I'm the son of a man who advises people on retirement planning. I grew up in a home where I was required to save fifty percent of all the money I earned, just to set a good habit. By the time I graduated from high school, I had enough money in mutual funds to pay for my first year at a private liberal arts college (after scholarships, of course). I say all this to note that I probably should have known better…
Crash and burn
In the three years between the time I left for college at 18, and the time I was forced to drop out at age 21, I made a lot of really bad financial decisions. I had joined the ROTC program at my college the spring before I turned 21, not out of a sense of duty, but because I wanted the money. They were going to pay my way, a full ride, and give me a stipend. On top of that, I had qualified for some non-military scholarships and grants that I would continue to receive, regardless of need. In short, I was going to be handsomely paid to go to school and study philosophy. At least, this was how it all played out in my head.
What I did, instead of waiting until all of this came to pass, was spend like there was no tomorrow. I didn't work at all during the summer prior to turning 21. I actually paid for all of my living expenses using a credit card. I used the card I got my freshman year with a ridiculously high limit, and maxed that sucker out. Then, I got another one. Maxed that out, too. No big deal, though. I'd pay it all off when I got my first quarter's payments on my scholarships.
A light should have gone off in my head when my ROTC payments didn't come through at the same time as everyone else's, but the financial aid office told me not to worry about it. I cashed out all my other scholarships and, instead of paying off my credit card balances, I spent it on stupid stuff. I'm sure a lot of you have the experience of looking at a five figure credit balance and honestly not being able to remember one thing that you bought with it. That was me.
The real world
When my scholarship fell through, I owed over $5000 to my college for just the first quarter of the year. I had no money to speak of in my bank account, and a pile of bills. I was told I couldn't come back to school until I paid my bill to them, and since I had no money, I had to drop out. I had to start my “adult life” a couple of years before I had planned, and in a serious financial hole.
I'm not sure how I allowed myself to get to that point, except to say that I had never really failed at anything before. Since nothing had ever gone wrong for me, I was totally unprepared for when it did. I had no concept of how life worked in the real world. I ended up getting a job working nights, assembling computer components at a factory in town. I made about $10 an hour.
I distinctly remember when my failure hit me full-force; I deposited a paycheck for $660 that was supposed to last me for two weeks, and I had just written $800 worth of checks for bills the day before. I cried when I realized my paycheck didn't even get me back to being broke.
All this information is really prologue to what I learned being a first-time failure. I know there are probably a lot of people out there like I was; it's your first time away from mom and dad, and you're testing your freedom. You've never had to be responsible for yourself before, and you don't really know how to make good decisions without a safety net. Maybe you've made one huge dumb mistake, or a lot of little ones that have compounded. The reason I write what I do is to help people who've never failed before figure out how to recover.
I learned a couple of key things as a first-time failure that are crucial to getting back to on track:
Life is hard, and there aren't any do-overs. I suppose I knew this on an intellectual level, but I was never really confronted with the pain of failure. I'd always done everything right until this point in my life. When I deposited that paycheck and saw my balance, I knew I was in it way too deep. This knowledge was so important for a couple of reasons:
- First, even though it was painful, I found out that failure wasn't the end. Although sometimes I felt pretty low, I knew I could live through failure. As cliché as it sounds, I had to learn to forgive myself. There was a lot of ramen eating, and I didn't buy a whole lot of new clothes for quite a while, but I never spent a night on the street. I eventually learned to look back at the decisions I'd made not with shame, but with determination. That feeling of helplessness was foreign to me, and I didn't like it. Rather than wallowing in self-pity, I used that feeling as motivation learn how to get out of the crummy situation I'd gotten myself in.
- Second, my failure humbled me to the point that I was willing to admit I didn't have all the answers. While I had to learn to forgive myself, there was also a change in me that always remembered that feeling of powerlessness. I began to understand that I wasn't always going to know exactly what to do, and that I had to look outside myself to find the answers.
Sometimes it's easier to increase than decrease. J.D. talks a lot about living frugally, and boy did I ever! I lived in an efficiency apartment, attached to the back of some folk's house in a pretty crummy part of town. I had a two-burner stove, a small fridge, a mattress on the floor, and a desk. I didn't have a TV, and I sure didn't have a whole lot of luxuries. I was operating on a pretty strict budget, and I still was having a tough time making ends meet. There came a point where I couldn't really cut any more expenses. I knew I had to make more money. Once I really started applying myself, the promotions started to come at work, and pretty soon I was making more than my friends who had actually finished college.
Frugality will only take you so far. You have to keep your eyes open for chances to increase your top line so you can show improvements on your bottom line. Maybe that means you need to sell some of your stuff on eBay to make rent, or get rid of your car and ride a bike, if it's feasible. Those types of things give you quick infusions of cash to keep food on the table so you can work on longer-term improvements.
Maybe you can take on extra shifts at work like I did, or start a side business. Try taking on a second job if you have to. If you're young and unattached, you could even look at joining the military. That sounds like a pretty radical thing, but I got a big signing bonus (multiple tens of thousands of dollars) when I enlisted in a high-skill field after 9/11. I didn't enlist for the money (that time, as opposed to ROTC in college), but I know of some folks who did. That kind of money can make a huge difference, as long as you're willing to use it wisely. Don't discount any means to eradicate your debt, even if it's not something you would have considered in your “former” life.
Frugality has its place, and it's very important. However, you'll make a much bigger impact by bringing in more money, especially when you're trying to pay off your debt.
Failing sucks. Anytime. Failing for the first time is even worse, because you've got nothing to compare it to. Take my word for it: you will recover. It will get easier. The fact that you're reading this article, on this blog, shows that you're taking the right steps to put things in order and fight your way out of the bad situation you've found yourself in. Don't give up, and make sure you look for other people to share your challenges and successes with. You need a community, and you're in the right place.
J.D.'s note: I subscribe strongly to Jason's central theme — that frugality will only take you so far, and that increasing your income can make a huge difference. I try to mention this often at Get Rich Slowly, but sometimes I feel as if the message gets lost in the commotion around here. Sartre photo by A.J. Smith. Frugality, Pennsylvania sign by Coneslayer.