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Experiences, Priorities, and Too Much Debt

posted 14th September 2010    Written by: Doniree    CATEGORY: Doniree, Life Lesson, Money, Season 3, What I've Learned

The money post. I had two directions I wanted to go with this. One was about money and limiting beliefs and abundance and manifesting millions of dollars. The other was about running myself into credit card debt in college and the hole I had to dig myself out of to learn what “financial responsibility” actually meant.

I went with the latter, because I know that debt in and after college is an all-too-familiar story, and I hope not only that my lessons (I learned the hard way) can help encourage someone else in that trap, but I also hope for inspiration and advice from this beautiful and savvy community for smart money-management from this point forward.

I should’ve learned financial responsibilities when I was a kid. Middle school, even. I had an allowance – not much, mind you. A dollar per year per week, so that at age 10, I got $10/week – or was it per month?  I don’t remember exactly, but I should’ve learned then to manage it.

I should’ve learned how to manage my money when I was in high school. When I told my parents I’d like a car and a cell phone, they said, “Great! Start saving!” So, I got a job and I worked and I had a car and a cell phone and enough money to buy CDs and Nokia phone plates.  By the time I got to college, I didn’t really have anything saved even though I worked enough in high school that I should have.

I should have learned financial responsibility in college, when I’m on my own, doing the “practice adult” thing, and paying for life and college through some combination of part-time jobs and full-time loans. The fact is, it got worse in college because I thought loans were free money and when those ran out – there were credit cards!

By the time I graduated from college (age 22), I had 5 credit cards (Visa, MC, AmEx, Victoria’s Secret, and Express) all maxed out (not that the maxes were astronomical, but still), and all on the brink of collections because my part-time job couldn’t afford to pay five maxed out credit cards.

Go figure.

And then they were in collections and angry credit people started calling me, wanting their money.  Phone calls and letters from agencies were scary, so I dealt with them the best way I knew how – I completely ignored the problem.

Until one day I didn’t, and I realized that 22 was too young for credit card debt. I spent the summer after college working two jobs until by the end of the year I’d paid every card off completely.  Five years later, I’m finally seeing positive changes in my credit score.

Financial Peace

Last summer, my parents and I went through a financial planning course together. Dave Ramsey’s financial advice is solid, and I learned one thing in particular I wish I’d have learned before I left for college:

If you don’t have the cash to pay for it, you don’t need it yet*.

Broad statement, big statement, but since I was essentially forced to learn to live like that over the last five years, I learned that not only is it possible – it’s necessary. For me.

*(And that doesn’t mean emergencies because there’s an Emergency Fund for that, so in theory – I’ll always have the cash for that.  In theory.  I’m rebuilding this one since when I moved, my Emergency Fund became my Relocation Fund and never fully recovered.  Relax, Mom.  It’s recovering.)

In the last 5 years, I haven’t bought anything that didn’t come straight out of my checking account.  I’ve traveled frequently, have enough clothes and shoes, moved across the country, eat well, drink well, and love toys like my MacBook more than I should.

What I learned over the last five years – and in the course we took – were these two really important things:

  1. how to prioritize, and
  2. how to budget.

Buy Experiences, Not Things

I have to credit my boyfriend for that little catch-phrase, but it’s really been the cornerstone to a lot of the financial decisions I make on a daily basis. I’d rather spend $30 on the experience of dinner and wine with him or my girlfriends than $30 on a pair of shoes that I wouldn’t even know how to match with the clothes I have. I’d rather spend $250 on a plane ticket than anything designer, any shopping sprees, or any additional housewares. I’d rather have a meal, share conversation, or take a trip than own things. And this is a huge player in how I spend my money.

Every dollar has a name

One thing I’m still learning is how to budget. Not “how to later look at and analyze what I’ve spent,” but how to actually plan what I’m spending. It helps to have a partner in crime on this one, so the fact that Boyfriend and I are both using Mint to track our spending, and we’re using it to actually plan how incoming dollars WILL be spent. And we’re talking about it, encouraging each other, and offering a little bit of accountability.

