them.

A little goes a long way when it comes to investing - the power of compound interest. Put in as much as you can for as long as you can to reap the benefits of compounding interest.

1. Determine how much you want to save 2. Decide where to invest
3. Choose your allocation/mix
4. Automater and limit withdrawals

The 4% rule. This states that a person with 25 times their annual expenses invested for retirement will likely never run out of money, when retired, if they only withdraw 4% or less money from their retirement account to live off of each year. This accounts for inflation over time and is based on the fact that the annual market rate of return is, on average, greater than 4%, year after year.

The FIRE (Financial Independence, Retire Early) movement - a strategy of aggressive saving, up to 70% of your income, and investing it until you have reached a number that is about 30 times of your current annual expenses.

The higher your savings rate, the more you can invest in your future. Action activates abundance.
401k matches /profit share contribution: annual contribution while working lowers income taxes in the year that you contribute. There are high contribution limits compared to other retirement accounts. People under 50 can put in $19,500 annually; those over 50 can put in an additional $6,500. Employers can also contribute up to $37,500 as a match on your behalf.
Catch up contributions allow people over 50 to stash away more in their 401 (k)s and IRA than the regular IRS limit in order to give them the chance to make up for the years they did not save enough.
Be cautious of the fees involved with management of the funds. The more human interaction your money gets, the higher the fee you will be charged for it being managed. The FINRA Fund Analyzer tool gives you a peek into associated fees with respective funds.
Traditional IRAs. You have more free reign over your money, can be rolled over, there is an early withdrawal penalty, tax-deferred and tax-deductible, lower amount limit ($7,000).
Roth IRAs. You access your money after-tax (not tax-deductible) and there is no penalty on the principal, there is no minimum age to open an account. There is however an income limit - $139,000 for an individual and $206,000 for those who are married or file joint taxes.
SEP IRA. Retirement account if you are self-employed.

Always update your beneficiaries as you go through every important life change. Asset allocation: Understanding your mix to manage your retirement money. When comparing stocks with bonds, Aliche discusses the concept of “Pedals and Brakes”; on a bike, stocks are like the pedals - without them you cannot go anywhere, while bonds are like the brakes - without them you (your financial path) will crash.

With that being said, reduce your stock allocation as you age to reduce risk as you get closer to retirement. Rule of 110. Subtract your age from 110 and use the bigger number as your stock % and the smaller as your bond %. Retake your risk questionnaire each year.

Target date funds (TDF) provide an automated investment mix. Many 401(k)s and most big brokerage firms have target date funds.

Investing for Wealth

1. Meet the baseline requirements before you start investing. Ensuring you are on time with current bills, making retirement contributions, have an emergency fund, paid off high interest rate debt, and are planning to invest money you do not need in the next 5 years.
2. Set investing goals. Figure out how much you can afford to put in as well as your why for wanting to build wealth.
3. Determine the type of investor you are: active, passive, in-between.
4. Determine your best management type: trading platform, robo advisor, or financial advisor. A financial advisor has a fully customised plan and is highly specialised.
5. Determine your best investment vehicle: stocks, mutual funds, and ETFs.
6. Start investing
7. Automate and ignore

Will stocks to your kids at death because they will receive the value of the stocks as-of the date of death and all previous gain will also not be taxed.

Fractional shares - you can buy as low as 1% of a share through brokerage firms. You can have a watchlist for stocks you are interested in. If you are just starting out, ETFs invested in the S&P 500 are recommended because they give you exposure to 500 of the largest companies listed on the US stock exchange.

Stocks have higher risk and return with no fees. Mutual funds have high risk and return with higher fees. ETFs have less risk and lower return with low fees.

The goal of an index fund is to mirror, not beat the market.

7. Insurance

Insurance is something that if you have when you do not need it, can feel like a waste of money because you are paying for a benefit you are not using. On the other hand if you do not have it when you need it, it can put you in serious trouble. Think of it as protection, or a risk management tool, for you and your loved ones against any future crises as life is unpredictable. Insurance is a small price for big peace of mind.

Health insurance

Deductible is the amount paid before your policy starts paying out claims Coinsurance is the percentage of the total bill you are responsible for paying Out-of-pocket maximum is the highest amount you will have to pay for covered services in a plan year.

Premium is the amount paid into your plan each month and there are multiple factors that go into calculating your premium. If you are retiring before the age of 65, you can buy a plan from Health Insurance Marketplace at healthcare.gov and qualify for a special enrollment period. After 65, you are eligible for Medicare. Part A (hospital insurance) and Part B (Medicare insurance).

High-deductible health plan (HDHP) works great for young healthy people with minimal medical expenses. Preferred Provider Organization (PPO) works great for those [and their kids] with high medical expenses due to illness, injuries or pre-existing conditions. Health Maintenance Organization (HMO) is the most affordable option and provides you with a primary care physician.

FSAs vs. HSAs.

Flexible Spending Account: Use it or lose it by the end of every year Health Savings Account: can be invested. Tax-free withdrawal. Your household size and income, not employment status determines if you are eligible for coverage. You may also qualify for free or low-cost coverage through Medicaid or the Children's Health Insurance Program (CHIP).

