Emma Edwards: How to know if you’re good with money

Bryce: [00:00:46] Welcome to Get Started Investing, a podcast where we answer all of your money and investing questions. If you've just joined us for the first time, a massive welcome for those that are new to investing and want a 12 part series on how to get started, we do recommend scrolling up to start episode one. Otherwise, deep dive into us from today. As always, I'm joined by my equity buddy, Ren. How are you?

Alec: [00:01:08] I'm very good, Bryce. I'm excited for this episode. It's not just us today. We're speaking to Emma Edwards. She's the founder of the Broke Generation, hosts the Broke Generation podcast, and is author of Good with Money. And this is an interesting one because we really want to focus on, I guess, the psychological side of money. And not not just behavioural finance when it comes to investing but also when it comes to, I guess, your relationship with money and your spending habits, because we don't really we don't really ever stop and say like what is good with money? There's no objective reason. It's always like, what can I do next? What can I do more? This is constant pressure. It doesn't help with this. Like constant comparison to shame that is social media. But yeah. Like, when are we good? That's what I want to know.

Bryce: [00:01:57] We're about to find out. As you said, Emma's written a book all about this, so probably no, no other better person to discuss than Emma. Well, Emma, welcome to get started investing.

Emma: [00:02:12] Thank you for having me. 

Bryce: [00:02:13] So we want to start with you're not buying clothes for an entire year.

Emma: [00:02:18] Yeah, I imagine this is right up your alley. It is the theme of the show right? 

Bryce: [00:02:21] Right up Ren's alley. Before I got into it, and, back when we first started the podcast, Ren took the frugal lifestyle of investing quite seriously and wore shoes to work that had no soles. Didn't want to buy a new pair of shoes like. 

Alec: [00:02:39] No, they had soles. They just weren't connected to the rest of the shoes for you. Look, I've had some shockers in my time. One of our housemates back in the day, Kip, was so worried about the state of my shoes, he gave me a pair of his shoes, like. Yeah, and it's not just shoes. I just don't buy a lot of clothes. 

Emma: [00:02:58] You're the poster child for fire. 

Alec: [00:02:59] Yes. I think doing your challenge for years just didn't even notice. 

Emma: [00:03:05] You're among the people on Instagram that love to tell me that. No, no, no, no, chief man, I've been doing this for seven years. I'm like, okay, thanks. 

Bryce: [00:03:12] We'll tell it. Tell us about the challenge. What? Put it on. How did you find it? What have you learned about yourself? 

Emma: [00:03:18] Oh. So much. Quite more revealing than therapy and free. So that was interesting. At the end of 2022, I'd been back to the UK, where I'm from, a couple of times for, like, the first time since Covid. And I was like, can I do a bit of clothes shopping when I'm over there, but I can't. I'd gone a bit buckwild and made a few kinds of purchases. I was a bit like, oh, that was a bit of an impulsive purchase. I used to be a big spender, which is how I ended up doing what I do. Terrible with money, a bit of a hot mess. So I was noticing that a lot of the intention behind the things that I was buying in the clothes category were starting to be reflective of how I was before. I'd kind of turn things around for myself, like very, women listening will relate to this. You kind of buy a certain version of yourself when you're trying to improve yourself, like coming out of lockdown. This is really big for a lot of women, especially in Melbourne, where we had a lot of lockdowns going in and out of the office, like you put on a bit of Covid weeks you have and going outside and you've been eating a whole pack of Tim Tams every day and that kind of thing. I noticed that that motivation was coming back and I was like, oh, I need to, you know, buy this stuff to look a certain way, to feel enough and to feel like I can go back to the office without everybody noticing that I've doubled in size and there was a lot of emotional attachment to it. So at the end of the year, I started to flirt with the idea of going a whole year without buying clothes for, you know, so nice and complete. But also, I knew that a year's really long time and that would really push me to actually untangle, not just get to a point where I haven't bought any clothes or save a certain amount of money, because you can't really put a number to that when it's something that you're not doing. But I knew that it would force me to, like, wear the stuff I've got and not look outside of myself for those feelings. And yeah, throughout the year I made it. I had rules around it, which I won't bore you with, but it wasn't like every single thing related to clothes. I don't really have an issue with shoes, much like, you know, I didn't, I didn't really over consume shoes, so I did buy a pair of sneakers for running during the year because it wasn't something I was trying to cut. But yeah, I learned a lot about myself. And also the way that we're conditioned to spend money and all the opportunities we have to spend money on material things, in everyday life. 