At 27, for the first time in my life, not only am I paying attention to where my money is going, but I’m actually creating and using a budget.

I know I’m not the only one with a credit card debt horror story. I know the credit card companies target inexperienced young folks with the appeal of all of the things a credit card can offer, but I don’t blame them for my poor judgment and irresponsible spending. I know that it took months of crazy work hours and a limited social life to pay everything off, but that – of course – it was totally worth it.

How do you budget? If you wrestled or are wrestling with debt, can you offer any advice or encouragement?


{Photo credit}

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Debt, Addiction, and Recovery, Oh My!

posted 1st July 2010    Written by: Katie    CATEGORY: Katie, Money, Season 2, What I've Learned

Growing up, I usually got what I wanted. If I wanted a doll, my mom would buy it for me. I can remember presents for days on Christmas. It would often take hours and hours of opening gifts Christmas morning. From what I can remember, my mom and dad were well off. Looking back now, it’s pretty clear that they were doing something right because I recall having home improvements done pretty often.

I knew that for quite some time, my dad did the working, and my mom paid the bills. I can remember her keeping the checkbook, tapping “MAC” for $5 for lunch, and doing the grocery shopping. I really had no concept of money, though.

When I entered middle school, we had this “Marriage Project” where I had to marry one of my friends, find a job, buy a house, buy a car, and pop out a kid. I was determined to spend every last dollar of the money allotted to us. We liked the $6,000 car, but that would leave us with an extra $2,000. In my mind, we had to spend that money. If we didn’t then it would go to waste.

My husband suggested that we “save” it.

“Save it? Why? Why the hell should we save it when we can get a 1999 Ford Explorer instead of a 1993 Plymouth Reliant Station Wagon?”

I was pretty forceful. He gave it rather easily. To this day, I wish he would have put up more of a fight or at least had his mom call my mom to give me a talking to on the importance of saving.

Years would pass, and I would find myself tangled in a pretty little web of credit card debt. No sooner did I start paying it down, that I realized that I could get payday loans. 134% interest didn’t matter to me. I was getting money without any need for more than my driver’s license number. So began my addiction to getting money and spending it quickly. The more quickly I’d spend the money, the better I’d feel. When I was feeling super bad, I’d binge spend then go through days of remorse and “I’ll never do this again” self torture.

Money was my drug dealer and shopping was my heroin. It made me feel amazing to walk into a store and buy something expensive. I’d literally buy anything and everything until every cent that I had was gone.

The one thing that I didn’t enjoy paying? Bills.

Car payments, car insurance and rent weren’t nearly as fun to buy as new Old Navy tee shirts and new gadgets. The risk of being homeless and car-less was a thrill. Everything about the situation screamed addiction. I made the connection early on. I didn’t want to stop, but I did start to feel bad. I found an awesome substitution that gave me the same thrill as buying things for myself without feeling selfish: buying things for other people.

So began that vicious cycle of insisting to pay my way plus the other persons, buying extravagant gifts, and loaning money. People would thank me, and insist they pay, but I’d shut them down and blame it on being so independent when in fact I had an addiction that would soon blow up in my face.

The blow up was huge. I lost almost everything from my car to my apartment to the respect of many members of my family. I hit rock bottom in every sense of the word. I’m endlessly grateful that my dad took me in. Luckily, I didn’t burn all of my bridges.

Even now, a good year from the blowup, I’m still in recovery from it. I never went to a “Spender’s Anonymous” meeting, but I did seek some therapy for it. I have an addictive personality, and a family history of addiction. I can’t blame it all on genes as I willingly made my own decisions, but I did have a little bit of an unfair disadvantage to begin with.

