From Broke Phi Broke to Financially Woke – Personal Finance for Beginners
Today, I am excited to share with you the latest interview in the From Broke to Financially Woke series! The purpose of this series it to give hope to those struggling to escape from the not so secret group Broke Phi Broke. A group whose chant is, “We ain’t got it. Broke, Broke, Phi Broke! We ain’t got it. Broke, Broke, Phi Broke!”
To help me accomplish this goal, I have invited the best and brightest of the financial independence community here to share their stories. As you read their interviews, pay close attention to the mistakes they made. Take mental note of the success principles they used to turn things around.
When trying to apply these principles to your own life, realize that success in life is rarely linear. You will encounter some struggles. But stay persistent. Keep moving forward.
Our special guest today is Aaron from Personal Finance for Beginners. He his low point during his 20’s after taking out $25,000 student loans and purchasing a car he couldn’t afford (one of my biggest mistakes as well).
What steps did he take to turn his financial life around? I’ll let him share his story…
Introduce yourself. Where do you blog? What are some of your interests outside of financial independence?
Hello everyone! My name is Aaron, and I run the blog Personal Finance for Beginners.
My site is dedicated to helping young adults learn the basics of financial literacy so they can make better decisions with their money and feel more confident in their financial future.
Outside of blogging and personal finance, some of my personal interests are:
- Watching NBA basketball (playoff tickets one of my “money dials”)
- Staying physically active by going to the gym, practicing yoga, and hiking
- Cooking new recipes at home (which also makes meal prepping easier)
- Reading non-fiction books and listening to podcasts on business, health, and technology
In addition to the interests shared above, I’m a serial hobbyist who enjoys exploring new interests. Over the last few years, that’s include swimming, poker, and piano, to name a few.
That’s one of my primary motivations for financial independence: regaining control over my time so I can dedicate more energy to the ideas and activities I’m curious about!
Tell us about a time where you were a member of Broke Phi Broke. How did living paycheck to paycheck make you feel as a person? At your lowest point, how much debt did you have?
Let’s be honest. I’ve been financially comfortable for most of my life. Even when I wasn’t making smart decisions with my money–living paycheck-to-paycheck and relying heavily on credit cards–I’ve been fortunate to never worry about having a roof over my head or where my next meal will come from.
There was a period of five months in my early 20’s that I’d probably consider my financial low point. I was paying $160 a month to rent a room I shared with two strangers, earning minimum wage while folding jeans at the mall, and living off a strict pasta and dollar-menu diet.
While it was just a brief transition in my own life, those months gave me a small glimpse of what life was like outside my comfortable middle-class upbringing for those who didn’t enjoy the same level of educational opportunity and social support that I did.
Although I was living paycheck-to-paycheck at the time, I wouldn’t hit my “all-time low” in net worth until I took out nearly $25,000 in student loans and bought my car (see “biggest financial mistake” below).
What are some of your biggest financial mistakes?
A few months before graduating from college, I experienced a financial “miracle” that’s turned into one of my biggest mistakes:
While I still needed a co-signer for my student loans, I was somehow approved for an auto loan that was more than my entire gross income during the prior year.
I’m not sure how the car salesman pulled off the financing, but I ended up with a six-year auto loan and thousands of dollars in negative equity.
It was less than a year later before I discovered the importance of personal finance and developed my interest in financial independence. If only I had become “financially woke” a few months earlier!
I still own that car today. I plan to own that car for a few more years, but next time I purchase a vehicle, I’ll follow the 20/4/10 rule:
- At least 20% down payment
- No more than a four-year loan
- Keep vehicle expenses to 10% of gross income
Describe your upbringing. Where did you grow up? What did your parents or teachers teach you about money?
I grew up in Utah, which is a great state to find adventures if you love hiking, rock climbing, skiing, or other outdoor activities. It’s also an up-and-coming area for technology start-ups and entrepreneurs, which has been perfect for my background and interests.
Growing up, my parents, teachers, and community taught me:
- To be industrious and disciplined in my work
- The importance of self-reliance and living within my means
- The value of learning and ongoing education
- How developing new skills opens the door to new opportunities
- The joy of “giving back” and “paying it forward” to others
While it still took me a few years to develop good financial habits, I’m grateful for the positive values and examples my upbringing provided me.
How important is becoming financially woke to you? What steps have you taken to increase your financial knowledge?
Becoming “financially woke” is very important to me. Even if financial independence is off in the distance, learning how to make better financial decisions has given me tremendous confidence and peace of mind. No matter how much or how little I earn, I know I use what I have wisely.
My personal finance transformation started when I wanted to move across the country without any savings. I was searching for advice online and was asked:
“How are you single, earning a comfortable salary, living in a modest apartment… and have zero savings?”
This anonymous commenter sparked an epiphany that inspired me to improve my financial situation, and eventually, start my blog.
