This episode was especially important to me. It’s challenging to tell an engaging and entertaining story about “personal finance.” But, the foundation of a solid financial future is staying on top of your money. It’s not about having a lot of it. It’s about being organized.
Personal finance can be intimidating. A lot of us fear it. We find it difficult to be smart with our money. It doesn’t help that banks and financial services use jargon and make things sound so complex.
At the end of the day, it’s really quite simple. Practicing and staying disciplined is the hard part. And now with technology and automation, a lot of the work can be done for us.
In this episode of Talk Money, we tell a story about Nashville musician Ron Pope, who struggled with debt and terrible credit during his young adult life. It was his wife & manager, Blair Clark, that taught him if he wanted a family and to provide for them, he would need to have his “money shit together.”
Then, my dear friend Will Peng, founder of Northstar Money, explains why it’s so hard for us to be organized about our money, and how technology and automation are making it easier for us to be better about it. Better is good. Better is great!
Here's the key. Know your monthly cash flow. What’s coming in and what’s going out. What are your fixed costs (rent, utilities, groceries)? What can you adjust, or get rid of? Then, with what you have left over, you can :
To make it even easier. Here are my picks for the companies and services I use and/or plan to use.
For full automation, budgeting, savings, emergency fund, and financial advice:
For Retirement & Investing:
This doesn’t have to be daunting. All you need to do is get started. Stop putting this off. The best thing about automation and these companies, is they do the hard work for you. I hope this has been helpful. Please respond with additional questions and topics you’d like to hear more about.
Please share this post with those you think would benefit!
R. Pope [00:04:03] Well, you know, I've always made music. I was certainly, you know, making music for a long, long time before it became my job. R. Pope [00:09:00] Like, there was a period I was playing music in the subway, then that's how I was paying my rent. And so, each month I would pay my rent in, you know, like, one dollar bills and rolled change and stuff like that I was just kind of living hand-to-mouth my mother was at that point pretty terrified for me. And so, there was a period when my stepdad and my mom were gonna tell me, you know, "This is it. You should probably give up and go to graduate school." And I showed up at my grandparent's house, and they were gonna tell me, you know, "We want to talk to you." And I was like, "Oh, come in the other room, I want to show this song I just wrote." And we went in the other room. I sat at the piano, and I played this song. And my stepdad turned to my mom and he said, "Let's give him six more months."
MESH: Hey everyone, I’m Mesh Lakhani and welcome back to Talk Money.
That was Ron Pope, a musician based in Nashville. Ron ignored his financial health for years before he turning things around. In today’s episode we’re gonna hear how he did that. And talk about how everyone can plan for a better financial future.
So yeah. Our story starts with Ron paying his rent busking in the subways in New York.
R. Pope [00:17:19] At that point in my life, I had the credit of..whatever the worst kind of credit is, that was what my credit was like. Like, debt collectors would call me and threaten me. And I would laugh, and I would be like, "OK. Repossess my nothing. Put a lien on my nothing." It was bad. My, my money situation was very, very bad.
MESH: If you’ve ever risked your finances because of something you’re passionate about, you know it’s stressful! These days, there’s technology that can help us manage things better.
Ron didn’t have that—but he did have something else. Someone else.
[00:45:20] I'm Blair Clark. I am an artist manager. And I am also married to the musician Ron Pope. he takes up most of my time
Blair’s the co-founder of Brooklyn Basement Records, an independent record label and marketing agency. It’s her second career.
She’d originally moved to New York for her job in advertising. And like a lot of New York transplants, she had a lonely start.
BLAIR: I didn't have very many friends in the city and just started reaching out to anybody that I even remotely knew on social media. And Ron was one of them because we met in middle school. So, he was gracious enough to take me out to dinner, to introduce me to a few of his friends. And that's how we got to really know each other.
R. Pope [00:13:55] And so, we sit down at dinner. And maybe an hour in, we've, you know, had a few glasses of wine and we're laughing and talking about growing up and all that stuff. And I said, "So, how are you and your boyfriend adjusting to living so far apart?" And she said, "Actually, we broke up." And I was like, "Oh, really?"
