How Competing with Friends Helped My Finances Race Ahead

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Personal finance has been a passion of mine since my late teens. After I headed off to college and set out upon my path in the industry, I quickly fell into the role as a financial guru of sorts for my friends. Early on in my career, I had friends coming to me asking for hot stock tips and advice about the penny stocks they were throwing their money into. From atop my virtual soapbox, I stressed to all of them the need for healthy asset allocation and diversification, and discussed why picking a hot stock was not what I did as part of the financial planning process -- but picking low-cost, healthy mutual funds and exchange-traded funds was.

In the years that followed, these discussions evolved into a friendly competition among a few friends and I to see which of us could win the race to become the first millionaire. While I'm a firm believer that money should be used to live a life you value (not what others deem appropriate), that competition added excitement, accountability and peer-pressure to the goal of keeping my finances in line.

Over the years, we've had conversations and check-ins about investment real estate, salaries, buying homes, retirement savings, passive income, asset allocations and more. Ultimately, the following rules of thumb and money principles really got the ball rolling.
  1. Go in for the ask. What's the quickest way to have more money to save? Make more money. When it comes to growing your income, many people follow the path of waiting for recognition or the standard yearly increase across the board. However, finding out what's needed to advance your salary, doing research on comparable positions, and being an advocate for yourself and your skills will help grow your income at a rate that allows you to stock away more.
  2. Set it and forget it. We hear this all the time in the personal finance world -– but what does that actually mean? It means automated monthly contributions to your 401(k)s and Roth IRAs. But not just those. It also means direct deposits into accounts dedicated to travel funds (so you won't be making big subtractions from your cash flow each time you go on vacation), insurance accounts (to have the funds on hand for annual premiums) and again prevent pulling from cash flow) and other savings accounts. Consistent preparation for big one-time and occasional expenses is a big help when it comes to keeping the rest of your budget in line.
  3. Seek out wise, unbiased advice. Even as a financial planner, I recognize it's helpful to get a second opinion on money moves. For example, being debt-averse made me want to get our mortgage paid down at a faster rate, even though I knew the numbers said I should put retirement first. So instead of going with my emotions, I talked it through with some financial planners I trusted, and made the right decision. Without their guidance, I could have sacrificed a significant return over the long run by basing my choice on emotion and pouring our extra funds into reducing the mortgage principal.
  4. Get creative. Trying to figure out the right way to deal with your money can often feel overwhelming -– but what matters isn't picking the "best" system according to some guru. What matters is finding a system that works for you. If a refinance makes sense, go for it. If having 10 savings accounts helps you manage multiple goals, go for it (but find a bank or credit union that doesn't charge monthly fees). Don't want to use an app to track your spending? Or would you feel more comfortable with the cash envelope method, or using a pen and paper. Do what works for you and save money in ways that fit your lifestyle. Just be sure they're moving you forward.
  5. Spot-check. Even in the times when you're sure your finances are under control and the system is handling itself, make time to log in to check your net worth for growth, confirm bills are being paid on time, review bill amounts for any significant changes, and look at investment performance. You won't always find any reason to make changes, but regular check-ins ensure you stay in the know and catch issues before they get out of hand.
Talking frankly about money with friends can be a tricky thing, so setting limits on the information you will and won't disclose is a must. In addition, always check with your financial planner before changing your investment allocation or overall strategies. While a bit of friendly competition can help hold you accountable (and give you some fresh ideas), you want to ensure you're helping your overall financial game, not hurting it.

Mary Beth Storjohann is a certified financial planner for Gen Y. She created Nine Steps to Workable Wealth to help you make smart choices with your money.
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