#155: Tess Wicks: Managing Your Money with Ease

Profit with Purpose by Anna Goldstein

Tess Wicks is a wealth and mindset coach. Traditionally trained in finance, Tess now works with individuals and business owners to help them cultivate the right mindset around money. She talks about the ideas that helped her manage her money, why boundaries bring freedom, and why her business has 4 bank accounts.

How did you learn about managing money?

Tess has a degree in finance, but that didn’t her to manage her money or to manage the finances of a small business. She learned to manage money was from a mentor who came to college and talked about the importance of managing money that made her aware of how important it is to manage your money.

We have all had the experience of knowing what to do but not doing what we know. There's a performance gap. How did you close that gap?

It starts with simple ideas, like paying yourself first. And learning to set aside 10% of your paycheck. That helped her understand that managing money has a simplicity to it.

Something as simple as paying yourself first – a lot of people don’t do it. Why do you think that is?

Some people truly believe that they need every dollar that they make. Parkinson's law states that you will use every resource that you have. When most people earn more, they spend more. Budgeting is about setting boundaries with your money, and many people shy away from that because it feels restrictive. People feel like they deserve the position they have reached and should be able to have that money. Tess tells them that having rules about money can create freedom.

A lot of us get into self-employment for freedom and when you put rules in place it can feel confining, but these rules are really just boundaries to create even more freedom rather than restriction.

Entrepreneurs tend to be very sensitive about their time and put boundaries on their time. If you can respect your time, you can also respect your money. Putting boundaries in place is a way of respecting your money.

I like the idea of delaying gratification. Which I think is getting harder for our society as a whole because we have the internet and things we can get right now. We’re getting used to this instant gratification, and I think it’s important to train ourselves to love the immediate discomfit for the long term gain.

Our society has become much more impulsive. We have trained ourselves to believe that we need immediate return or intimidate gain. We have to get used to enjoying the good kind of pain.

Was it helpful to you when this mentor described putting a small amount of money away and looking at it from a long-term perspective? How can that impact your long term gain?

Tess found it impactful to take a step back. Every decision we make in our day to day has an impact on the long term. The best teachers put things into perspective in really great ways. If you earn $15 an hour and save $3 an hour you’re earning $12 an hour and that is actually a small difference that can have a greater impact. He also broke down different spending patterns that people have after college. Such as leasing a brand new car over driving the one you’ve had as a teenager. Every decision we make have long term repercussions including the short term gratification ones.

It’s interesting to me that you were having this experience of being educated in a conventional way. You took courses in mathematics and finance. But then this mentor put it in a personal and practical way. And that’s where you had your a-ha moment. And I think that’s missing from our education system.

All of Tess’s financial classes were focused on big business and after college she worked as a consultant to big corporations. This knowledge didn’t help Tess’s personal finances and she made a lot of mistakes. She was fortunate to find her mentor. She also had the influence of watching her parents manage their money. And she had a lot of nerdy friends who were also actuaries, and they talked about things like maxing out Roth IRA’s and what they were doing with their 401K’s. She knew other people did not have her financial understanding and were confused about how to manage their money. She wanted to provide that level of mentorship for people.

You mentioned paying yourself first? How do you do that?

It depends if you’re a business owner or traditionally employed. If you are a business owner your business needs to be on a budget just like your personal finances. Often we pour any money the business makes back into the business. But it is important to take money out of the business for yourself. This means that you can see that you are getting something out of it but it also creates an important boundary. Even if this is just a small amount. It is important to set aside some profit and to get into the habit of doing that. You could start with 1% and build in up to 5-10%. You business will adapt to that boundary. Tess does this twice a month. She takes a small amount of all the money she’s made in that fortnight and transfers it to another account. This is in addition to paying herself.

Is this money you are saving? Or money you are using to enjoy and buy things that you want?

Tess gives herself a paycheck twice a month. That is the money she lives off and she saves a portion of that. She has a SEP IRA, which is a retirement account for self-employed people. She puts a percentage of her income into that, saves money into a variety of savings accounts.

How many accounts do you have?