Since that turning point, I’ve increased my financial knowledge by:
- Reading several financial books and hundreds of blog posts (I’ll offer a few recommendations later)
- Building relationships with like-minded individuals at meetups, conferences, and online
- Taking action on my own financial situation so I can “learn by doing”
While I can point to a specific day in time when I decided to become “financially woke,” I didn’t improve my financial situation overnight. Getting my personal finances in order has required planning, discipline, and persistence.
It will require the same from you, but don’t let that discourage you from getting started!
What are some of the key principles you have used to improve your financial life?
Personal finance doesn’t have to be complicated or overwhelming. I’ve tried to focus on a few “big wins” so I don’t need to worry about every little detail.
Here are a few of the big wins that have helped me improve my financial situation:
- To cut down on food expenses, I’ve started cooking more meals at home. Not only does it keep me from spending lots of money at restaurants, but it also makes it possible to eat healthy while respecting my budget.
- Instead of frequently spending money on nightlife, concert tickets, and road trips, I’ve found leisure activities that allow me to have fun without spending money. You may have to take the lead for your social group, but there are plenty of ways to have fun without breaking the bank!
- I’ve chosen to keep investing simple. Rather than trying to pick a “winner,” I opt for lower-risk, diversified options like VTSAX. I’ve automated my contributions and make sure I’m contributing at least enough to receive the full employer match.
How often do you consume personal finance information? Name 3-5 of your favorites sources (books, podcasts, blogs, etc.).
As a personal finance blogger, I consume some type of money-related content every single day.
Here are a few of my favorites:
- Book: Financial Freedom by Grant Sabatier, I Will Teach You to Be Rich by Ramit Sethi
- Blogs: Minafi and Four Pillar Freedom
- Facebook group: ChooseFI
- Other: Personal Finance and Financial Independence subreddits
I’m always looking for new recommendations. Feel free to leave a comment below with your favorite source of personal finance content!
Where are you on the path to financial freedom now?
I’m still in the early stages of my path toward financial freedom. I’ve paid off all of the credit card debt I accumulated during college, and right now I’m focused on building up my savings.
I’m contributing enough toward retirement to claim the full match from my employer, but can’t wait to start investing more as soon as I’m comfortable with the size of my emergency fund!
Is there any advice/encouraging words you can give those who are struggling to escape Broke Phi Broke?
To start making progress with your financial situation, you’ll need to make sure you’re spending less money than you earn every month.
There are two ways to this:
- Increase your income
- Reduce your expense
Most people start building the gap between their income and expenses on focusing on frugal living.
However, if you’re already living on a tight budget, there’s only so many expenses you can really trim before reaching the bare minimum.
Ask yourself, would it be easier to earn another $100 or save another $100?
Don’t underestimate how much some additional income–whether it’s working overtime, taking a second job, or starting a side hustle–can speed up your financial transformation from “broke” to “woke.”
How can the readers contact you?
Readers are welcome to contact me directly via email. In fact, I just launched a free email course called “7 Days to Financial Confidence” that walks people how to make their own financial transformation.
I’m not particularly active on social media (part of my own efforts to practice digital minimalism), but Twitter is probably the best place to connect with me. Feel free to follow my profile (@PFforBeginners) and give me a mention/message.
Thanks for having me on your blog, Jerry!
[Editor’s note: You are welcome, Aaron! Thanks for such a wonderful contribution.]
Read more interviews in the From Broke to Financially Woke Series.
Please share this From Broke to Financially Woke interview on social media with the hashtag #escapebrokephibroke
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Author: Jerry
Jerry is a Business Insider Contributing Writer who is obsessed with personal finance. He believes you can improve your financial situation by applying principles taught by the financial independence community to your financial life.
If you are having trouble saving, he recommends that you join the SaverLife Savings program where you can get a $60 reward after six months (no income requirement). All you have to do is put a minimum of $20 a month into a savings account. Easy, right?
For a fun read, check out his article 10 Signs You’re a Personal Finance Addict to see if you are a personal finance nerd.
Before you go, check out the new From Broke to Financially Woke Interview Series.
Also, please subscribe below if you found his content valuable and want to continue following him as he documents his own journey from Broke to Financially Woke!
Great interview Jerry!
As someone in my mid-20s, I learned a lot reading about Aaron’s mistakes in his 20s. I’ve seen a lot of people fall in the pit traps of getting into education and car debt that they really couldn’t afford. I guess when you’re not earning so much, starting out in your career path, it’s best to avoid any kind of borrowing unless it’s 100% necessary. Love his tip to cook more at home – something I’ve definitely taken a lot more seriously this year. Less expensive, tastier, and healthier too! I really like his suggestions for having fun without spending money over on his blog too. Particularly enjoying the sunrise and volunteering at a soup kitchen!
Thanks a lot for posting this interview – super helpful! 🙂