When Did You Start Caring About Your Finances?
Cap at Stop Buying Crap recently asked: “When did you start caring about your finances?” This is an interesting question. I've always believed that my finances were important to me, but I never actually acted on this belief until a few years ago.
My parents set poor examples for managing money. In high school, I ignored the mandatory personal finance class. When I was offered credit cards in college, I signed up, and I used them, and began a lifestyle of debt. For the first few months after college, I was in a lousy job, and felt lucky to have a credit card with a $10,000 limit. I maxed it out buying clothes and paying for hotels and taking cash advances for living expenses. I bought a new car.
By the mid-nineties I was deep in debt, but I didn't have the discipline to stop myself. I paid minimum payments. When my credit limits were raised (always a joyous day), I viewed it as a license to spend. In 1995 I got a $5,000 windfall. Rather than pay off my credit card debt — which had swelled to $20,000 — I bought a new Macintosh Performa 640CD DOS-compatible personal computer and loads of games to go along with it. I bought new clothes.
This whole time, of course, I felt lost. I knew I was in debt, but I didn't know how to escape it. The only thing I seemed to be able to do was spend. I was very good at spending. I fantasized that I could quit my job, take the money from my retirement plan (less taxes and penalties, of course), and pay off my debt. I fantasized that we could sell the house and I could use some of the equity to pay off my debt. I fantasized about get rich quick schemes.
I began to make small steps toward taking responsibility for my money around my 30th birthday. The interest rates on my credit cards were killing me. One day my bank sent a mailer advertising home equity loans. I'd never heard of these before, but a little research convinced me to try one. I cut up my credit cards. I moved all of my credit card debt to home equity. I cancelled the credit card accounts. I haven't had a personal credit card since.
This stopped the flood. I no longer acquired new debt. But I wasn't doing anything to eliminate the old debt. I spent everything I earned. I was living paycheck-to-paycheck. It was going to take until 2013 to pay off my home equity loan.
A couple years passed. In the winter of 2004, two things happened that changed the course of my life. They seemed small at the time, but in retrospect they were the sorts of things that move mountains.
First, a friend who had heard me moaning about my debt asked me to lunch. He told me about a book he had read that helped him gain control of his finances. “I'll send you a copy,” he said. A few days later, Your Money or Your Life appeared in the mail. But I didn't read it.
A few weeks later, another friend listened to me complain about my debt. “J.D.,” she said, “I have just the book for you.” She handed me a copy of Dave Ramsey's The Total Money Makeover. “Read this,” she said. “I think it'll help you.” I didn't read that book, either.
We moved to a new house in 2004, and the financial obligations were overwhelming. Our mortgage was higher. The upkeep was higher. Plus we were putting away money for a remodeling project. I felt broke. I was making $50,000 a year, but felt penniless. I still had a $21,000 home equity loan on which I was making interest-only payments. I felt oppressed.
It was during the spring of 2005 that I actually began to care about my peronal finances (instead of just believing I cared). I was 36 years old. I picked up The Total Money Makeover and I read it cover-to-cover. A lot of the information didn't apply to me, but the core ideas were revolutionary. An emergency fund! Pay the smallest balance debts first! Live debt-free!
I picked up Your Money or Your Life and read it on a Sunday afternoon. This book made even more sense to me: Time is money; if you can develop enough passive income, you can become financially independent; frugality can go hand-in-hand with making more money; simple living is an option.
April of 2005 was the turning point for me. It was during that month that I began to care about my finances. Now I have an emergency fund, my debt is almost eliminated, and I've begun to make money writing. By following the advice in these books, I've been able to turn my life around.
Did you have a specific turning point? Or have you always been aware of your finances?
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