Alexa von Tobel likes to say that she’s “customer number one” of her financial planning business, LearnVest. Working in trading at Morgan Stanley after graduating college (Harvard, no less), she realized she had “no idea what to do” about her own personal finances. “I just said if I feel this way and I am living in a great city, I have no responsibility—I was 22, it wasn’t like I had two kids or a mortgage—and I’m just overwhelmed, what does America feel like?” von Tobel remembers. Starting LearnVest was as much about answering that question as it was about authoring her own financial success story: the business was acquired by Northwestern Mutual for $250 million in 2015, when von Tobel had barely broken into her thirties.
While LearnVest started in 2009 as a tool for women to take control of their money, it eventually evolved into a solution for all, combining an app with a personal financial plan and on-call financial planner. Von Tobel is also the author of a best-selling book, Financially Fearless, that focuses on giving real people down-to-earth advice on everything from paying off massive student loans to saving on grocery bills. Brimming with energy (as well as statistics about the state of America’s finances), you can’t help but believe her when she says that she’s only just beginning.
AWT: Tell us about the journey of discovering the deficit in America’s knowledge of financial planning, as well as your own.
Alexa von Tobel: The deeper I get into the problem the bigger I realize it is. At first I realized that we don’t have enough tools, so we started building the tools. Then I started asking where America gets its advice. Financial planning is a luxury product. If you have a lot of money, lots of people give you advice, but that doesn’t make any sense because you need advice the most when you don’t have a lot of money and you can’t afford to make mistakes!
What we heard loud and clear in this election is that people are very, very worried about their wallets. The average family doesn’t have $400 in savings, has around $9,000 in credit card debt, and 74 percent of the country lives paycheck-to-paycheck. It’s so pervasive but it’s not something like cancer where we don’t have the cure. It’s math. We can mathematically solve this problem by giving everyone in America a living and breathing financial plan. So it’s also a very positive problem because we can fix it. When you deliver a family a financial plan, even if you have to deliver them bad news—like, hey you can’t afford to do these things—the security you bring to them is almost better than paying off their credit card debt. Because they now understand the framework they have to operate within. The amount of stress that it relieves is incredible.
AWT: So LearnVest is founded on the belief that you can reach economic security no matter how much you earn or no matter where you are?
Alexa von Tobel: I will say that’s not true in all cases. There is a whole portion of America that lives below the poverty line or in a place where they’re so challenged. There are some financial problems that you can’t plan your way out. I do see some of those and they’re heartbreaking and might require bankruptcy and seven years of getting out of that bankruptcy. For everybody else, which is most Americans, financial planning can accomplish so much. And as I said, even if you have bad news, even if it may take three years of really hard work, people are thrilled to just know that there is a plan to get them out of debt or their current situation.
AWT: “Financially Fearless” is very action-oriented: this is how you should be dividing up your paycheck, this is how much you should be saving, this is how much you should be using to pay off your debt. How do you bridge that gap between telling people what they should be doing and actually making them do something about it?
Alexa von Tobel: On my bookshelf there are a bunch of books on behavioral psychology, because there are really two parts of financial planning and handling your money. First, you have to know what to do—that’s the math part. The second part is actually getting you to do it. And the hard thing about money is that some things are quick things you can do—download a will, sign it, you’re done. Other things, like pay off $9,000 of credit card debt, don’t happen in two minutes. If you had the $9,000 to pay it off you probably would have already done it! It’s actually about getting people to make important commitments to changing their lifestyle and their habits in order to solve those problems. We always say that the action piece is the most important because you have to find a way to help people stick with the plan. That is why we spend so much time thinking about it.
AWT: When you tell someone, you have to put away in savings $400 more a month, I imagine that person might say, “I need that money for this or that.” That’s what I would say! How would you respond?
Alexa von Tobel: There is a lot of psychology around this. Some of it is basics: If you see a picture of yourself with gray hair, you’re much more willing to put money away for your future self because you can now envision it. So a lot of the impact is in how you deliver the advice that’s really important. For the most part, people don’t like to sabotage themselves. We have self-interest built into who we are as a species and as a result we want to take care of ourselves. If I said to you, if you make this decision you will retire in poverty, you’d be much more likely to make that change. But most of the time people don’t have that clarity.