B. Clark [00:07:05] he was very confident. He was happy. He seemed really excited about life. He was a musician, which was crazy to me because I knew nothing about him being a musician. And so we just...oh god I don’t know how to say this on a podcast but I mean we were just like, it was easy, it, we, we were...sorry, I’m gonna start over
MESH: ...they liked each other.
BLAIR: Hahah. Ummmm
R. Pope [00:06:15] So, when we started going out, I was, like two bad weeks from homelessness, I would say. I didn't have any fans. I had just come off of a miserable tour. And, you know, I, I played in the back of a sushi restaurant for two people, and one of them was asleep. It was like that kind of tour. They were lean times. So, I bet it wasn't very impressive.
B. Clark [00:14:03] Well, this, I, I want to preface, was not his fault. But he and his roommates did get evicted from their apartment one night, so he and one of his roommates showed up to my apartment with a bag That was in my very first apartment in New York that I was sharing with two other girls that did not know these people, and they were like, "Wait. What? Two dudes are coming to stay on our couch? Why?" So that was, that was a little bit of a clue that things, you know, weren't perfect. But I was 24, 25 and I was like, "Yeah. He'll, he'll probably figure this out at some point."
Mesh: She gave him a chance! Eventually they moved in together. And that’s when Blair, a big music fan herself, got involved with Ron’s career. She would come home from work and help him out on the side, sending emails here and there. Promoting shows. Starting to act like a manager.
BLAIR: Until finally I was taking on more and more of a central role and I wasn't acting as his manager anymore. I was his manager.
Once she realized that, she started paying herself. And then! Quit her day job.
Things were getting serious on the personal front, too. They were talking about marriage. And she loved him, but...
...I feel like I was hesitant only because he was, he was an artist, you know. An artist. Is an artist. And sometimes that's comes with not knowing exactly what to do with your money. [00:27:21] I remember saying, "If you don't get your money shit together, there's no way I can marry you." [00:28:53]
Blair told Ron that with his credit? There was no way they’d get a mortgage.
She told him:
BLAIR: I save for retirement. I have a savings account. I pay off my bills, like If this is stuff that you want, you have to sort it out. I’m not gonna tie myself to that. As much as I loved him.
R. Pope [00:23:37] ... You know, it was a practical thing. She had good credit. She was serious. R. Pope [00:25:39] I really came to understand fairly quickly that it was important. / / Even though my lifestyle and my career are unconventional, some of my wants were very conventional. And that require that I make some substantial changes.
Mesh: For Blair, it wasn’t about the money, it was about a future without worry. She loved Ron. But she had worked really hard to set herself up.
Blair didn’t come from money, but her mother had always taught her to budget and save. Ron hadn’t had the same financial guidance.
MESH: Around this time, Ron’s career started to take off. He was one of the top unsigned artists during the height of the myspace era. Courted by major labels. This is song habits,
The money started coming in, and he began to take it seriously. Ron started buying prepaid credit cards and paying them back in full, to build up his credit. It took a while, but it worked. Ron says he couldn’t have done it without Blair.
R. Pope [00:29:43] There's no way. It would be impossible for me to be at this place without Blair. The career that we've built is really, it's a reflection of the, the two of us working in tandem with each other.
Ron’s had a lot of managers over the years. And not all of them did a great job. For Ron, Blair has something they didn’t.
And what I found is it doesn't matter the credits that someone has. It matters how invested they are in what you're doing. So, I think it's important to find partners that understand what you're doing and care enough to actually offer value. And that's something that Blair did for me that no one else did before.
MESH: it comes down to trust. Ron trusted Blair enough to follow her guidance, and together they created an amazing life together.
They started their own record label. And Ron’s music has been streamed hundreds of millions of times. His credit score is in the mid 700’s. They relocated to nashville and bought a home. They own the building their office is in!
They have retirement accounts, a special savings account for their daughter’s college, and multiple emergency funds for all the worst-case scenarios you can think of.
In other words, they really have their money shit together.