Alec: [00:05:24] Yeah. I mean, it's such a big part of finance and something that you don't really think about when you're getting started, but like that behavioural side of finance. So I guess from a what did you realise about yourself in terms of mindset and spending and what are the lessons that you're trying to apply now? 

Emma: [00:05:41] I've learned how, not just for me, but for everybody, particularly women, how easy it is to outsource any feeling that you want to consumption, spending money and buying stuff is literally a shortcut to anything that you want to feel. Again, particularly more so for women. And I've noticed how that shows up more in my life at different points. Like if I'm feeling good about something, oh, I'll spend some money to celebrate if I'm feeling bad about something. Oh, well, I have a little treat. That's okay. I think how, like a little treat culture is huge all over the internet, like everybody talks about it. And it's not that having it is bad, but I think it's, you know, I kind of talk about spending in like a few different categories. There's like impulsive spending where you haven't really thought about it at all. You've literally just decided there's planned spending and there's prepared spending. And really we want to be indexing in the second two. Why be the fenced off the money for that category? Because it matters to you. Or use like plan to buy that specific thing and then gone and done it. You know, everybody's going to buy impulsive stuff every now and again. Like I buy ridiculous novelty beds for my cat and like, it's not a value alone spend. No was $20 from Kmart and it's shaped like a pumpkin and he loves it and so do I. But that's a very small portion of where my money goes. The rest of the time, it's not this heightened emotional experience, it's something that I need or something that I genuinely do want, not just something that I think that I want and I can naturally, you know, manage my emotions outside of spending money. 

Alec: [00:07:11] Do you have a quarantined, impulse spending bucket? Cat bed bucket?

Emma: [00:07:18] Sort of. I have, like, discretionary free money every week for whatever. Whether that is a pumpkin cat bed or, you know, lunch or whatever, like, because they're low spends it buckets into that for me. But equally for you, like if your stuff is like a video games like fencing that off, if that's a high spending category, if you fencing it off so that the permission is there because it's really easy. Like, I mean, having been in the frugal world yourselves, sometimes it's really easy to think that saving money or being good with money means you're never spending any money. It's like, no, it's the intention behind it, really. So yeah, I'm all for fencing off money for things you want and then giving yourself that, that 10%, 5% just for just for crap that you don't need to think about too much. 

Bryce: [00:07:58] And so what was some of the like major changes if you had to make when you, you know, you recognise look, I'm in a spot now where I'm impulse spending. It's it's not a reflection of, you know, who I want to be and that sort of thing. And now it sounds like you definitely have much more of a considered approach to the buckets and all that sort of stuff, like what were the key challenges and I guess changes that you have made to get to this point, because I'm sure there are a lot of people listening who, you know, in that period of how do I actually get there? 