These days, I’ve learned to be super careful with money. I don’t have to spend every dime that I get. I don’t live paycheck to paycheck anymore. While I’m not banking $60,000 right now, I have a comfortable enough cushion to where I could float a month of bills if I had to. Being in Freelance really helps me because sometimes, I don’t know when my next paycheck will come in. So, when I do get paid, I need it for necessities, just in case the next check doesn’t come in for awhile.

Hi, I’m Katie and I’m an addict. I haven’t binge shopped in 8 months.

(photo: via)

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The $60 Pot Of Tea

posted 29th June 2010    Written by: Nicole Antoinette    CATEGORY: Job/Career/Work, Money, Nicole Antoinette, Season 2

There’s a tea house here in San Francisco that sells, among it’s regularly priced items, a $60 pot of tea.

When I first saw it on the menu, I thought it had to be a typo. I mean, $60? For tea? I called the waitress over and asked and she told me that no, it wasn’t a typo and that a singular pot of that particular tea really did cost $60. I stared at her. She stared back.

I asked if the tea would either a) make me high or b) come over and do my laundry. She said no. I told her I was kidding. She didn’t laugh.

But I did. Well, until I didn’t. Until I realized that there are seriously people out there who spend $60 on tea. $60! On! Tea! Maybe everyone who does this is considerably older than me, I thought. Or maybe they’re trust fund babies. Or maybe they just know what in the hell they’re doing when it comes to being 25 and being smart with money at the same time.

Not that I’m bad with money, I’m not. I’m a meticulous (read: anal) budget keeper, I pay my quarterly taxes on time, I don’t have any credit card debt, and I still can’t fathom being able to spend $60 on tea without having a stroke over it. Being 25 feels like a weird financial age. It feels like an age where if you took a sample of the financial situations of the people I spend my time with, everything would be scattered and you wouldn’t get anything close to equal results.

In college, I felt like people were more or less operating on similar budgets – namely, everyone was broke.

Being broke was almost the hip-ish thing in college, wasn’t it? We all bonded by complaining about how expensive everything was, searching out the best possible drink deals, and signing for student loans we couldn’t imagine having to pay back. But after we graduated, we all went in different directions. I have friends who went the serious relationship route, joining their finances with someone else and plunging on toward marriage. I have friends who went straight to grad school, friends who jumped into the corporate thing, friends who moved back in with their parents, and then there’s me. I went from graduating early to a series of non-traditional jobs, one after another, and I’m still following a similarly road-map-free path. I’ve never had a 401K, never had any formal financial guidance, and am only now starting to give some thought to how I’m ever going to get out from under my student loans.

Which is why this little tea incident got me thinking. I mean, if being able to taste $60 tea without simultaneously crying about potentially being homeless is on my goal list, I should probably start forging a path to get there.

The hardest thing for me when it comes to money, though, is trying to figure out where to start. It all just seems so… surreal. Having enough money to retire one day? Owning a house? Paying off my student loans? Thoughts like that seem like some sick fantasy land that I’ll never reach. I took this financial fitness quiz last night, out of curiosity, and I scored a 51. Out of 100. Which seems like a rather epic failure, but apparently I’m pretty in line with other people in their 20s, struggling to find that balance between playing hard now and saving hard for later.

I find that that’s the biggest difference between people my age when it comes to money – the now vs. later question. I have some friends who will run up their credit cards for a good time, and then I have other friends who won’t pay more than $20 for dinner. Would it be easier if we were all in the same financial situation? Sure.

But, more than anything, I think it would be easier if money weren’t such a taboo topic, if friends were more comfortable discussing it in detail as if it were any other conversation.

*Disclaimer: This post is part of the 20SB Blog Carnival: Friends & Money, sponsored by Charles Schwab. Prizes may be awarded to selected posts. The information and opinions expressed in this post do not reflect the views or opinions of Charles Schwab. Details on the event, eligibility, and a complete list of participating bloggers can be found here.*

{photo credit: Photos8.com}

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