A Zombie apocalypse is here, but did you know we can fight it with a focused money mindset?
A focused money mindset means that all financial decisions -- from student loans to funding kids' colleges to buying a car or home -- get made in the context of a larger financial goal.
By contrast, a Zombie money mindset lacks the context of such a goal and prioritizes the act of buying in the now. It delegitimizes the importance of saving and investing for the distant future or managing debt wisely.
Last week's student loan column hit on an issue close to home with me. You can easily detect my frustration with the complication of the program and my own attempts to simplify it. But you can also sense my own desperation to wake people up. That desperation is a trigger from my own past money mindset.
I was a Zombie asleep to my finances and accumulated student loans I never should have had in the first place from schoolbooks, travel, mocha lattes, pub crawl nights and lavish dinners.
I had also consolidated those loans after graduation at the urging of the government, not even considering that interest rates were about 2% from my first year in grad school and over 6% from the second. I lost the opportunity to hold onto the 2% and pay the minimum then aggressively slay the 6%+.
The most cringeworthy Zombie detail? At the time of the consolidation, I was not even aware of the interest rate implications.
I think about a trajectory where I didn't go into personal finance and continued to be in the Zombie money mindset from those prior years.
What if I'd worked for a nonprofit, still had all my loans, and someone sent me that column? Gosh, I probably would have flagged the email to read later and never gotten around to it.
Truly, I think the only way I would have read it is if someone came to my house with a bottle of wine, a bar of chocolate, a printout of the column and said "Read this. I'll wait."
This trusted friend would then probably have to pull up the website and start to break it down into action items for me. Then, let's be real, she probably would have had to sit on the phone and call the servicer with me.
Is that careless mindset bad, though? In other words, are we getting into the dangerous territory of cheering for the left brain over right brain, those math brains over the artistic brains?
It wasn't that long ago that I was at Harvard getting my master's degree.
I hurriedly clicked through the student loan "education" requirement to the signature as fast as possible.
"Details schmetails" on this insignificant burden in my life. Devoting any brain power would take away from the world changing classes and experiences that really mattered.
Yes, my brain told me a convincing story, but it had to constantly remind me of that story when I felt twinges of regret at the growing student loan balance, or when I heard some of my classmates actually discussing strategies for paying off their loans or for applying for relief from Harvard's own fund for loan repayment.
Well, I did wake up and develop a new money mindset. The Zombie was destroyed when I learned through practice that I could live below my means and not feel deprived. I learned that I could focus on work that I loved and manage my money well. Those two things indeed were not mutually exclusive.
In fact, over time I learned the symbiotic nature of managing my personal finances well and being able to do the work that I was passionate about. As part of the overall strategy, when I discovered I couldn't "unconsolidated" my loans, I paid them off.
After all, it was the act of managing my money well, paying off those loans and living below my means that gave me the financial courage to start my own business.
I want that money mindset for you. I want that for every person, and I believe it is achievable. In fact, I believe that this student loan moment could become the moment you adopt this money mindset.
As you can imagine, I spent the week sending out the column over social media and individually via email to people I suspect could be affected. Since my family was quarantined with covid, I couldn't come over with chocolate, but I dialed for dollars. I asked friends if I could get on the phone with them and their servicer.
One friend from school reached out to thank me after she read the piece.
This was the first she had heard about the announcement and was encouraged that the waiver could wipe away 6 figures of debt. But after reading the government link describing it, she almost seemed to shrug and say, "looks like I would need an accountant to sort this all out."
There, do you see it? That statement was an identification with a Zombie money mindset. This particular story narrated by the Zombie brain is that the student loan steps are reserved for math people, left brain people.
First of all, folks, accountants probably don't know much about this student loan program. They know about taxes. Frankly, most financial advisors will not be much help on student loan strategies.
If an advisor requires a minimum asset level of half a million dollars to manage money, I wouldn't imagine there is a ton of crossover of people with six-figure student loan debt and that much accumulated in assets. Most financial advisors are not encountering student loans enough to wrestle with the individual details.
But y'all, if you think this is a math problem or a hard finance problem, you are wrong. It's a personal finance decision. As with all personal finance decisions, most of the time if you want to get a good answer you have to do a little of your own homework.
Would you go to your certified public accountant to help you in your car purchase negotiations?
While I do take the point that the jargon is frustrating, the answer is there to anyone willing to spend a little time Googling the jargon, asking questions about their own loans and applying the new rules to their loans. And they are capable.
It's the same level of research and understanding that I see people engage in when spending 20 hours on negotiating tips and nationwide vehicle searches to try to score an extra $300 off their car purchase. It's the same level of research for people attempting to understand the complexities of home purchases and interest rate strategies.
So, where's the disconnect? Why is the same group of people willing to dig in and research a purchase but not face student loans?
Because student loan management is personal finance management. The initial act of car and home ownership is a purchase. It is consumerism. Remember, we like to buy things, and our economy is driven by Zombie consumerism.
Making purchases lights up the brain and feels good, and we can buy things more easily when there is no accompanying counterbalance to how that decision will impact the big goal.
Unfortunately, smart student loan management and payment not only fails to light up the brain, but dealing with them also can trigger lots of emotions. This means the long-term impact of interest accruing at 6% in a virtually zero-interest environment simply doesn't register.
Making a good decision on student loans requires a focused money mindset with an overarching goal, which I believe should be the ability to retire one day. I can tell you it is very difficult to save enough to support our lifestyle in retirement. Now add student loans?
Last year, we learned that boomers are entering retirement age with an average loan balance over $40,000. Sometimes I worry about stating the obvious, but just in case -- "Folks, wake up! You don't or need want to have the burden of student loans at retirement age or later."
Since it's Halloween week, I think about this Public Service Loan Forgiveness program opportunity as the final Zombie apocalypse war.
For many folks working for nonprofits or the government, student loans by every measure, are apocalyptic. They can wake up and fight, or they can stumble to and through the October 2022 deadline.
Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at sc@aptusfinancial.com.