B. Clark[00:40:02] The emergency fund is very important to me. I don't even want to touch it when we have emergencies. I, I, I think because, I feel like I'm constantly scared that everything that we've built is just going to evaporate. And so I, I would save every single penny that we ever made if it were, you know, possible. But it's not.
It’s a good thing to be on top of your finances. Because you never know what could happen.
Ten years ago we all saw the worst case scenario, during the financial crisis.
Losing a job or not being able to find one. A housing and stock market crash. All of that has made us skeptical of banks and financial institutions.
At the same time, we’ve seen companies emerge that compete with the traditional banking system. With lower fees, better customer experience and more transparency.
A lot of these new products can act AS the Blair to our Ron.
This emergence of financial technology, or “fintech” was started by entrepreneurs solving their own frustrations with the system.
WPeng [00:02:24]I graduated from college with a bunch of student debt. And as you know, the student debt epidemic has reached some unfathomable levels.
That’s will peng, founder of northstar money. A company that helps you automate all your finances, and provides a human advisor.
The frustration Will wanted to solve was around his student loans. He had two federal loans, three private loans, and no idea what to do.
I just went with whatever payment plan they recommended. I was like, "This sounds good.".
MLakhani [00:03:32] Did you not do any research at all? [crosstalk] ...
WPeng [00:03:34] I did. I mean, I Googled around like, like anybody would. But part of -- the, the tough part about personal finance is that you need to know what questions to ask. So I just Googled around and, and -- because -- and I think this is the theme in financial services in general, is that it's built on a high level of complexity, maybe purposefully so. So that people just give up and do whatever is the easiest, which is, in many cases, nothing.
That’s what Will did. He went with the payment plan his lender had set up.
And fast forward three, four years, I was like, "How are my student loans doing?" I logged in, and my balance hadn't changed. And I was like, "This makes no sense. Like, something must be wrong." But unfortunately, it was right, because as -- for, for the people who also are long payment plans, I was just paying interest rather than the principal. So I was pretty angry.
Will’s frustration with the financial system is pretty common. Nobody likes the jargon and confusion that come with financial services. But at the end of the day, our money and financial health is still our responsibility. It’s intimidating.
WPeng [00:23:10] I read somewhere that people are more willing to talk about their sex lives than about their personal finances. There was an Atlantic piece titled "The Secret Shame of Middle Class Americans." And it talks about how we get rewarded through social status for consumption. But there is no similar thing for the invisible things that we do to improve our personal finances like saving.
It’s easy to convince ourselves we’re being responsible if, say, when we bring our own lunch to work everyday. (BUT) Then we reward ourselves with a $100 dinner that weekend, which cancels it out.
WPeng [00:42:42] there's a lot of research around the behavioral psychology of personal finance. And one of the most intriguing concepts around personal finance is this idea of mental accounting. There is this behavior economics named Richard Thaler who came up with it. And the idea of mental accounting is that when you assign different purposes to different dollars, you consider them differently. [00:44:16]
Thaler ran a famous experiment about this. Let’s do it together.
Imagine you’re on your way to the movie theater. You already have your ticket, which cost ten bucks. (It’s a cheap theater).
When you arrive?
You realize you lost the ticket.
It was on paper, they can’t print you another one, game over.
Do you buy another ticket?
Most people would not!
54 percent of the people in richard thaler’s experiment would not buy another ticket if they lost the first one.
But hold on. Now imagine you’re on your way to the movies and you don’t have a ticket yet. You’re planning to buy one when you get there. It’s still ten bucks.
When you arrive, you realize you’ve LOST ten dollars, somewhere along the way.
Do you still buy a ticket?
Almost everyone does!
88 Percent of thaler’s subjects said yes. They would still buy a movie ticket if they lost ten dollars on the way to the theater. Almost like that first ten didn’t exist.
To thaler, this was crazy, irrational behavior. People who lost ten dollars in the form of a ticket wouldn’t buy another one. But people who lost ten dollars in the form of a ten dollar bill...they would.
