Here are The Five Cardinal Rules of Personal Finances

“Sometimes life knocks you on your ass… get up! Happiness is not the absence of problems, it’s the ability to deal with them”

Steve Maraboli

Unemployed and Unemployable

After watching Elizabeth White’s desperate plea over the internet for those who are “unemployed at 55 and faking normal”, I realized a few things. For over 25 years, she broke what I’ll dub “the five cardinal rules of personal finances”.

Elizabeth White is a highly educated and resourceful professional who at times in her career was making over $100,000 per year and sometimes $200,000 per year. She was a far cry from those struggling to make ends meat. She was to all extent and purpose, “living the dream”. Traveling to Africa, every other 3 months. Lavish sit-ins at restaurants for brunch with friends while likely #securingthebag and getting all the pampering needed to maintain being posh. It was valet parking, galas, and awards. It all started to sound familiar.

Securing the Bags

In 2019, that’s still the DC norm on steroids. Look no further than the story of Tyrone Hankerson who allegedly finessed Howard University’s finances and then allegedly didn’t. The verdict is still out. A closet stuffed with shoes, bags, and clothes. Ms. White was a precursor. She was living the Instagram travel lifestyle before it was even cool to hashtag. She was the nouveau rich, now masquerading as Black Excellence. Often found, posting about “Diner en Blanc”, “Afropunk”, La Fête du Rosé”, “Angora SneakerBalls”, “Beycella”, all black parties, all-white parties, and every new excuse in the book to spend as much and as fast as possible. Who TF is creating these color-coordinated spending sprees?

Watching the Monday morning, weekend recap parade; all I want to say is, “look to your left and your right, your friends are broke and you guys are not doing each other any favors with the #bowwow challenge.”

…From purposeful living to purposeless and struggling? LG

Upscale and designer, Elizabeth White (like a lot of other people) left her “basic” job at the World’s Bank for the high-end entrepreneur life. She might have consulted businesses; this was out of her league. Hearing her mistakes were cringeworthy. She was overleveraged and like many of us, living in the RED. Ignored the math. She favored multiple expansions just to say she was the CEO.

Most people ignore their net worth statement while sticking their heads in the sand for years.

The Pay Was Peanut!

When life gave her a second wind, Ms. White declined the adjunct professor role and another position as a research assistant stating that “the pay was peanuts”. She wanted the C-suite style job with the C-suite style lifestyle. While listening to her story, I clued into the plethora of bad decisions after bad decisions. Buying a home while doing temporary contract labor. Bad decision. Having 5 stores in multiple states instead of focusing on just one. Bad decision. Depleting her savings in hopes of striking it rich. Terrible decision.

I kept thinking, “For God’s sake, sell the car! You live in DC.” She ended up wrecking her credit score when she could have renovated and rented out her location at hipster prices (to the tune of $2,000/a month). She was shopping to keep up with trends and eating at expensive restaurants. The most egregious problem, not learning from your mistakes.

In the end and by God’s mercy; she is now a published author and a renowned speaker. 

She tours speaking about this issue because most Americans are truly faking the look of normal. Most don’t land back on their feet. “Most stories aren’t sunshine and rainbows”. At one point, we will all likely have to “Small-Up” before it is too late. Her’s is a cautionary tale that ended in a final window of purpose changes.

Elizabeth White earned her poverty. She also earned her way out.

Though life is filled with uncertainty, the following are five cardinal rules of personal finance. If you break even two of them, you will end up on a downward spiral:

Free resource: Money Management Estimator

#1 Too Cool to Work

We live in a new age. Everything is fast or easy. Order something online and get it in almost a day.

The old “Push to Flex” technique. Gone are the days of ingenuity, learning, and improvising. If it doesn’t work, throw it away and buy another. If it lasts more than two years before the next iPhone 3000 with all the bells and whistles, replace it.

Most people are too cool to work a job without the proper title. Most millennials graduating today, expect to earn north of $57,000/per year for an entry-level job in the C-suite.

I can’t blame them. Most young millennial television programming has people living in New York in a 2-bedroom super condo on the 25th floor with a massive view and open-concept living room. People are literally too cool to work a desk job while others are traveling the world and making YouTube videos for a living.

I know of many DC wannabe socialites making less than $50,000 a year and living in a studio apartment to the tune of $1,500 or $2,000 monthly. They want the boomer lifestyle that their parents made them pre-programmed to expect with none of the tools necessary to achieve them. Work where you can and when you can. There are tons of people desperate for any work. I know you think you deserve the director level, however, based on your resume you lack the expertise and the time earned. 

Based on the rate of consumption (via social media) and my exp. with financial consulting (in DC), most are living above their means (income).

