Challenge #2 saw our contestants thinking about how to manage and achieve their life goals. While making a net worth statement is quantitative—adding up assets and subtracting liabilities—achieving life goals is a much weightier subject, and our contestants wrestled with the implications of the question.
Jia started out her response with some good (and funny) hypotheses about why young people aren’t great at planning for the future. Is it maybe because: “we truly believe that Medicare and Social Security will tap out to nothing by the time we are old, leaving us inevitably consigned whatever dystopian Vonnegut-esque beehives are available to house our elderly bones”? Perhaps! Either way, Jia is saving every month, and the judges gave her points for automating the process. Automation goes a long way to ensure that dollars make it to savings vehicles, even when money is tight. But what about the revenue side? The judges would like to see her evaluating her freelance income more carefully: is she spending time on opportunities that are low-probability? Could she be leveraging her experience into more substantial assignments?
Speaking of this being a tough challenge, the judges told Meghan they continue to applaud her early steps on the journey towards financial control. With debt looming over the picture, the future can seem like a scary prospect. Meghan wrote about her difficulty imagining that small money-saving steps like forgoing lattes would make a dent in paying down her student loans. But she stopped there. The judges responded: okay, “starting small” might not work, so then what does “starting big” look like? Sadly, those debts aren’t going to disappear, and Meghan is doing herself a disservice by not making any plan.
Last week’s big winner Seth kept up the good work, with specific dollar amounts to back up his goals to pay off his and his wife Margaux’s debt. He outlined the benefits of having a combined income with Margaux, as well as the debt that he acquired with marriage. As he said, while finding true love is great, marriage will substantially change your finances, and it’s important to take active control of the new financial landscape. But where was the discussion of the coffee shop Seth dreams of opening? The judges said they didn’t want to see him abandon that goal, just think about how he could prioritize it among his other plans for the future.
Tristan got more specific this time around, and that’s great, but he brought up debts he hadn’t even hinted at in the net worth challenge. He owes over $1,700 in credit card debt, but is still developing a savings plan that addresses his long-term dream of owning a lake house, rather than paying off the hefty bill first. The judges told him to consider the interest he’s racking up on the credit card before he starts socking away money for a vacation home.
The big winner this time around is Matt. Matt not only made a decent stab at outlining long-term goals, he also admitted his fundamental ignorance about financial matters. It’s helpful to acknowledge what you don’t know, and question assumptions about money management. Don’t sling around jargon to try to sound smart—ask for help when you need it! Matt tried to ask his parents, and found out they actually do not have their financial planning in hand, either. Because of the conversation with Matt, Mr. and Mrs. Culkin are calling their lawyer and starting estate planning. The judges were impressed! Talking to your parents about financial matters is hard, and it’s great Matt is not shying away from asking his parents tough questions about their retirement plans and wills.
Check back next week for Challenge #3: Investing!