Hacking.
We all wish we could hack all of the time, or at least more often. In this community, I know there are many entrepreneurial spirits who want to design their own games, create their own art, and tell their own stories. The hack is simply one outlet to do so.
But the passing of time brings the coming of age. Responsibilities pile up. Work obligations, bills to pay, and so forth. Spending the time needed to create without immediate payoff becomes a harder and harder proposition as our lives shift to needing to generate enough income to cover the relentless march of expenses, like reinforcements that spawn for just a few too many turns.
Those who know me know I often talk about “the mountain”, a mystical place where I can leave it all behind and spend my days in pursuit of the hack and other creative outlets. Ideally, this comes with not needing immediate monetary reward to stave off the ceaseless arrival of bills. Basically, a retirement from the “nine to five” and having enough to live comfortably while I pursue what I like without needing to rely on others for housing, food, etc.
While this sort of quasi-bohemian retirement may be an end destination, even having enough money to work less or feel empowered to take bets on yourself and your art is empowering. Simply having enough extra savings so you can afford to order DoorDash guilt-free when you’ve been on a bender creating a chapter in febuilder for twelve hours straight is a form of freedom. We all have different financial goals and aspirations, but the path to get there can be difficult to figure out: schools don’t teach financial literacy, and navigating the space can be challenging without trustworthy guidance. Getting started can feel really difficult, but there are a few basic things you can do now to improve your finances so you can hack guilt-free and earn a little extra money passively to help cover expenses and boost your savings over time, giving you more flexibility to take risks and invest time in creative pursuits without immediate payoff.
To get anywhere, we need to start somewhere.
I know many folks in this community skew younger and may be thinking about jobs and money for the first time. The benefit of youth is that you have a lot of time to earn and compound your savings.
I’ve talked with a few folks here about some basics of personal finance and wanted to create a guide that shares what I’ve learned and what I wish I knew as a teenager so I could be better off today.
While success with money is often conflated with being lucky (ie the birth lottery) or working hard to earn income, one aspect that doesn’t get talked about enough is how to manage the money you already have to “make your money work for you”. Regardless of your personal situation, you can take these tips to help improve your finances.
Getting started is hard, but building a better relationship and understanding of basic finance will help you tremendously over time, helping you earn and save more to use for things you care about.
My goal in this post is to create a personal finance guide that makes money feel less stressful and something you can build command over. Even if you’re older and “feel behind”, these tips should help you build some financial literacy and get started towards building better savings.
To be clear, I am not a financial advisor and nothing written here should be seen as financial advice to point you towards specific investments. The goal is to break down some basics so you feel empowered to better understand how you can make banks, credit cards, and your money work in your favor. Financial institutions typically rely on your ignorance to make more money off of you, but knowing the fundamentals and developing good habits will help you build wealth over time. It’s like knowing the meta of a competitive game.
Much of this advice comes from a very US-centric approach and conditions. How things like credit work in your country may be different, but the tenets here apply globally IMO.
I. Intro
This guide will focus most heavily on a few concepts and skew towards basic money management for folks just starting out. The primary goal when you’re just starting is to have as little debt as possible, build the right infrastructure and places to keep your money, and develop good money habits. Long term, this will help you compound your savings over time.
Compounding is a term we will use a lot. We will also be talking about interest and interest rates. Let’s define these.
Interest is the money gained by a lender of money that is paid out by a borrower. For example, when a bank gives money to someone so they can buy something, the money the lend is paid back with interest. How much is determined by the interest rate.
For example, if the bank lends you $10,000 to purchase a car with 5% interest over a five year period, this means you’d pay roughly $188/month over a five year period, meaning you actually owe ~$11,322.60 for the $10,000 purchase because you needed to borrow from the bank to pay off the car. The total cost of your purchase increased by almost 12% because you needed to borrow money from the bank to get the car at all. So the bank, over a five year period, makes $1,322.6 from lending you money.
Let’s flip this to show it a different way. When you open a savings account at a bank, you are effectively lending money to the bank. This is why a savings account is “free” to open. In a way, you are doing the bank a favor by giving them money that they can then lend out for more money. If you open a savings account with a 5% interest rate and deposit that same $10,000, you would get 5% on your money each year, paid out monthly. Like your monthly car loan payment, the bank is giving you 5% on the money in the bank each month. The bank would pay you roughly $41.66 each month, assuming you withdrew the money immediately. This would mean you’d earn $500 just by parking money in the savings account. If you let that money sit there, it would compound, meaning the interest payment you receive gradually snowballs each month as the base money in the calculation increases. Over one year, that initial $10,000 would grow to $10,511.62. Over five years, that increases to $12,833.59. That’s just for letting your money sit in the bank.
The 5% interest paid on the car comes from the interest rate, which is essentially the “price of time” or the “cost of borrowing”. This rate is determined by a number of things, including the rate set by The Federal Reserve or a central bank in your country, your credit score, and the nature of the borrowing itself.
