This guest post from L. Marie Joseph, the Money Monk, is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. Marie is the author of the new book, First Generation White Collar.
My story is like most others: Girl graduates from college, Girl goes on interview, Girl gets job, Girl uses her paycheck to indulge herself. If I couldn't afford something, I'd just charge it. Before long, I was carrying student loans, credit-card debt, and a personal loan.
Eventually, I met my husband-to-be, and decided I needed to be a grown-up. We went from “which restaurant are we eating at tonight?” to “we need to improve our credit report so we can qualify for a mortgage”.
Maybe it's because he's from the Caribbean, but my husband's appetite for credit isn't like mine. I was astonished when we pulled his credit report: It was one page long! His report had four creditors. Mine was six pages long. I had jumped into credit three months after my 18th birthday — and I didn't start saving until I was 29, and that was only because we were talking about buying a house.
I had a lot of work to do to clean up my credit. My husband did not. In fact, although my husband made less money than I did, his cash flow was far greater. Why? Because he had no debt. I made more money, but I also paid out a ton in interest. This experience made me realize that it's not how much you make that matters, but how much you keep. I felt embarrassed because although I was making $50,000 a year, I had no savings. My husband made less, had savings, and was helping me to pay off my debts.
I knew I needed to change.
I started reading books about personal finance, and started reading personal finance blogs. About a year later, I started my own blog. Personal finance became my passion.
- I started saving 10% of my income after reading The Automatic Millionaire by David Bach.
- I also started setting aside 10% of my income to my 401(k). I had mediocre results. No bad, but not the best.
- I started watching Suze Orman and realized that more people my age had more money in their 401(k) than I did. Hmph! I needed to bump up my percentages.
I started saving 15% toward my 401(k). I felt better. I felt like a real adult. I also started seeing above-average results. The money was compounding and growing faster. My ego was also growing.
Today, my husband and I save 30% of our income
- We allocate 15% to retirement savings.
- We put 5% into an emergency fund.
- We set aside another 10% for giving or future purchases (depending on our goals at the moment).
It took time to get to this level of saving. In fact, it took us about four years to be able to save 30% of our income. And it took sacrifices. But I have no regrets. If one of us were laid off, we'd be okay. We have a nice savings account. We can survive.
I now believe that savings is the most crucial part of personal finance. It can be a life jacket when we're drowning in financial crises or economic recessions. Savings gives us freedom. For example, I'm able to take my daughter to see her grandmother in New Orleans, or to send for my mother whenever she needs to get away. Without savings, I couldn't do these things. Savings buys you options.
Whenever I find myself shopping or starting to splurge, I repeat this African proverb to myself: “Save your money, and one day it will save you.”
I'm glad I made the decision to save. I'm the first in my family to do so, and I didn't have people around to show me how to do it. That's why I wrote my book, First Generation White Collar: for people who are the first in their family to graduate from college, for people who need a new direction in managing their new-found income. Maybe they too can find the freedom that comes from saving.