Emma: [00:08:26] Yeah. So, I mean, this has been a long journey for me. I started turning my money around in like 2016, 2017, and that kind of clothing experience was noticing, like how I'd almost regressed a little bit. So it was kind of nice to especially doing what I do to revisit that and, you know, get back on track sort of thing. And honestly, what I've had to do this is probably one of the biggest, at least sexy parts of behavioural finance. But I've honestly had to pay attention to all of the times when my brain will tell me that none of those goals and plans matter. I can just do whatever I want, like really noticing where those like beliefs and perspectives are completely jumping in and changing. The goals that I've set that do really matter to me. And like the importance of not just setting goals or plans or budgets, but actually choosing to stick to them, like seeing them as a this or that experience when there's something more shiny on offer. It's the bit that nobody really wants to address the power of habit change. But when you're out and about, like you are going to be shown ads and you're like, especially in this world, you're going to get millions of ads a day, probably going to say you're going to see stuff on influencers that make you want to buy stuff, but you can't. And, you know, the world's burning and it's really easy to be like, oh, not really going to need to retire because I'll be dead by then. It's, you know, we can tell ourselves this when we are feeling like disillusioned by what we're trying to do. So I'm like, I think that you really need to pay attention to where you're being guided off track and bring yourself back to centre and like, meet that resistance almost, like when you don't want to go to the gym, but you do want to be fit and healthy. You have to like you have to care more about wanting to be fit and healthy than how come you are on the couch right now and how great a Whopper is from Hungry Jack's. It's just that, like those micro moments that add up to the big to the big outcomes. And I talk a lot about inputs and outcomes. Often we're so focussed on the outcomes, like not buying clothes for a year or saving ten grand or investing X amount, but the you can't stop there. The inputs are the little things that you do over and over again. They're the boring ones, but that's really where the outcomes come from, is those repeated inputs. 

Alec: [00:10:36] Well, as we start getting into what being good with money, looks like, let's introduce your book, Good With Money. Congratulations on writing it. It's a big effort. Yeah. So I guess, before we get into the nitty gritty of, you know, like, talking more about those inputs and specific things that you do. Let's just start, general. What does being good with money look like to you? 

Emma: [00:10:58] Being good with money to me is a perspective and a foundation and a standard. It's like flipping a switch. You can be good with money even if you're still in debt. You can be good with money if you are investing 50 grand a year, you can be good with money. If you're making your first investment or paying down your HECS debt, like chipping away at that top number, you can be good with money anywhere. It's you deciding that those long term goals matter more than the little things that grab your attention, it's you deciding that you are going to make a change and you are going to progress forward with your money, because there's a unique kind of shame in money, because we're kind of expected to know how to manage money, even though nobody teaches how to do it. So when you're good with money, you kind of accept that you are going to confront the things that you don't know and commit to learning them, whether it's a behavioural thing, a habitual thing, or an education piece that you need to learn the practicalities of. I see it, as almost a shift in identity that I aim to take people through in the book. You know, they're not, they're going to finish the book in a few days or a few weeks. Their financial situation won't be that different. They'll be different. You can teach amount of fish or you can give him the fish, the books, the teaching. If I gave you ten grand, that's the fish. The book is the teaching. 

Alec: [00:12:16] You book sales if you gave everyone ten grand. 

Emma: [00:12:20] I put cash in copies of my book and it came out. 

Alec: [00:12:23] Yeah, like a golden ticket. 

Emma: [00:12:24] Yeah, yeah. And then I, like, filmed myself doing it on social media, and people had to go find it. 

Alec: [00:12:28] That's good. 

Emma: [00:12:29] Yeah. I don't quite think I was really well known enough for that to work, but some people found the money. A lot of people just got lucky I think. 

Alec: [00:12:35] That's epic. So that's good, I like that. 

Bryce: [00:12:39] So can you talk us through some of the specifics then, that you the inputs that you have managing your money like from the moment you paid or I mean, you're also self-employed, which is a whole other dynamic on top of being good with money. So some of the keys, I guess, are products that you might use or, or habits that you have on a weekly basis. 

Emma: [00:12:59] Yeah. The number one thing is a pay day routine. Even though I'm self-employed, you know, at the end of the month, I pay myself a bit of money so I can pay rent and this and that. Or whether you get it from a salary, whether it's weekly, whether it's monthly, having a pay day routine so that you're spreading your cash flow. That's like the number one thing that will change your life more than you think that it will. Working out what an equal portion of all your expenses for the whole year is and fencing that off as soon as the money comes into your account. Number one thing, if I can tell anybody to do anything. 

Alec: [00:13:26] And so what you mean by that is like the big annual purchases, like car insurance built into your pay day.