Business-wise she has 4 accounts. 2 checking and 2 savings. She separates her revenue from her expenses. Her 2 savings accounts are for profit and taxes.

So let’s say you have $3000 in your travel savings account and you want to go on a trip that is $5000. Do you wait until you get to $5000 to book that trip?

You would save until you have that money. Tess doesn’t want to spend money she doesn’t have.

I love how you are using the word boundary. Let’s start with our relationship to ourselves. You put a boundary in place, and you honor it. I think that’s so important for building our own self-worth.

Tess thinks we should never let the numbers in our bank accounts or our net worth impact our sense of self-worth. You have to set a boundary between the numbers and your self-worth.

There’s a huge wave of self-love popularity right now. I’m going to love myself so I’m going to just buy the shoes. Tess tells her clients that taking of themselves is taking care of their finances. The harder decisions of not buying that thing because you don’t have the money is taking care of yourself and loving yourself. We don’t need some of these extra things that are going to make us feel good in the short term to actually make us feel good.

I’ve been online shopping and not buying. It’s really fun to load my cart up. I do this with Amazon all the time. I add things to my cart and save for later. Many times I decide I don’t want it. When you have a budget in place, it takes a lot of the decision making out of the equation, which I think is really helpful.

Tess has her clients do a unique way of budgeting. They have a dollar amount that they can spend every day. This means they don’t have to catergorize their spending or decide what category something fits in. They get to spend that daily amount however they want. She separates fixed and discretionary expenses and doesn’t let her clients add groceries or gas to their fixed expenses. When you get a daily number, it can be low at the beginning of the month but will add up over time. What if you didn’t say yes to every happy hour or every invitation to go out to dinner for the first 7 days of the month? That can be a boundary that then gives you more money to spend at the end of the month on whatever you want.

It seems like you have created your own system.

As the money coach Tess always wanted to provide tools that really worked for her. A lot of the tools out there didn’t work for her. When she works with clients, she tries to find what works for them and apply certain rules that help them build wealth and live a financially free life.

What’s been some of your inspiration?

Tess gets inspired by working with her clients and seeing them crushing it. It shows her that she needs to keep doing what she’s doing.

Can you share a story of someone who implemented your system and a result that they had?

One of her clients is an accountant who is traditionally employed but also has a side business. She was stressed about her money. She felt that she should know this stuff, especially because she worked in finance. She felt disorganized, was spending a lot and considering buying a house. After they worked together, she realized that she loved renting and putting her money into the stock market. She increased her net-worth by something like $10000 in 6 months. When you put your mind to something, you can achieve a lot. Her entire mindset and outlook on life changed.

You just said ‘Do a lot with the money that you have,’ I love that so much. There’s such a mindset of more and such a mindset of lack. We’re very conditioned with this type of thinking from a young age.

Tess gets her clients to look at their priorities and core values. And then line that up with the money they’ve been spending to see is anything is out of sync. It’s really useful to see what truly makes you happy and fulfilled versus what you believe makes you feel fulfilled. It’s not about not spending money. It’s about spending money on things that you value and prioritize.

What is something practical that someone who is feeling a bit overwhelmed can do? Where do you suggest people start?

Sit down and identify all of your mandatory expenses. What do you need to pay for to live your life? Such as rent, mortgage, insurance, debt payments and utility bills. Determine what is essential and what is excess.

There can be this feeling of shame around money. Money does not equate self-worth. It’s really about the integrity that you have with yourself.

It is all about doing what you say you will do. After we get over the shame of whatever is going on with our finances and make a plan, then it’s about committing and following through. Our self-worth can ebb and flow depending on whether we follow through on the promises we’ve made to ourselves. How much money you have compared to someone else means nothing.

What is the best advice you’ve ever been given?

When Tess was in high school, she was a diver. They had a quote - “Feel the fear but do it anyway.”

Tell us how we can get in touch with you

Wander Wealthy: https://www.wanderwealthy.com/

Instagram: https://www.instagram.com/tess_wicks/

Links

SEP IRA

https://www.investopedia.com/terms/s/sep.asp