The recently-released Netflix documentary highlights the financial struggles faced by four families, reflecting the common problems many people encounter when managing their finances. These issues include inadequate savings, mounting debt, financial struggles before starting a family, living paycheck-to-paycheck, and being clueless about savings required for a smooth and timely retirement. Although the problems depicted in the documentary are characteristic of young middle-class urban American households, they are also prevalent among their young Indian counterparts living in big cities.
It is crucial to understand that financial planning is essential for a secure future. It is never too early to start planning for your financial well-being. One of the most common issues people face is not knowing what to do with their money. It is essential to set financial goals and plan accordingly to achieve them.
Another issue the documentary highlights is the lack of financial knowledge and investment training. To tackle this, one must invest time and effort in understanding the basics of personal finance and investing. Numerous resources are available online and in the form of books, blogs, and podcasts that can help gain financial knowledge.
The documentary also portrays the struggles of individuals with mounting student loans. With the rising cost of education, many students end up with significant debt that can become a burden in the future. Knowing the various financial aid options and scholarships available while pursuing higher education is important. Additionally, planning for loan repayment and budgeting can ease the financial burden.
Here are some wise money lessons advised in the documentary:
Cultivate A Frugal Lifestyle: In the movie, a character suggests that a significant portion of our earnings goes towards the "big three": food, housing, and transportation. We can save a considerable amount of money by reducing our expenses in these areas, even by a small amount. While there may be a limit to how much we can cut back, there is no limit to how much we can save and ultimately make.
Be Prepared For All Eventualities: Your situation may shift unexpectedly at any given moment. Although it's not pleasant to contemplate the possibility of facing financial turmoil due to a sudden job loss or a health crisis, it's an eventuality that we should all be ready for. Establishing an emergency fund and acquiring disability insurance can go a long way in stabilizing your financial situation in the face of adversity. However, it's important to remember that just as circumstances can take a turn for the worse, they can also eventually improve.
Eliminating Debt Has The Power To Transform Your Future: Debt, which involves paying a fixed amount of money every month, can hold you back from progressing. However, getting rid of debt can also positively impact your future. The documentary introduces us to Ariana, an emotional spender who harbours a fear of money.
Ariana's parents had instilled in her the belief that they deserved to indulge in spending, which led to her spending more than she could afford. As a result, she is currently facing a large amount of credit card and student loan debt. In the documentary, we witness Ariana's shame and guilt as she strives to pay off her debt while caring for her two children. Her husband covers the bills, and Ariana contributes $2,000 of her income towards monthly debt payments, working tirelessly to manage her finances.
Ariana once took out a personal loan to pay off her credit cards, but she eventually returned to the debt cycle once the limits were cleared. Tiffany Aliche, known as The Budgetnista, assists Ariana in creating a plan to allocate her income and automate her budgeting.
Also, The Budgetnista provides Ariana with a set of criteria to help her control her spending:
Is it necessary?
Do I love it?
Do I like it?
Do I want it?
The focus should be on prioritizing "necessities" and "loved" items. Throughout the documentary, we observe how Ariana is determined to improve her financial situation for her family's sake. She dreams of reducing her work hours, decreasing her stress, and going on vacation - aspirations she shared with Tiffany when discussing how she would like to spend her money. It is evident that eliminating debt can potentially transform Ariana's future.
Consider Starting A Side Hustle: It's possible to explore a supplementary business to generate additional income. Side hustles can provide a steady stream of extra income that can be used to pay off debt or invest in long-term financial goals. By diversifying your income streams, you can reduce your reliance on a single source of income, making you more financially resilient. Pursuing a side hustle can also help you develop new skills and experiences, which could increase your value in the job market and lead to higher-paying opportunities. In the movie, Lindsey was advised to create drawings of dogs and show them to their owners to promote her secondary dog walking job.
Invest In Index Funds: Investing in index funds is a highly beneficial option for beginners looking to invest their money. These funds consist of a diverse range of stocks from various industries, such as finance, retail, healthcare, technology, oil & gas, and airlines. This makes them a smart and reliable way to earn money gradually. For example, in the movie, Teez Tabor, an NFL cornerback, faces a sudden loss of income due to an injury. His financial advisor suggests investing in index funds, which have historically shown an average annual increase of around 10 per cent.