Not too long ago I was working a decent paying job with lots of overtime pay and spending every dime that I was making. I would get paychecks around $1500 and by the time the next paycheck was due in two weeks time I was out of cash. Thinking about that now kind of makes me sick.
Fortunately, I have gotten way better at money management but it was not an overnight task.
About two years ago I had to sell a paid off car that I absolutely loved just so that I could pay my American Express bill. I had charged it up on an impromptu trip to Los Angeles that I thought I both deserved and could afford. Turns out neither assumption was correct.
That was my only car, so before selling it I had to get another one. Funny logic, I know. So, I went to a lot and got myself a brand spanking new car and only put $500 down because, let’s face it, I couldn’t even afford to put that much down. That got me a $350 car payment on a 72 month loan. *sigh*
I sold the car, paid off the credit card and immediately booked a trip to London.
I know, I was really an idiot. I get that now.
Luckily for me I did not book the London trip on the AMEX, which has to be paid off in full each month, but on another card. I quickly realized though that I could not afford the trip to London because I did not have another car to sell to finance it. Man how I missed that car too. Oh the agony of realizing stupid financial decisions.
That was when I started realizing that I need to be better with money. Up until that point I was living life in the now and thinking that I would worry about retirement if I lived that long.
One of the first things I did was sign up for the 401K program at work. They matched 5% so I put 5% as my contribution.
Other than not taking the trip to London and signing up for 401K that was pretty much all I did for about a year in terms of being financially responsible. I kept going to restaurants with regularity. I bought books and cds I didn’t need. I liked new clothes that I didn’t need. So, I wasn’t dropping a lot of cash at once (say on a trip) but I was spending that equivalent slowly.
Then about a year later I wanted to book another trip overseas. My other half would not let me. We will call that a blessing. I was mad about it for a little while but looking back it was the best thing ever as a lot of medical bills were about to start happening due to some unforeseen health issues.
That happened at about the same time as our apartment lease was up. We had been planning on moving back to NYC and getting an apartment with a max rent cost of $2500. Instead we moved into the spare room at my parents for 3 months.
It was horrible. They lived an hour from our jobs. We had to get up at 4:30 am to be at work by 8:30 am, since everyone had to shower and get ready. We didn’t have a lot of space and they only had dial up internet! Eek. But we had no rent payment. There were no restaurant nearby as it was a rural area, so we didn’t spend a lot eating out. We didn’t spend a lot on food cause the ‘rents shared. We were able to save up about $7,000 before we got a new place of our own – and not in NYC. Our rent now is only $767, but I have decided that is still too much. When our lease is up in January we are looking for as close to $500 as we can get. But first we’re going to stay with family again for a couple of months.
After moving out of the parents we read Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence which totally changed our way of thinking. If you have not read this book then you are seriously cheating yourself out of some great information.
We started tracking our spending and created our very own wall chart, as suggested in the book. We have stopped buying things like books and DVDs and have instead been enjoying the local public library. If we cannot find something that we want at the library then we use MyPoints to get a gift card for Barnes and Noble and buy it that way.
We have started creating menus for the month and doing our grocery shopping once every 3 weeks. This has greatly reduced the amount that we spend at the grocery store! I have also just started my own price book, which should help save us even more. We have reduced our dining out to only once a month, and usually that is only because we are out somewhere and have no way of eating our own food. But when we do dine out we either use a free gift card from MyPoints or we use a coupon! We do not do fast food, even though it is cheaper, because we have also gotten health conscious while on our debt diet.
One of the important things that I have learned is that it is more important to pay for experiences that it is for stuff. For instance, we are going to a local festival with family this weekend and there is a fee to go. I would rather pay that fee than pay for something I do not need at Best Buy or Target. The memories will always outlast the stuff.
While I have found my way to the path of financial success, I am afraid that I have not gotten very far down the path. I still have some debt that is pretty major, but I am focused on paying it down. Once that is taken care of though I plan on working on retirement saving. And I have done my best to educate my youngest brother on financial success and the costly detours that I took. Hopefully my lessons are enough to keep him from having to learn them on his own.