The interest rates that generally matter the most in day-to-day life are the interest rates on your debt, the money you owe (like the car loan above), or the interest rate on your savings account (like the latter example).
So two of the most important things you can do when just starting out is ensuring you are paying limited interest on your purchases and that you are earning maximum interest on your savings. This will increase how much money you have.
II. Checking and the High-Yield Savings Account
I assume many of you have a bank account. Maybe your family helped you open an account at a local branch in your hometown so you could deposit some birthday money or have a place to direct your paycheck from your first job to. When I was young, I looked at the bank primarily like a vault for the money I had. Effectively seeing it as a business that put money under the mattress for me to keep it safe. In truth, the bank takes what I have and loan it out at a higher rate, collecting the delta between the interest rate the give me and the interest rate charged to the borrower as profit. The money is never under the mattress, it’s always flowing around somewhere, making the bank money. However, the amount kept in an account is “liquid” (our favorite TLP character), meaning we can withdraw it at any time. This is typically why savings accounts offer lower interest rates than something less liquid, like a “certificate of deposit” or a bond, where the initial deposit you make isn’t immediately or always accessible. Banks rely on some level of deposits always being available so it can provide this service to customers while also simultaneously loaning money out to make money off of it.
Banks typically offer two types of accounts: Checking and savings. Checking accounts are usually where money comes and goes. This is likely where you get your direct deposits from your job and where you withdraw money from an ATM or pay if you’re using a debit card. A savings account is more like the vault where you keep more money that should be slightly less accessible for security reasons, but still something you could transfer out immediately if you needed it. For example, if you lose your debit card, you don’t want some stranger to be able to withdraw all of your cash. Savings accounts aren’t typically accessible from a debit card.
If you have these accounts, check your interest rates on each. The bank websites or their account apps will tell you what the interest rate is on your account.
I remember learning about this and finding out my bank was giving me nothing on my checking account and .01% on my savings. I had been banking with the same bank since I was a child and earned close to nothing for holding my money there. I realized I could switch to a bank that offered a “high yield savings account”, which would give me a much better interest rate at no cost to me.
So check your interest rates on your accounts and look for options that pay you more for your money. Check the terms, as some banks require minimum deposits to be eligible for a rate or offer a temporarily high rate before reducing it. Switching to and keeping your savings in an account that pays you more is one of the highest leverage activities you can do when you’re just starting out. I went from an account giving me .01% to an account giving me 3.5% on my savings. This may sound insignifcant, but over time it makes a huge difference as you build up your account.
So find a bank offering a better interest rate (sometimes called the APY, or annual percentage yield) on a savings account and put the majority of the money you don’t need for day-to-day purchases into it. Ideally, you keep the checking and savings account with the same bank so you can easily move money between accounts to make payments. I did this when I switched from my old bank to my new one.
If you’re not sure where to start, I like NerdWallet since they offer in-depth reviews. For folks outside the US, search for best high yield accounts available in your country. Beyond yield, you’ll want to ensure the bank is properly insured on your money, that they have an app that is good to use, and if it matters, a branch or limited ATM fees should you need to withdraw cash.
But in general, the takeaways should be:
- Look at your current checking and savings account APYs, or interest rates, to see how much you’re earning holding your money there.
- Consider switching to a bank offering a savings account with a higher yield to earn more passively on the money you have.
- Ideally, keep the checking and savings in the same bank so money can flow instantly between the two as needed
- Use your checking account only for money you need for immediate purchases, and put the rest into your savings, which typically will earn you a higher yield if you follow the above.
If you move from a bank offering you .01% to something higher, you’ll immediately start earning more on your savings, which will compound over time.
III. Credit Cards
As a youth, we often talk about the need to “build credit”. This is typically reflected in a credit score, which determines how risky you are to lend to. Having a high credit score means you’re reliable: you pay back what you owe on time and aren’t maxing out your credit limit, or the amount the credit card company is willing to lend to you.
Building positive credit history is important when you strike out on your own: whether that’s buying a car, renting an apartment, or upgrading your credit card – you want to have good credit.
Good credit typically results in you getting a better interest rate on loans, meaning the bank lending money to you is giving you a discount because you’ve built a reputation for being reliable.
Credit cards are often looked at as a way to build credit. Chances are, your bank will offer a basic credit card to you. I got my first credit card as a teenager from my bank.
Credit cards are ways to take out loans on day-to-day purchases. Each time you swipe, you’re taking a loan from the credit card issuer. Typically, they give you about a month to pay back the cost of the item before they start charging you interest on things. This is where it gets dangerous and compounding works against you.
While a good interest rate on your savings account today in the US is like 3 or 4%, credit cards often put a much higher fee on purchases that aren’t paid off immediately. From what I read, the APR (average percentage rate) is currently ~24%. So for every dollar you spend, you’re essentially paying an extra quarter to delay paying it off. This typically kicks off one month or so after the purchase if it goes unpaid and you “carry a balance”. Credit card bills are notorious drains of wealth, and so it’s critical to not spend more than you can afford and keep the bill in check. Much like your interest rate in your savings account compounding your wealth, this can quickly compound in the other direction.
