Where We’re Starting From
Each of us has a unique relationship with money. Some have always used it wisely, have saved, have avoided debt. Others, like me, have struggled. I carried consumer debt for 20 years. I didn't open my first savings account until I was 36 years old. But now, after just over four years of intense effort, I feel financially secure. I still make mistakes (boy, do I!), but my momentum is leading me in the direction of my dreams.
Some people — through luck or right action — have good careers with comfortable salaries. Others — through luck or poor choices — face a daily grind in a low-wage job. Most of us fall somewhere in-between.
Each of us is different. We all have different attitudes and relationships to money. Obvious, I know, but it needs to be said. That's why I try to cover a wide range of topics at Get Rich Slowly: we're each starting from a different financial place. I think it's wrong to judge anyone based on their situation. If you're trying to improve, I'm willing to help, no matter whether you're deep in debt or financially secure.
Here are some profiles of real-life GRS readers I've spoken with in the past (details for each have been changed slightly to disguise identities):
- A middle-class couple with two young children and not a lot of debt. They live on one income, but the breadwinner will be taking a pay-cut later this year, and they're already feeling pinched.
- A woman who runs a popular web site that generates over $50,000 in revenue every month. She's still worried about spending too much, about investing wisely, and about avoiding lifestyle inflation.
- A man who works hard to run his own business, but who found himself on the wrong side of the housing bubble. He now faces bankruptcy.
- A woman with mental health issues who makes a little over minimum wage. She has a drug problem and feels like her situation is hopeless.
- A man who was raised poor, but who has managed to save money as an adult because he has smart money habits. He's slowly building wealth, making cautious moves, but wonders if he should take more risk.
Each of these people is eager to improve their financial position. Each of them wants help. But each has unique questions and concerns.
It's important to realize that despite our different starting points, the same rules of money apply to all of us. It's easy to say, “If I made $50,000 a month from a website, my life would be complete.” But for the person earning that money still needs basic personal finance skills to avoid the fate of the rich and stupid.
Likewise, it's easy to condemn a woman for spending ten minutes fighting over a $3 discount at an office supply store, but for somebody earning minimum wage, that $3 is important.
Though each person starts from a different place, there are a few principles that can help everyone who decides to make a change:
- Stop the bleeding. When you decide to make a change, one of your first steps should be to “stop the bleeding”. Identify the habits and expenses that slowly suck you dry. Reduce or eliminate monthly expenses (cable television, magazine subscriptions, etc.) and modify your habits (drink water instead of soda, walk or bike to the store, etc.). As you do these things, begin to track your spending so you can actually see your progress.
- Look for big wins. While small changes can have a very real impact on your finances, there's tremendous power in big wins. Can you move to a cheaper apartment? Refinance your mortgage? Sell a car? Increase your salary? The money you save (or earn) from a big win can jump-start a financial turnaround.
- Take stock of your strengths — and weaknesses. Because we're all different, there's no one right way to make a financial turnaround. We have to call on our individual strengths while striving to avoid our weaknesses. For many, the best first step is to embrace frugality. Cut back on spending. But for others, the right choice is to boost income by taking a second job or starting a side business. Like most people, I did a little of both.
- Don't compare yourself to others. It's fine to share notes, but don't fall into the trap of judging your progress — or the progress of your friends — based on how others do. It's not a contest. My success does not hinder yours (and, conversely, your success does not prevent my own). Focus on improving your situation, on meeting your goals. Remember that each of us starts in a different place, with different resources. It's not where you start that's important, but where you're going.
- Ask for help. I made my financial turnaround with the support of friends. I sought advice from those I knew had been successful. But my biggest source of help was the public library. I read dozens of personal-finance books, and these helped me develop the skills I needed to get out of debt and to build wealth. Fiscal fitness requires a different skillset and a different mindset than living paycheck-to-paycheck. By seeking help, I was able to more easily make the transition.
- Set goals. The road to wealth is paved with goals. It's not enough to simply say, “I'm tired of being broke — I want to be rich.” You need a reason for the change. I've found that when I'm working toward something concrete — getting out of debt, saving for my Mini Cooper — I'm much more focused and motivated. Goals provide direction.
- Get rich slowly. I'm a firm believe that slow, measured progress is more effective in the long-term than a mad sprint to financial freedom. Yes, some people are successful at obsessively paying down debt. But I think that for most of us, the important thing is to make steady progress. Learn new skills. Recover gracefully from mistakes. (Everyone makes mistakes along the way.) Pursue your goals with passion, but also with patience.
Rather than compare yourself to others, evaluate your own situation, decide what your goals are, and then formulate a plan to pursue them. Concentrate on your own starting line, your own finish line, and your own individual race plan. Do what works for you.
Starting line photo by Jon Marshall.