Emma: [00:13:32] Yeah. So in the book I go through working out like all those annual expenses. What does that look like per pay your monthly rent. What does that look like per pay? Because I used to work in this job, we were paid fortnightly and we had this joke of like, is it good fortnight or bad fortnight? Because you'd leave all your rent and everything and, you know, needing to buy olive oil and toilet paper, you have like a really high grocery bill and your rent and your car payment or car insurance or whatever. And then the other week you'd be like, whew, free money. I am rich this week, and the best thing you can do is spread that cash flow. And it's simple cash flow management. But the majority of people aren't doing it. The next thing I think is you can either do this proactively, but nobody wants to like, track their spending in real time. Like literally nobody wants to do that apart from a very small portion of people that love that like really intense management. I use retrospective reviews to keep tabs on where my behaviour is, you know, working and maybe not working, where certain things are tripping me up and basically viewing all of my financial behaviour as data that I can then farm to do whatever I want to do. So when we keep a very loose finger on the pulse of where our money is going, we can really do anything that we want. We can exist in like a status quo of, you know, spending a bit, saving a bit. Things are good. But then if you decide that you want to pursue a bigger goal, like go somewhere, buy something big, change careers, take six months off between jobs. When you have a baseline idea of what your financial life looks like, you're much more able to go, oh well, I spend a lot in that category. What if I cut that by half and put that over here? And if I did that in three of these categories, there's your pathway to your goal. There's your input without really changing your lifestyle all that much. It's that it's that constant awareness and knowledge that's part of being good with money, I think. 

Bryce: [00:15:20] And so this was those category that, that way of doing things hadn't you hadn't been set up, you know, back in 2016, 2017. 

Emma: [00:15:28] No, I was like, I would, I would try, but there was never any behavioural follow through because I wasn't thinking about inputs. I was thinking about outcomes. I just want to save ten grand and then I'll feel, I don't know what is good enough. Then what happens? What for? What am I going to do? What am I gonna use it for? And I think that often happens. A lot of people go balls to the wall on a savings goal to feel like that's the end destination. And then they get there, maybe, and then they don't know what to do with that money, because it was never a meaningful goal. It was just like an arbitrary goal. And often the arbitrary goal will mean you won't work towards it. But if you are able to because you go really hard, focus and you get there. I see this a lot with having emergency funds. If you haven't actually ever understood why you're saving that money or what, how you want your life to benefit from having that money there you're putting yourself through. Even though you've saved the money, you're not benefiting in any way. Like if you've got an emergency fund that you haven't emotionally partnered with as an emergency fund, and you're holding on to it as some kind of security blanket when an emergency comes in, and you can technically afford it, but you don't want to take it from your emergency fund, what's the point in having it, then, if you're going to put yourself through the same psychological stress that you would if you didn't have the money, because you don't want to spend the money that you've worked hard to save? There's a lot of stuff in that about, you know, you might save money, but you haven't actually changed at all because you don't ever want to spend it. You just want to, something about having that money there that you're like, oh, I've got to have it. Otherwise who am I? Or otherwise? I don't trust myself to get back there. Like if you don't have that awareness over your financial behaviour, you can't get back there because it was a one and done saying like doing. I'll use another fitness example. Those eight week god awful eight week challenges. Then what though you do the eight week challenge, maybe you win the trip to Bali or whatever it is. Then what if you haven't changed as a person, you'll never exercise again. You tell yourself you will, but you won't. 

Alec: [00:17:24] Yeah. Well, Emma, speaking of building our emergency funds, we're going to take a quick break here to hear from our sponsors. And then on the other side, I want to keep unpacking the book and then also ask you what financial health means to you. Welcome back to Get Started Investing. We're speaking to Emma Edwards. She's the founder of the Broke Generation and the author of Good with Money. Before the break, we were speaking about what good with money looks like to you. And there are a couple of key inputs, having a pay day routine, being intentional and aware of how you are spending, I guess. What were some of the other key things that you really wanted to get across in the book to help people get better with money?