Ideally, if you are using a credit card to build credit, try to use it like a debit card – only using it knowing you have enough to immediately pay it back. For me, I basically run my entire life through my credit card and pay it off immediately when I get paid at the end of each month. This makes it easy for me to track my spending, but I also get all of the benefits of a credit card without the downside cost associated with carrying a balance each month.
Credit cards often lure in customers with perks and rewards. This typically manifests into points (credit card currency you can use to pay for stuff) or cash back, a percentage earned on each purchase that gets returned to you as a balance, effectively discounting what you buy. Like the bank giving you money because you’re holding money in a high yield savings account, credit card companies will offer these incentives since they make money on transaction fees, as well as delinquent payments that they earn interest on.
So ideally, if you are only using your credit card as a replacement for cash you have, you’re likely to benefit from their rewards while building credit. Just don’t carry a balance to avoid paying hefty credit card fees, which can be really painful to dig out of as compounding works against you.
When evaluating a credit card, see what they are offering you and see what makes sense. Be extremely careful. It took me a long time to get comfortable with my monthly budget enough to know what amount I felt comfortable charging to the card each month. But over time, by being responsible and only swiping what I can afford, I’ve been able to save money and get perks without paying the credit card company any interest.
So TLDR:
- If you are choosing to build credit with a credit card, evaluate the a) annual fee for holding the card, b) the rewards the card offers you for purchases, c) the APR for carrying a balance, and d) how soon the credit card company starts adding the interest payments on top of the cost you paid on the card. This is typically a month, but PLS check.
- But you should avoid carrying a balance at all costs. The high APR will eat in your savings and drastically increase your costs on purchases over time.
- Treat your credit card like a debit card – only buy what you can afford and pay it off immediately.
- Take advantage of points and cash back to effectively discount items you’d buy anyway.
IV. Managing the Flow of Money
We’ve covered a lot here. Let’s bring it all together: how do you manage the flow of money?
Think of a business. They typically earn money each month from the goods and services they provide, while they pay for all of the costs of running that business. Let’s say you’re Intelligent Systems, you’ve likely got a few income streams across various games and merch that you sell, while you pay out the cost to rent the office building and pay glorious Higuchi for his dedication and service (as well as other employees, of course). A company will typically automate a lot of its processes to ensure money flows to where it needs to go to avoid extra fees and maximize its earnings. A business will likely pay off whatever loans it has and any immediate costs, like labor, then put the rest into a savings account or investments where it can earn interest for later.
For me, I try to look at personal finance similarly and run my own budget like I am a business. This helps me build good habits and only spend a portion of my paycheck each month.
In most modern bank apps, you should be able to set up automation to direct money around to different places each month. Here is a sample flow you can consider.
- Last day of month: Money arrives into checking account from job
- First day of month: Money from checking account is routed to savings account to immediately start earning interest
- Second day of month: Money is sent to all bills for payment. This for me is usually just my rent and my credit card.
- Pending how much I spent, I may have some leftover in my checking account. I usually like to keep a smaller buffer for emergencies or quick payment, but I will then send any leftovers into savings. I get next to nothing for keeping money in a checking account, so I only keep a bare minimum to avoid any overdraft fees or if I desperately need cash. The rest goes somewhere where I can earn interest.
The automation and “paying yourself first” by socking money away into savings helps you budget and build good habits, while also increasing your ability to compound.
V. Closing Thoughts
Getting started can feel daunting. Think about Night of Farewells in FE7 when you get Nino, who needs to be carefully used to not die immediately. But with careful grinding, Nino’s stats snowball, and her power increases dramatically in a short time. This really isn’t too different from starting with a small amount of money in a savings account, watching it compound slowly, but increase in the amount of compounding over time. Saving at a high yield is like an est unit with good growth rates: slow at first, but gets incredibly powerful over time.
For me, I’ve been fortunate enough to learn these basics which help me worry about money a lot less. When I was starting out, money was scary and something I wanted to avoid. But knowledge is power, and building good habits has helped me earn a lot more than I would just from labor alone.
This is only a beginning – I wanted to keep this focused on the most basic components for starting out: understanding how interest works for and against you, how to evaluate a bank account, credit card basics, and how to manage the flow of money you earn. This guide doesn’t cover more advanced items like investing, retirement accounts. A high yield savings is the first step and can make a big difference when you’re just starting to build your own finances out. Over time, you’ll want to think through how much you keep in a savings account vs. other investments, but once you’re in this position, you’re likely already in a good place.
I recognize it can be really hard to budget and save, which is why I advocate for automating it as much as possible and keeping a few key tenets in mind. If you have good accounts and build a strong system, you will put yourself in a better position on the margin than someone who doesn’t. Building discipline and understanding how money works so you can navigate it confidently will help you earn more in the long term so you can spend less on bullshit and more on the things you care about.
I hope this guide is helpful and is encouraging. Small steps like this can make a big difference over time, and there is no better time to start than now.
Thanks chiefs and be safe out there.