Life insurance

This is a contract between you, the policyholder and the insurer where you pay a fixed amount each month(premium) and the insurance company in turn pays out a lump sum (death benefit) to your beneficiaries. Think about those your policy provides for long after you are gone.

A medical exam is performed and there is a mortality table reflecting life expectancy based on results and factors. Lower age and record of sickness, the lower your monthly premium. You cannot change your premium over time so it is advised to sign on for insurance early on. Term life has a much lower monthly premium than permanent (whole life/universal) insurance.

Insure yourself for a minimum of 10 times your income, preferably 15, and consider any debts or future obligations you want taken care of. If you have a pre-existing medical condition, consider using an agent instead of an online service in order to get more personalised attention and nuanced advice.

Disability insurance

This type of insurance is important but overlooked. It provides you with money in a situation where you are alive but unable to work. The policy provided at work can leave you underinsured and is also taxable.

Women usually pay more for coverage (as a result of pregnancy and childbirth).

Property & Casualty Insurance

This applies to physical items (such as cars, houses, phones) and casualties, such as accidents. Auto insurance is legally required in every state except Virginia, New Hampshire, and Mississippi.
Ensure your liability limit is not too low and that you have uninsured/underinsured coverage which protects you if you get into an accident that is no fault of your own, and the other driver is either uninsured or underinsured.

Homeowners insurance

There are 8 types of homeowners insurance as well as riders for specific valuables. Discounts may be applied if you have protective devices such as security cameras in your home.

Umbrella policy - extends above your underlying liability limits to match an increase in assets/income. There is also renters insurance.

8. Increase your net worth

Your net worth = your financial temperature. Having a positive net worth means owning more than you owe. Your net worth is not linked to just your income.

1. Calculating your net worth: Assets - Liabilities. Assets include income, stocks, real estate, jewelry, savings, collectibles/antiques with value, etc. Liabilities include loans, credit card debt, mortgage, huge outstanding bills, etc. The cornerstone for wealth is homeownership. Homeowners have 41 times greater net worth than renters. Your net worth potential lies in your ability to increase assets and lower liabilities.

2. Accept your net worth for now. It is not immune to the impact of a solid goal and action steps.

3. Establish your net worth goal and identify next doable steps. This takes away worry. Your goal should be more than to just make more money. It should be to own a little more and owe a little less each year. Goals set should be specific, realistic & supportable.

4. Make future financial decisions with your net worth in mind. “When you borrow money, you are taking money from your future self and future earnings and spending it today.” Assets should pay for your liabilities. Know your net worth, create goals to get to where you want, and remember that you are in charge. Your activities are directly related to your net worth.

9. Have a money team

This is your support system to guide and influence your financial choices and members depend on the complexity of your finances. “The more you make or want to make, the more you will need assistance.” All in all, do due diligence up front.

1. Accountability partner - Everyone needs one (or more) person who is supportive and encouraging, has clear direction in their own life, is positive and possesses a strong work ethic.

2. Certified financial advisor/planner - They have the knowledge base and contacts. A CFP meets long-term goals, has credentials and your best interests at heart.

3. CPA - deals with tax planning but for more complex tax situations (owning a home, business, dependents, married...)

4. Estate planning - For all your essential, legal documents (such as will, healthcare directives, power of attorney, trust, etc)

5. Insurance broker - does not work for a singular company, helps vet your options and assists in purchasing the policy that makes the most sense for you. Brokers represent you, Agents represent the insurance companies.

10. Leave a legacy (Estate Planning)

Estate plan entails what happens to you, your property, dependents, and assets after you pass away or become incapacitated. Your estate does not necessarily refer to a ‘mansion’ and can be cash, clothes, jewelry, property, car, etc. Identify, create, execute and fund components of your estate plan. Revisit and update said plan every five years to reflect life changes.

It is important to remember you do not have to have it all set up at once and it can be broken down. Perhaps the easiest to begin with are beneficiary forms which apply to HYSA, employee benefits, life insurance, and cash benefits. Guardianship for minors or children with special needs should also be covered.

Write a will and assign an executor of [your] estate. Identify what properties you own as well as who in your life should be considered - immediate family, extended family, business partner if applicable, charity organisations. Manage and distribute assets in your trust.

A will becomes public record after you die.
It is important to note that fiance(es) and longtime partners are not legally covered unless specifically covered in your will.

Advance directives (living will) assigns medical care instructions in the possibility of advanced terminal illness. It involves your preference for life sustaining treatment, pain medications, resuscitation, intubation, feeding tube, organ/tissue donation, long- term care plan while you are still of sound body and mind. A durable power of attorney acts on your behalf in legal, medical and financial areas while you are unable to.

A trust is advisable if you have at least $100,000 in assets, and absolutely a must if you have assets of $500,000 or more. This helps your heirs avoid the probate process.

A trust is immediately activated once it is written, assigned a federal EIN, and a bank/financial account has been opened to hold the trust assets.
Once all the logistics are figured out, execute and fund. Get it all the way done so there can be no dispute if you are gone untimely or unexpectedly. Sign, speak with your accountant, attorney, trustees, and formally execute.