7 key takeaways from Origin’s Financial Planning Lead
Lee Jung-jae (Player 456) is in a deadly competition in the Netflix drama “Squid Game.” Image via Youngkyu Park/Netflix.
As I watched the first few episodes of Squid Game—the Korean show that has become the most-watched show on Netflix—my immediate thought was not “how cruel.” Or even, “this is so unrealistic.”My first thought was, instead, “Why doesn’t anyone have a financial advisor (like Origin, that's free)?”Followed up by, “How is everyone so far in debt?”Then I recalled a sad, but true, experience for many people: it’s expensive to be poor.Fixed expenses (your monthly phone bill, utilities, and rent) take out a larger proportion of income, and fines and fees take out a larger percentage of your income. Having too small of an emergency fund leads to unexpected expenses covered by high-interest debt or predatory pay-day loans. Or you face overdraft fees. These were some of the challenges faced by the contestants of Squid Game.Several tech companies are trying to solve this short-term cash-crunch problem (Earnin, Dave, or DailyPay), but it is still a precarious place to be.My next thought was: “Someone should write an article about finances and Squid Game.”I proceeded to Google it and found that many people already have.However, the advice was pretty generic:
None of which is particularly helpful. So, I thought I’d put together my own list of financial takeaways from Squid Game.
Do you think the answer to your problems is winning the lottery? About 70% of people who win the lottery go bankrupt within a few years.Read that a second time.OK, now a third time.People easily get into a habit of spending all the money they have all the time. When they win the lottery, they continue to act the same way. The problem isn’t how much money they have, but rather their attitude towards money.
Lesson: Check your money attitude. Spend less than what you make.
I know this is not always possible (see the next point), but this should be on top of your radar each month as you consider your spending habits.I have family members who have fallen into this trap: They’ve worked their whole life, put 10% of their money into a 401(k) Plan, and spend the rest, every month, for their whole life. This doesn’t build enough wealth.At a minimum, my recommendation is to put 15% of gross pay into a 401(k) Plan and 5% into a taxable investment account.So then clients are left with 3 pots of money:
Spending everything you have every month is really dangerous, independent of how much you make.When some people get raises or more money, they still just spend it all.One study found 40% of people making more than $100,000 a year live paycheck-to-paycheck.The first step to setting up a budget is to monitor spending. Real easy—no stress, no judgment.Use financial tools like Mint or Personal Capital to monitor your spending at no cost. Ask your employer about a financial wellness benefit, like Origin, which offers a comprehensive look at your finances and matches you 1-on-1 with a Certified Financial Planner™.Look at your average monthly expenditures, and take a minute to look at spending by category. But before we get all wrapped up in “cutting” spending and how awful that sounds, let’s just start easy, monitor spending. Just look at it once a month. Easy-peasy, lemon squeezy.
Lesson: Monitor your spending habits with a financial tool (there are free ones). Evaluate your spending and begin to set aside money for emergencies, goals, and retirement.
Sometimes life is too expensive—and the money coming in just isn’t enough. Usually, I find there are also debts involved. After looking at consolidating and refinancing debts, there are two solutions: lowering costs or increasing income.On the income side, I might recommend a side hustle, preferably one that’s enjoyable because it will be extra work. On the cost side, maybe moving in with family for 6 months to save rent money and knock out a debt would help right the ship.
Lesson: If you feel like you can’t climb out of debt, look at ways to increase your income or lowering your expenses.
Is there a prepayment penalty? (Note: this is bad!)If you’re on a 12-month 0% interest rate and don’t pay it off in time, do you get hit with all 12 months of interest?If the debt terms are too confusing, keep asking questions until you get the answers, you’re not the dumb one; they’re just bloodthirsty.When I was buying my first home, I repeatedly asked questions about how the mortgage was calculated, monthly payments, how points worked, and so on.If you have student loans and are on an income-based repayment (IBR) plan, read the fine print.
Keep asking questions until you understand how it works.
Lesson: Not understanding the fine print can cost you big time. Keep asking questions and don’t be embarrassed if you don’t understand.
There’s a saying, “life insurance is sold, not bought.”Don’t go to a financial planner just trying to sell life insurance that you don’t need. Go to a fee-only, CFP® certified, fiduciary financial planner, like anyone on XY Planning Network.Looking for somewhere to invest? Go to Vanguard, Wealthfront, or Betterment.
Lesson: The law requires a fiduciary to manage your finances in your best interest, not theirs.
Prior to 1976, you could discharge educational loans in bankruptcy. Changes in 1976, 1984, and 2005 have made it almost impossible to get your student loans forgiven in bankruptcy.Thankfully, federal student loans have more repayment and forgiveness options than private ones, so if students absolutely have to take out loans, I recommend federal.It is criminal to allow students to get $50,000 of student loan debt for a degree that doesn’t lead to the job they thought they would get that they can’t wipe away in bankruptcy. Spread the word to high school graduates, and be very careful with loans.
Lesson: If you must take out a student loan, stick with a federal one that has more forgiveness options.
Stolen straight from the book “I will teach you to be Rich,” I love this take on budgeting, and it solves all the money misunderstandings that couples have in a single sentence, and it’s beautiful. Don’t try telling your partner to cut spending on something they love, but you don’t. It won’t end well.When people think about budgeting, they think about how they can no longer do the things they love. Think again, my friend. Keep living life, doing what you love. But! Then you must cut on the things you don’t particularly care about mercilessly.For me, that means I get to keep spending money on collectible card games (awesome, I know, not nerdy at all). But I couldn’t care less about eating out, so I’ll cook cheaper and large meals so I can have leftovers.My wife loves two Starbucks a day. Don’t try to change her mind. It won’t work. But she doesn’t care that much about buying a ton of clothing or shoes (something she says I should be thankful for), so she’s super efficient with her money in this area.
Lesson: Do what you love. But cut, really cut, on the other things.
The contestants of Squid Game dug themselves into so much debt, they felt like they were at a point of no return. While facing your finances can be intimidating, scary, or embarrassing, it’s never too late to get your finances in order.Origin supports every aspect of your financial well-being, no matter what stage of life you are in. Learn more about how companies are using Origin to help their employees reach their financial goals here.About the author: David Barta, CFA, CFP®, is a self-professed financial nerd who enjoys cuddling up with an Excel spreadsheet on a Friday night. He received his MBA from UCLA, and is passionate about helping people reach their long-term financial goals by giving them comprehensive advice that fits their unique lifestyle. He still holds onto his first investment he made as a child: Magic: The Gathering cards.