Emma: [00:18:02] So I spent a year last year studying financial psychology through a college in the US. It's a big emerging field over there. It's led by clinical psychologists and financial advisors that kind of combine the two, very necessary. And there's a big part of the book around financial perspective, financial beliefs, how your upbringing and just your experience of money throughout your life impacts your financial behaviour. And like the crux of financial psychology, really, is that you develop, through a series of major financial experiences and micro financial experiences. You develop a set of beliefs like a core perspective around money, and that is what informs your behaviour, which is true with everything. Psychologically, you have a belief and that informs your behaviour. If you believe that chocolate's delicious, you're going to eat it. It's the same with money. If you believe that money is X, Y or Z that is going to inform your behaviour. Now that can be very unique to the person. You might hold a similar, you know, written on paper belief to somebody, but it drives a different behaviour. But the key thing is understanding how your experiences have maybe made you the person that you are and why that is driving those behaviours. We see it a lot in terms of a financial perspective. I think there's a lot of things you can do with money in your life and financial health, financial confidence, financial wellness can look like, you know, taking big trips or it can look like having money to cover yourself if you get made redundant, you know. The problem that a lot of people have and I experienced this too, is that we don't have the visibility or the proximity to what that actually looks like in context. If you have not grown up around any level of financial confidence, you've grown up around money stress, money, conflict, or maybe something really bad happened and you lost a lot of money. You can form this key perspective that none of those things are available to you, or that they won't ever happen for you, or the way that you experience money is stressful, or that money is hard to manage. And then when it is in your adult life, you're not empowered to experience anything different because you didn't know that that existed. So there's a big kind of thing about how it shapes your perspective, as well as core beliefs that may drive specific behaviours. 

Bryce: [00:20:00] If you were to teach, like, I'm just thinking about how that then comes, but we have a lot of questions from parents. Like what? How should I be talking to my kids about money? Because it's at that point in their life that I can really start forming the belief of what money is. So how would you help our audience who are asking those questions, think through chatting to their kids or their teenagers about money? 

Emma: [00:20:24] This is a really common question because nobody wants to, like, screw their kids up, especially with money. And the hardest part is you can't stop your children necessarily being in the presence of financial challenges because you can't control whether you're going to have financial challenges that are external necessarily. You can do everything right and still get made redundant to the point that it exceeds your emergency fund, or that could be a recession or whatever. That can be another, you know, major event. You can get sick, whatever. Firstly, I would say probably the fact that you're thinking about it already sets you apart from a lot of people. I think the biggest thing is everyone's going, you know, what do I say to my kids? What activities do I do with my kids? I think that a lot of the material, you know, I'm not a parent, so I won't, speak on behalf of them, but a lot of them, you know, activities having, you know, pocket money that goes, you know, to giving, to saving, to spending or whatever people do. Like there's a lot of different ways of doing it. I think that any way to engage kids with healthy money management is really good. From a beliefs perspective. I think the biggest thing we need to pay attention to is the flippant ways that we talk about money around them. For example, if there is a redundancy, this is where your own kind of beliefs and perspectives are going to come up. And often it's not so much what you teach your kids, but how you communicate and behave around them. Even if you're not saying it to them, they are in the presence of it, so they will deduce their own, you know, beliefs around that and what that means. So I think it's a difficult one. And again, I'm not a parent, and it's one of those things that you don't know how your current actions are going to play out, and they're going to have their own experiences with money as well. I think the biggest thing is, yes, engaging them in those practicalities and being careful of how the language that you use around money and the emotions that intersect with money in your household. If there is an emotional financial experience, talk about it. I think the biggest problem for the current generation is that money has been this taboo for so long. So when there were these unavoidable financial challenges, divorced, whatever. My parents got divorced when I was ten. Complete financial shit show, but it was never talked about. It was never discussed in a financial capacity. It was just kind of like money. Is this, like, big scary thing. And there's all these, like, grenades coming for it. So you are never really going to. This is my own experience, but you never really going to get anywhere because one of these various big bad wolves will come along and create conflict or create stress or make it difficult to manage if there are healthy financial conversations happening at the same time as unavoidable challenges. I think that that that can help foster less of a volatile financial environment from a belief perspective. It's hard to say because you don't know everybody's situation. And when you're in an emotionally charged state. I think the biggest thing, though, is if you're have it, if you're asking these questions and if you yourself are doing things to work on your financial health, you're you're sort of already halfway there because the problems come when there are unavoidable challenges and there is no financial foundation, you know, because you're going to be less emotionally entangled with it if you're doing this work that does a lot of it for you. I don't think it's as much like, do this, this and this, and your kids will be fine with money. It's a bit more like integrating it into your life. 