If you tell someone in their twenties that they should be saving as much money as they can, they’re often like, “Well, I don’t have any money, what are you talking about, I’m going to Zara.” But if you can say to them, listen, right now you feel like you have none, but if you want to outsmart the system you would save as much as you could in this decade and then you would probably never have to worry about money, you would protect your credit score and you would pay off your credit card debt really quickly, they would say, “Awesome, I will make those hard calls now.”
The other issue is when you educate people in high school or college about money, they absorb some of it, but they don’t have money! They don’t have a job, they don’t have bills. It’s like teaching someone about cooking by saying, let me read you these recipes and talk about flipping the skillet. That’s not a productive way to learn.
The other thing that’s really important about money is that it’s very unforgiving. You enter the real world and you use the folklore you learned from your parents which isn’t always the best model because your parents were also making it up, and you make a bunch of mistakes that stick with you. If you destroy your credit score, it takes seven years to fix it. If you don’t save for retirement in your twenties and thirties you cannot catch up. These mistakes are very permanent in many cases. I feel for people because I understand why we’re here [as a country], but we need to fix it.
AWT: Looking at yourself personally, have there been times when it’s been difficult to change your habits?
Alexa von Tobel: Oh, all the time. One of the best things about being an entrepreneur is you get tested in so many ways. I’m super impatient, it’s definitely a weakness of mine. It was a good trait to have when I started because I moved really fast and demanded results, but now I don’t need to be super impatient. We are a much bigger company so I have to be more mindful.
I’ve also trained myself to like negative feedback. Obviously hearing it is never fun, but instead of pushing it away I actually lean into it now. I don’t always have to agree with all of it but it’s what makes you a better entrepreneur. When you’re starting an idea you don’t want the feedback of what’s good, you want the feedback of what people don’t like, why it’s not working. And does it suck? Yes! Of course! You wanted this thing to work yesterday! But you have to lean into the negative stuff. That’s the one thing that people probably don’t think about: becoming a successful entrepreneur is more humbling than you’d imagine. Because the only way you get there is by beating yourself up all the time.
AWT: Was there any particular piece of negative feedback that you remember, either personally or about your business idea, that really changed you?
Alexa von Tobel: It was a really simple one but someone on my team said, Alexa, you don’t celebrate our successes enough. I feel like I’m a very celebratory person but with my personal success, what I’m trying to accomplish, I never feel like we’re done, right? I don’t feel like we’ve solved the problem. And so I realized, wow, I would have never figured that out on my own. It was really important for me to pause and take the time to celebrate these milestones in order to replenish people and keep them focused and excited even if I don’t feel like we’ve accomplished it all yet. Now we celebrate a lot. [Laughs] I’m like, woohoo, we built a new desk, yay!
AWT: You’ve been very thoughtful about who you approach to join or invest in your business, like Ann Kaplan, one of the first female partners at Goldman Sachs and your first big seed investor. I think a lot of us feel intimidated about approaching people we don’t know to ask them for help. Do you have any advice?
Alexa von Tobel: My best advice is to make it easy for someone to say yes to you. Just the basics: I will come to you in any moment in time that you are available for 15 minutes, I will bring you a nice cup of coffee—what do you like, would you like a cappuccino? Literally that much bending over backwards. And then say, I’m going to ask you to do nothing except give me advice on these two things. Over time, people began to trust that I wasn’t going to waste their time, that it was going to be easy for them to give feedback. They understood how passionate I was and I think a lot of people got on board because they realized it was a problem we could fix. The other thing is I sought out people who either already cared about this problem or whom I thought could care about the problem. You have to get to someone’s heart, not to their brain.
AWT: As LearnVest and your own success have grown, has your own perception of money changed?
Alexa von Tobel: Not at all. I think if your value system is to always be frugal, it doesn’t matter if you have $1 or if you have $100—you’re going to continue to care about being frugal. I want my daughter to grow up being extremely thoughtful about money, so in her room right now she has seven piggy banks (because of course everyone thought it would be a great gift!) and one of them is a retirement fund. They’re all labeled for different buckets: one’s going to be for a toy she wants, one’s going to be for college, one’s going to be for a house someday. We are literally having her put away all these little pennies. I think it’s about recognizing that money doesn’t grow on trees. There are only two parts to money, what comes in and what goes out. We often can’t change what comes in that easily—it’s not like you can miraculously triple your salary overnight—so you really need to know how to save. It’s a muscle you have to discipline.
This interview originally appeared in the Money issue. Find more inspiring stories from the Money issue here or read The Floridian Underbelly: A Review of Sarah Gerard’s “Sunshine State”.