This Finance Expert Gets These 4 Questions From Her Friends All The Time

published Nov 7, 2020
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It can be difficult and daunting to know what to do with your money—after all, the stakes are pretty high.

If you’re struggling to understand your finances solo, you’re not alone. Financial illiteracy is actually not all that uncommon in the United States. According to a 2019 study by the FINRA Investor Education Foundation, there’s been a decrease in recent years of how much Americans know about interest rates, taxes, loans, and debt—a.k.a., the major money decisions that affect so much of our lives. The study also showed that millennials have the biggest gap in money know-how as compared to other age groups, which is worrisome because they’re America’s largest generation, and are often shouldering outsized debts and limited economic mobility.  

Learning about how to budget, how to wisely invest, and how to control your spendings can seem scary from afar, but money experts like Stefanie O’Connell, author of The Broke and Beautiful Life, have made it their mission to make finances empowering for everyone. Think of it this way: The more you know about your own spending habits, the less likely you are to make a costly mistake.

While not everyone is friends with a finance professional, some are more than willing to share the proverbial wealth. O’Connell talked to Apartment Therapy about the four most common questions about money management that she gets from her friends. 

How can I maximize value and freebies advertised by credit cards?

The number one question O’Connell gets from her friends is how to get the most out of credit cards and other rewards-based systems. For example, credit card lenders will often throw in perks that seem shiny and bright on paper (cash back on certain purchases, discounts at select places, etc), but could just be tempting you to spend money unnecessarily. This is why O’Connell recommends looking past those deals and building good credit habits. 

“There’s a lot of interest in things like the perks or rewards of a credit card, but I’d love to get more questions about how to build credit and use those credit cards in the smartest way possible,” said O’Connell. For that reason, it’s important to try avoiding maxing out your limit, keeping your credit utilization to under 30 percent of your total available credit, and remembering to make your payments on time. If you have a steady or reliable source of income, setting up auto-pay can help with that.

What money apps are worth downloading? 

Our phones are full of knowledge and can be our most helpful assets. But with a surplus of apps to download, it can be tricky figuring out what’s worth getting and what’s not.

“I’m always a fan of downloading the apps of your bank, brokerage, and credit card companies,” said O’Connell. “You can create a dedicated folder of apps for managing your financial life. The reason I like the apps is because our phone is generally the thing that is always with us. So it can serve as the ultimate tool for helping us manage our money if we leverage it correctly.”

Imagine you’re out shopping, but on the fence about whether or not to buy that barely discounted cashmere sweater (even though you have perfectly fine sweaters at home). “Being able to take out your phone and check your bank account balance or credit card balance can serve as a kind of in-the-moment gut check to help keep you accountable to questions like, ‘Can I really afford this?’ and ‘Is this going to bring me closer to or push me further from my goals?” said O’Connell.

She recommends making sure you’ve downloaded any apps associated with your bank or credit card company—you can also schedule payments and make sure you haven’t missed any crucial deadlines that might affect your credit score. It’s also a good idea to look into a bill-splitting app or money-transfer system like Venmo, to lessen the headache of paying a friend back for your half of brunch. “If you’re in the process of combining finances with a partner, you might try out an app that’s specifically designed for managing money as a couple,” O’Connell added.   

As far as paying for an app, O’Connell recommends the ‘try it before you buy it’ mindset. “The best apps are the ones you actually use and the ones that help you live in alignment with your values and priorities. If an app is actually helping you do that, I find it’s generally worth paying for,” she said. 

What is Bitcoin?

A lot of people are still in the dark about what bitcoin, or cryptocurrency in general, is. It ranked number 1 on Google’s most searched in 2018 for a reason. But to save you from your own search, O’Connell advises to not worry too much.

“My response is always to ask whether that person was already utilizing their employer sponsored or solo retirement account, and whether they had a 3-6 month emergency savings fund in place,” she said. “Nine times out of 10 they didn’t, so my response was always really simple: ignore the headlines for now and focus on getting a strong financial foundation in place.” You can do that by setting money goals that make sense for you, learning how to budget, and finally getting rid of those subscriptions that you never actually use. 

How do you practice good money habits during the COVID-19 pandemic? 

Finances are hard enough without a global pandemic and an ensuing financial crisis serving as the backdrop to your everyday life. Understandably, many Americans’ financial situations have changed since the onset of COVID-19, and they are in need of help adjusting to the current climate. You may even be one of them.

“I’ve had a lot of COVID-related finance questions, from what’s going on with federal unemployment benefits to how can I renegotiate my rent,” O’Connell said. She’s understandably wary about giving blanket advice, however: “The trickiest part about all of this is that so much of what’s happening right now is so contingent upon where you live and the specifics of your situation,” she noted.

“Things like aid and protections are being doled out on a federal level, state level, and local level—so the resources available to me in New York City might be totally different than those available to my brother in Nashville,” O’Connell said. “And when it comes to things like lease renegotiations, that can differ from landlord to landlord. So it’s hard to offer a singular set of action steps or best practices for managing this time.”

You can find information about what your state is doing to assist with financial relief by going to the CDC’s Financial Resources page or going to your state’s government website. Some states, like California, are making it a law that forbids landlords from evicting tenants struggling with rent due to COVID-19 related reasons. Research all of your options for aid on a federal, state, and local level to see what’s available to you. The more you know, the better prepared you’ll be for whatever comes your way.