Alexa von Tobel, founder and CEO of award-winning financial planning platform LearnVest.com, is making the rounds with her recently released book, Financially Fearless, already a New York Times bestseller.
In the text, Alexa outlines The Learnvest Program For Taking Control of Your Money and tackles how to challenge the way we see our money, how to successfully budget our money and how to protect our money—from life, from others, and even ourselves.
So what is it about the LearnVest Program that has the masses scrambling to jump on board? We caught up with Alexa to find out.
Smarty Cents: We love the straightforward, conversational tone of Financially Fearless. What inspired the premise of the book?
Alexa von Tobel: I wanted to create a book that was digestible and accessible. Financial topics can be so incredibly dense, so the goal was to write something that’s easy to consume. This is exactly the goal of LearnVest more broadly speaking—we take the complicated world of financial planning and distill it into actionable items. We want to help everyone make progress on their money.
SC: We are completely on board with your conviction that not having a plan is, in fact, a plan. Can you elaborate on that?
AvT: When you play it by ear, you end up throwing away money that could be spent on more important things—the stuff that actually brings you joy. When you’re working with limited funds, it’s key to maximize each and every dollar and to know you’re making smart decisions.
By avoiding financial planning, you may be leaving yourself vulnerable to any of life’s curveballs. I dedicated an entire section of the book to protecting yourself— protecting yourself from life (with proper insurance), from the people in your life, and ultimately, from yourself.
The consequences of being in the dark about your finances are terrifying. According to the American Payroll Association, 61 percent of Americans live paycheck to paycheck. That’s a staggering statistic! And the less we know about money, it seems the more we feel stressed about it. We need to have a candid conversation about money, because we all deserve the sense of freedom and power that comes from being knowledgeable and in control of our finances.
SC: What would you say is the most common money management mistake you see?
AvT: One of the most common mistakes I see time and again is that people are not saving enough (and early enough) for retirement. I’ve heard every excuse you can imagine, but the bottom line is that saving for your eventual retirement is a non-negotiable. The earlier you start to set aside money for retirement, the better. That’s because money allocated in an IRA or 401(k) isn’t just sitting in the bank—it’s invested, and since the market ebbs and flows, investments need time to grow.
Think of it this way: You’ll likely work for 40 years (age 25-65) to fund 70 years of your life (assuming you live to 95). If you’re not putting money away in those 40 working years, it’s going to make retirement a difficult feat, and more often than not, will put financial strain on your children and future generations.
SC: One of our favorite things about The LearnVest Program is that it acknowledges “lifestyle” expenses (lattes, for example) as a major part of the equation. Can you describe the 50/20/30 rule?
AvT: This is always a favorite, and I’m right there with you! I love the 50/20/30 budgeting formula, because it doesn’t ask you to deprive yourself of the things that you love. Instead, it helps you better allocate your money so you have room for the things that enrich your life.
Here’s how it works: 50 percent of your take-home pay goes to your essentials (your rent/mortgage, transportation to work, utilities and groceries), 20 percent goes to your future (retirement savings, tackling debt, emergency fund), and 30% is for your lifestyle (all the fun stuff—travel, eating out, etc.). Once you have this plan in place, I really encourage people to think critically about how they want to spend their 30 percent. The “cost-per-happy” equation, which I detail in the book, helps you to calculate where this lifestyle money should be going and how to prioritize the many expenses in your life.
SC: What else is it that sets The LearnVest Program apart from other financial planning platforms?
AvT: We recognize that taking action can be a challenge, but we can all make progress on our money. One size does not fit all in financial planning. The LearnVest Action Program is tailored to each client’s lifestyle and their own individual dreams and goals. As your life changes (new relationships, children, jobs, cities), your financial plan needs to be adjusted accordingly, and at LearnVest, our experts work with clients to make those adjustments every step of the way.
SC: Financially Fearless hit shelves at an ideal time, when people are still fired up about their New Year’s finance resolutions. Did you make any money resolutions for yourself this year?
AvT: That’s exactly right. The New Year is the perfect time to look at the year ahead and set your money goals! I got married last year, so I’m focused on working with my husband to set and tackle our big goals. We’re eager to buy our first home together, so that’s what we’re focused on right now.
SC: Finally, what’s your most fundamental piece of personal finance advice for readers hoping to turn over a new leaf, financially speaking?
AvT: You can always make progress, no matter where you’re starting from. It all starts with putting a plan in place, because as I said, not having a plan is a plan, just a really bad one. At LearnVest, we’re here to rip the Band-Aids off and help people take the first step.
For more on Alexa von Tobel, The LearnVest Program and how to order your copy of Financially Fearless, visit LearnVest.com.