You will be challenged and that’s not a bad thing. To avoid challenges is to avoid change and the necessary tools you need to achieve a better future. Work two jobs, if need be. Use the benefit of your time, and read up on the PRIMARY reason to start saving as soon as possible.

#2 Buying Expensive Cars

Buying a new status car is another dagger to your financial future. The value depreciates immediately off the lot. The cost of owning a new car in 2018 was about $38,000. That’s a monthly payment of $566.14 with a down payment of $8,000 at 5%.

Add on the average car insurance of $125 per month and 1 fueled-up tank of $55/per month, you are looking at a clean $750/per month. Even if this was drastically cut down to $500/month. It might sound manageable until you get into your first accident, parking fees, traffic tickets, etc…

Riding in Debt

The car is a financial liability that is guzzling your wealth with the trip. While I understand some will need a car to get around, you can afford a used car for less than $8,000 that can run you for at least 10 years without any payments. Saving you at least $33,969. The difference minus interest. What’s worst is that luxury brands such as Lexus end up being a luxury maintenance premium cost.

You only need a car to get from point A to point B. Do your homework. Do preventative maintenance such as an oil change, fluid inspections, tire checks and even washing your car. All of this will save you a headache. Additionally, note that car companies make most of the interest income in the first four years, so try to keep that lease for more than 10 years to recoup the value.

#3 Buying or Leasing Unaffordable Housing

The only thing worse than buying a home you can’t afford is renting homes you can’t afford.

The news is dubbing us “A generation of (lifelong) renters”. Not positioning yourself for home ownership and affordable housing may as well be the ultimate dagger through your financial life.

While experts warn you against the $5 latte which you should avoid. “For many young adults, home ownership is simply out of reach”, The Wall Street Journal reports. The median age of U.S. home buyers is 46, the oldest it’s been since the National Association of Realtors started keeping track in 1981. Most are scared since they don’t understand home ownership even though there are free classes available and YouTube videos until the end of time.

Some of living in what looks like Lalaland. Just going with the flow and blissfully unaware of cause, effect, and consequence.

Between 2000 and 2017, median household income inched up by just 2%. Median home prices shot up by 21% during that same time. If you want to change the narrative; buddy up with roommates to save money, live at home with the parents if it’s possible, track your expenses, and start drafting a plan to fix your credit. Here’s a quick formula for an affordable home purchase.

#4 Eating Out over Eating In and Meal Prep

This is where the average person burns cash on both ends. We eat out. We pay a lot more than cooking at home. Our nutrition suffers. We get sick. Go to the doctor. They prescribe medication. Ultimately, we pay money.

We eat out more. Work out less, due to lack of energy. Our nutrition suffers. We get sicker. Go to the doctor. We pay way more. It’s a vicious cycle. It’s not the $5 latte a day that’s killing you. The average is $25/a day for lunch and dinner, plus the latte. Do that for on average 6 days, that’s already $180/per week or $720 per month not including brunch, drinks, and other groceries that we end up tossing out.

A good $800/month nets approximately $10,000 per year. Add on healthcare cost of $1,500/year that’s an avoidable $5,000 that you could have used to travel. See my brunch article, “Brunch and Day Parties, for the Culture!“ The solution is to self-inventory and prioritize your life. Make the decisions that will keep you alive as you navigate.

#5 Living Above Normal

This is the ultimate no-brainer. Most people are living above their means. Due to the ultra-dependence on credit cards and likely attributed depression, our society is suffering from the fear of missing out and keeping up with whomever. We are all at our wit’s end and headed towards a collision course with a brick wall called life. Most don’t know how much they are spending and how much to spend. From expensive outings to travel and shopping, we are living more debt to debt than paycheck to paycheck.

We can blame it on whomever we want but the check is still due. If you aren’t sure you are living above your means, read “The warning signs of living beyond your means.” And watch, “How Single Mom Naseema Paid Off $300,000 in Debt in 2 Years” You can get on my Net/Max Financial Plan as well to help define your purpose and live a maximum lifestyle.

In conclusion, if you break any of these, you are setting yourself up for failure. If you break two of these cardinal rules, you are digging your own end. And if you break three of the five, you have successfully earned long-term poverty. Life and the turns that come aren’t certain, however, all your actions today weigh heavily on the future that you are robbing from yourself. I leave you with this passage from Mauris Nicolls’s Book, “Living Time and the Integration of the Life“ pg. 3:

We can all see another person’s body directly. We see the lips moving, the eyes opening and shutting, the lines of the mouth and face changing, and the body expressing itself as a whole in action. The person himself is invisible… if the invisible side of people were discerned as easily as the visible side, we would live in a new humanity. As we are, we live in visible humanity, a humanity of appearances. In consequence, an extraordinary number of misunderstandings inevitably exist.

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