WILL: And so this demonstrates the concept of mental accounting, which is that we've earmarked money for certain things. So we apply this idea to personal finances, which is that when you earmark your money for certain purposes, you're less likely to, for example, spend your savings first for, for, for going out with your friends on a Friday night.
Mental accounting doesn’t benefit us. It allows us to cheat.
But there’s a way to cheat ourselves out of cheating ourselves. Automation. Automatic transfers.
Instead of having to constantly keep track of saving and deciding and what your goals are, set it up once and flip the switch. Start automatic transfers into the accounts and goals you want. You don’t have to worry about building habits, or forgetting to put money aside or paying your bills on time, or investing in your retirement every month.
Technology has enabled us to automate our financial well being.
[00:44:16] I know some people who actually "pay" themselves. So what they do is that they have their money from their paycheck deposited into an account. And then they actually have it split into different accounts for spending, for bills, for discretion, for their savings towards their goals for their retirement. So when you not only assign value or assign a purpose to your different dollars and maybe even put them in separate physical accounts, that's one of the most effective ways that you can actually create behavior change for yourself in personal finance. Again, this idea of creating a system that keeps you on track when you have low motivation.
So how do you get started?
Setting up a good foundation starts with figuring out your monthly cash flow. How much is coming in, and how much going out to fixed costs. Rent, utilities, groceries. Once you figure that out, you can start making plans for what’s left over.
There are four categories to consider.
One, paying down your debt. Two, setting aside for savings. Three, retirement and investment accounts. Four, your emergency fund.
So let’s start with one, paying down debt. We all know the hardest part is just doing it. But Will does have a tip or two.
WPeng [01:04:10] I love this idea of secrets. And one secret that I love related to paying off debt is that if you pay, if you make payments to your loans more often than monthly, you actually save money on interest.
Most of us pay our debt bills once a month. But with certain kinds of debt, interest is charged daily. Over the course of a month, that daily interest compounds. So when you pay more often than once a month, you can start to nip that interest in the bud.
You also want to paying down your higher-interest loans first.
Okay, the second big thing: savings accounts. Open as many as you want, if it’s helpful to have different buckets for different goals. But! Will says...
WPeng [00:50:03] it is possible to keep too much money in your savings account. And what I mean by that is once you get past the, let's say, three to six months of expenses in your emergency fund or your savings account, it is no longer advantageous to you to keep putting money into that. You should -- that money is better used investing, putting into your retirement, putting into an IRA.
Which leads up to number three, your retirement account. Stocks and bonds, meant to grow over a long period of time.
Sometimes your job will set these up for you, some you can create yourself. If your job does offer a plan, make sure you take advantage of their employer match!
MISSING FOUR EMERGENCY FUND
And that’s it! You’re probably wondering, Mesh, well which services should I use for all this automation stuff that’s going to help me plan a great future. I’ve got you covered.
For overall financial automation see Will’s company Northstar Money, or Albert Finance. I like both. They’ll help you with everything from knowing your monthly cash flow, to automating savings, retirement and emergency funds. Both have financial advisors you can talk to about your specific situations.
For savings I like Marcus. By Goldman Sachs. It’s super easy to use, with minimal fees and a competitive rate.
For setting up investment, retirement or college savings accounts, check out Wealthfront.
Keep in mind, the goal of ALL these companies is to make money off of you. They’ll offer you all kinds of products. Study them and make your own decision. Hope this has been helpful. I’m Mesh Lakhani and thanks for listening.
I’D LIKE TO THANK OUR GUESTS Ron Pope & Blair Clark for sharing their amazing story.. Check out Ron’s music on Spotify or to Pope music.com. Habits
I’ve personally become a fan. I’d like to thank my dear friend Will Peng. Remember, you can see the written format of this episode on thetalkmoney.com, along with other episodes. THANK YOU TO RYAN KAILATH FOR PRODUCING AND EDITING THIS EPISODE OF TA[PAUSE] Our music is by Blue Dot Sessions. As always, thanks to the folks at Anchor. Please subscribe to us on Spotify, Apple Podcasts, or wherever you choose to listen. If you like our podcast, please share it with our friends. Until next time.