I’m a stickler for taking quality public transportation to get me to where I need to go. I take it work, and if I’m going somewhere that’s decidedly on the Chicago L red line route, I almost always default to taking the train. But from time to time I need to take an Uber to get to my destination, maybe because I’m short on time or the destination is just so out of my way that I’m willing to spend a little extra money to avoid an overly complex trip.

So while I’ve advocated many times in this blog (here and here) on how you can make major inroads to achieving your saving goals if you cut back on tiny expenses like Uber, I admit that if done sparingly and within budget, it’s not too much of an issue. Relax, and indulge. But what I also want to tell you is what I recently learned from an Uber driver about personal finance. It was humbling and illuminating.

I’m that Uber passenger who enjoys engaging in conversation with my Uber driver. Uber has always felt more personalized than taking a cab; I mean you’re in someone’s privately owned vehicle, right? So we’ll start with small talk, and eventually, I want to know more about them – who they are, why they got into driving, and if they do this on the side or full time. I’ve met a variety of drivers: some more talkative, intriguing, and professional than others. But overall, they are an amiable bunch of folks. And recently, I’ll inquire a bit more and ask (if they are working full-time somewhere else) if they have a 401(k) and about investing.

I focus on investing, it’s my niche. To me investing requires a certain set of prerequisites before you can start. First off, to invest wisely you need to have a solid handle on essential money management basics, such as budgeting, credit management and paying down debt. To invest you need to master these basics first before moving on. And truthfully, many folks aren’t quite there yet and that’s OK – for now. We live in an age where investing is so necessary to achieving wealth accumulation, financial freedom and, most importantly, retirement security.

One thing I appreciated about my recent Uber ride was that our conversation helped me get a pulse check on what financial challenges folks are facing with basic money management, which ultimately prevent them from investing. Here’s what I learned from my Uber driver, as well as what you can do to overcome these challenges to get well on your way to investing for the long-term.

  • Credit management is an issue. My Uber driver struggled with her credit score, and many people have struggled with managing credit. Your credit score is an important element in your financial makeup, as it can determine if you are approved for a rental apartment, what your interest rate is on your mortgage, as well as if you are accepted for a job offer. And so credit management is incredibly important. My Uber driver talked about having a credit score that’s been low but that she’s trying to repair it. To do so, she had opened up a store credit card because she was denied a general purpose card, and many times this can happen: the approval rates for retail cards are higher for those with less than excellent credit. She was aware that the APR (i.e. interest rate) was high. So the first lesson, for any credit card you have, know what the APR you are paying, because that’s called interest, and it’s the money you pay for borrowing money. Remember, credit you use is not your money, it’s your creditor’s money. Credit cards help support short-term financing. On the positive side, you typically get an interest-free loan for one month, but if you don’t pay the balance pay in full after the monthly billing cycle, then interest kicks in. Second, she didn’t know that she should spend only 30% of her credit limit. The second lesson, spend only up to 30% of your credit limit. Just because you have $500 available to you doesn’t mean your creditor wants you to max out your cards. And lastly, pay your bill in full, or if not, have a solid repayment plan in place. I was happy to hear my driver was working her way up to making sure that she’s paying off her bill.
  • Living paycheck to paycheck is common. Survival speaks to the very heart of the human condition. We live needing to eat, seek shelter, and ensure our safety. To fulfill these needs, much of our survival depends on the income that we make at our jobs to buy necessary goods and services. When your goal is only to survive, instead of what I like to say “thrive,” you are thinking only of the next day. And so, to me, it’s no surprise that living paycheck to paycheck is the effect of thinking in the short term – it’s about thinking of how to get by only until the next pay period. Truthfully, that’s not conducive to building an investing persona, because as an investor you need to think beyond the pay period cycle and think long term. My driver was living paycheck to paycheck, but even she was cognizant it wasn’t a great state to be in. She expressed to me that she wants to get out of this cycle, and a reason she is driving Uber is to make more money on the side as a first step to do that. So my first recommendation on stopping this cycle is to think long-term, build a vision for your financial life, and get your budget in order.
  • But many are learning more about saving. But among all those struggles, as our ride came closer to an end, she said very proudly that she was learning more about saving. It was great to hear, and I learned that despite these struggles there’s an earnest desire to learn about how to save money. In this case, the savings may start as a small emergency fund. But that’s an excellent first step. Start there and you’ll begin to learn the basic of saving and begin to internalize saving habits. And so it occurred to me that despite what can seem like a sometime ominous financial picture, many folks do want to secure their futures. And when you start saving, you’ll gradually move onto investing – they are two horses of a different color. Saving is with a bank, and investing is with the stock market. Similar principle of paying yourself first, but in a different way.

My conversation with my Uber driver was very humbling. I felt very much in touch with the struggles and opportunities that not only she, but many folks face, when it comes to managing personal finance, and ultimately getting started on one’s journey to investing. Luckily, in my new book, “From Millennial to Millionaire: DIY 401(k),” I address several of these concerns that you may have about your own personal finances. I devote a section on how to set up a budget so you can balance your entire set of financial obligations, and show a detailed budget example. And additionally, I provide my tips and guidance on how to pay down student debt so that you can save and invest for retirement as well. With what she taught me, with a real understanding of the struggles many face, I feel I can help you achieve a better financial life, and ultimately actualize your investing objectives.

Follow me on Twitter @MatthewKMiller.

Want to learn more? Pick up a copy of my book …

From Millennial to Millionaire: DIY 401(k) – 5 Do-It-Yourself Steps for the Digital Generation to Design and Manage their 401(k) on Amazon.