Alec: [00:23:41] So you're a hot mess with money. Self-described. And then, you know, you make this public account, you turn it around publicly. Now, you've written the book on how other people can turn it around. And I guess, you know, the challenge with money is there's no real end goal. We're always working on things. We're always trying to learn more. We're always trying to do better. Everyone has money challenges. How do you assess financial health? Like how do you assess when like I'm in a good place, like maybe not the perfect place or the best place, but like, how do you say like one of the pillars of financial health to say, I'm okay?

Emma: [00:24:15] There's a section in my book where I talk about financial resilience, both mental and mathematical. I think that's a really good measure of financial health. The category, I guess, of financial resilience that I'm talking about is, it's come from the field of financial psychology, where it's almost a mindset shift, where we start seeing experiences as movable, as changeable rather than permanent, personalised and pervasive as three P's. And it's like shifting away from that. I think doubling down on that with having whatever it looks like for you, but, financial level of resilience so that you can weather certain amounts of storms. Again, nothing's in anybody's control externally. But thinking about what does your life look like and what is your personal risk profile in terms of impacts and needs? Do you like as an example, I use my laptop for work every single day. If my laptop spontaneously combust switches knowing Apple, who knows, I need to have 2 or 3 grand to walk right to the Apple Store and buy another one and bring all my stuff down from the cloud. If I work in a school where they provide all my equipment, that's not so much of a risk for me, and I feel like it's looked at as a really specific example. But looking at your life and what your needs are. I'm also from the UK. My mum could be at any moment. I'm an only child. Don't have a dad in the picture again. I need to have that money that my financial health. I'm not financially healthy unless I can deal with these things that could happen for me. Okay? Someone who's parents lives up the road. Different issue, but they might have children. They might rely on their car for work where they would need a new one very quickly. If that spontaneously combust and so much combustion happening. I think it's a case of looking at the mindset piece of how am I seeing these things? How is my mindset? Which I know sounds weird, but it's a big part of it. How do I see my finances and and what do I think about what would make me feel financially confident, financially healthy, and then looking at how you can adjusting it over time as well, how you can build out emergency funds, fencing off funds, behavioural protocols, even to a degree like how can you optimise your financial lifestyle to be prepared for impact? I think the other part of it is also well being comes down to financial health of understanding what your values are and are they being honoured in your life. It's fine to be braced for impact and have your emergency fund in your laptop fund there to go. But if you're not ever giving yourself any enjoyment out of your money or using your money to shape your life where you want it to go, I think you're missing an opportunity. And that's not helping with your relationship with money. So I think understanding what your values are again, exercise to do this in the book or there's a free one on my website, understanding what your values are and how money is used to uphold that, you know, is it everybody says freedom and security, right? But freedom and security to one person might look like travelling the world with money in the bank. Freedom in security to another person might look like not going back to work for another year. They can be with their kids completely different experiences. So really breaking down. What does freedom look like to you? But also what are your values? Do you value comfort, calm, ease, stability, or do you value fun and adventure and exploring like two completely different things understanding how that is present in your life and how you're, you know, adjusting that over time to meet your needs. Emotional physical. I think that like the three components of financial health for me. 

Alec: [00:27:40] Nice. 

Bryce: [00:27:41] Well, if you're looking to get good with money, make sure you check out Emma's book, Good With Money. Also, the Broke Generation on Instagram and Emma also hosts the podcast The Broke Generation. Plenty of ways to connect with Emma. But, we have reached the end of today's episode, so thank you so much for coming on, sharing the journey. Congratulations on the book and also the community that you've built. And I guess being so transparent with your money and your journey, it certainly, is it relates to a lot of people. So, thank you very much. 

Emma: [00:28:10] Thank you so much for having me.