There are financial pitfalls aplenty for career-building millennials—be it shoddy planning, outrageous debt, or credit card quandaries. At only 23, Zac Bissonnette has staked his young authoring career on untying his generation’s financial tangles: His second book, How To Be Richer, Smarter, and Better-Looking Than Your Parents, is out now (you can check out an excerpt here). Fast Company talked with the precocious author about financial freedom, Benjamin Franklin, and making good decisions automatic.
FAST COMPANY: To begin, are you richer, smarter, and better looking than your parents?
ZAC BISSONNETTE: I would say richer, yeah; smarter, no; better looking, maybe. You have to handicap it because my parents are 63. I would say we're even. That title I took from, there's an old Yiddish proverb, that with money in your pocket, you're handsome and wise, and you sing well too. The idea behind that is that if you have the money, if you're on top of the money thing, your life—everything else—is better. So that's really what that title's from, not so much a narcissistic comment.
Like Kanye West says, "Having money's not everything/Not having it is."
I think versions of that have been around long before Kanye West. It's absolutely true. Income only really affects happiness, in terms of differences in levels of income in lower levels of income. Someone who's earning $300,000 dollars a year is not really much happier than someone who's earning $200,000 a year. Someone who's earning $60,000 a year is a lot happier than someone who's earning $30,000 a year. The benefit of money is that is it can help you relax a little bit if you're on top of it, but other than that, it doesn't have some magic ability to make you happier.
What are some of the key elements of establishing financial stability?
The biggest one is getting out of debt—kind of a cliché, but it's really, really true. People that don't have debt are happier than people that have debt across the board. Building a stable emergency fund, having a financial life where you're saving for your retirement automatically each month so you have the sense of accomplishment that comes from that, and you're living on the rest of your money and you're not going into debt. I think that's about what it is. Then how do you do that is harder.
Would you say your relationship with your parents motivated you to so quickly become a sort of financial expert?
My relationship with my parents has always been fantastic. I would say that watching my dad struggle with stuff and never have that sort of comfort level that so much as he deserved and deserves, he's never been able to have. I think the irony that always struck me with him was someone who basically doesn't care about money, he's profoundly unmaterialistic, I would say, the irony of someone who doesn't care about money spending 10 times more time thinking about money than people who do care about money. I think that's what happened with him. That was absolutely huge in my life.
So to to be successfully unmaterialistic, one needs to be aware of one's money.
Right. Absolutely. It's like, I save a large percentage of my income for retirement, I stay away from credit card debt, no student loans. I think about money and I work hard and everything, I don't have this nagging sort of fear going through my mind all the time worrying about money and the only way you can get there is to be on top of it.
Beyond cars, what else are some practical ways to get on top of money?
The one's that's driving me nuts is student loans. The reality is that for most people the best way to deal with your student loans is to pay as much to them every month as you can, the gimmicks for lowering the monthly payments in the long run just extend the life of the loan. It will take you longer to get out of debt and it won't lower your interest. It's not sexy or cool, but one of the best things you can do is cut your expenses and put as much toward your student loans as you can.
You quote Ben Franklin, "Beware of little expenses, small leaks will sink a great ship"—how do you do that?
Ben Franklin was very big on some of this Yankee thrift stuff and budgeting. When you're looking at your investments, the single best thing you can do to improve your returns is to reduce your costs. That's why low-cost index mutual funds, not actively managed funds, not buying individual stocks here, is the way for investors to go with their retirement money. I think so many people get focused on trying to chase returns, I think it never works. What always works is just minimizing your expenses.
In terms of the budgeting, cut up your credit cards, put 15% of your income into retirement, and then live on the rest no matter what. That way you have essentially a budget-free balanced budget. If you're not using credit cards, and you're automatically saving for retirement, no matter what, then everything's fine.
Make the smart decisions automatic?
Totally. I have virtually everything in my financial life that can be automated, automated. The reason it works is that most people overestimate their willpower. People generally don't have the ability to go through life on pure willpower and keep doing smart stuff.
Whereas if you can spend that one day setting up an automated student loan payment from your bank account that's $100 more than the minimum, and you do that automatically, and you automatically up your retirement contributions, then you just sit back and it does it. That's much more likely to succeed than setting a goal and saying, "I'm going to write a check for an extra $100 every month," because you won't end up doing that.
Making the good decision automatic takes the mistake out of our hands.
Exactly—and only having to make the decision once, instead of relying on willpower every single time. Theoretically, you could go back and reduce your automatic payments, but you won't. Once it's the status quo, you won't change it. That's another nice thing about setting it up automatically, if you log online to reduce your retirement contributions, you're going to feel like crap.
So you manipulate yourself into behaving better.
Totally, that's what all this stuff is.
[Image: Flickr user Gueorgui Tcherednitchenko]