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.

Seeking change
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.

Starting right
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.

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Damon
Damon
11 years ago

Very good advice. I was lucky as a kid. When I was 16 I bounced a bunch of checks. I was working at a pet store and was collecting salt water fish. My Dad made me go to every store I wrote a bad check to, including my employer, and make good in cash, in person, including the bounced check fee. I learned real fast, it’s no fun spending money you don’t have. I stopped the bleeding. Whereas my best friend owed nearly $20,000 on a $6k Cavalier by the time he was 20 and continued to spend what he… Read more »

Baker @ ManVsDebt
Baker @ ManVsDebt
11 years ago

The most important part that I take away from this post is that as long as people are committed and searching for ways to improve, we shouldn’t let our judgments of them get in the way of helping them.

In reality, I think we all have a tendency to do this a little. Most of us have been in a lot of those “bad” situations throughout our lives. In fact, most of us are still struggling through them in one way or another.

Rich
Rich
11 years ago

This is why I continue to read this blog and advice, just sound positive reinforcement and solutions. There is no get rich quick scheme that has any long term success. Thanks JD.

Jim Blankenship, CFP®, EA
Jim Blankenship, CFP®, EA
11 years ago

Excellent explanation of the first steps – where we’re starting from. I’ve always advocated something similar, just a more concise list:

– Organization – understanding “where we are now” and the flows in and out of our financial lives
– Discipline – developing your plan, monitoring results, and sticking with it
– Efficiency – making it all work with little friction in our day-to-day lives (auto-pay, eliminating the excesses, etc)
– Purpose – take time to understand your own internal values and beliefs, and make sure your plans focus on your passions

Thanks for a good post, JD!

jb

Gregfox
Gregfox
11 years ago

I might add to “Set Goals” the following: Then set strategies to achieve those goals and metrics on which to measure your progress on those strategies.

Holly
Holly
11 years ago

Wow. Very inspiring! One simple point is that everyone has a right to make both good and bad financial decisions w/o being judged since, like everything else in life, practice makes perfect. I am one of those who will fight for that $3 discount (and we’re not poor by any means). It’s just a principle that my Dad taught me– better in my pocket than in theirs. A merchant needs to honor its promises to its customers–after all, we’re the reason for his success. So attention shoppers behind me in line: just wait patiently; comments and eye-rolling will not make… Read more »

Tyler@Frugally Green
11 years ago

Although I’m only 24, I’ve been lucky enough to never get myself into debt. My parents taught me sound personal finance from a very young age and I’ve been able to use it to keep myself on a positive financial path. I used to look down on people that “didn’t get it” and scoffed at those using credit to buy things they couldn’t afford. But about a year ago, I came to the realization that not only was I not helping anyone else by taking that attitude, I wasn’t helping myself. You can’t fault someone for making mistakes when they… Read more »

Adam
Adam
11 years ago

We *need* people who are bad with money to make our lives easier. If it weren’t for people carrying a ridiculous balance on credit cards, the rest of us wouldn’t even have one. The entire industry relies on people paying interest and fees.

MLR
MLR
11 years ago

“Don’t compare yourself with others.”

This is sometimes one of the hardest, but most rewarding, things to do.

I sometimes struggle with it myself, but I feel like a 500 lb weight has been lifted off of my shoulders since I stopped caring.

I have gotten so much from that, even though it is non-measurable.

MLR

Rob Bennett
Rob Bennett
11 years ago

I believe that the common theme in most success stories is planning. Those who plan their financial lives do well. Those who do not do not.

I don’t meant to suggest that there is one way to plan. There are as many approaches as there human personalities. But some sort of planning is essential.

And most engage in no planning whatsoever. That’s why you hear of people turning things around so dramatically. When so many are stuck at zero, there’s a lot of potential for forward movement.

Rob

Ben
Ben
11 years ago

I am 25 and I stopped the bleeding about a year ago. I was living on my own, lost my job for about 4 months and fell deeper into debt. By the time I recovered I was about $8000-9000 in debt (mostly high interest credit and cash advances). After making minimum payments for awhile, I bit the bullet and moved back with my parents for almost a year now. Since then I have paid off ALL the above debt and have about $6000 in emergency funds. Thanks to blogs like this and thesimpledollar.com, I will never go back to that… Read more »

frugalscholar
frugalscholar
11 years ago

I think the little things count too, especially for low-income folks. For the mega-blogger, saving $3.00 on cheese when it’s on sale is truly trivial and not worth thinking about. For a minimum wage worker, however, it means around a half hour or work.

Minding the little things is within everyone’s control and, for some, it makes a big difference–one that is cumulative.

Insurance Guy
Insurance Guy
11 years ago

I think it is also important to sock away money in places where it is not easily available. Annuities, IRA’s, SEP’s, etc are valuable savings tools that are likely to be left alone.

Tyler Karaszewski
Tyler Karaszewski
11 years ago

We’re not all starting right now, either. When I was 23 years old, in 2004, I hit financial bottom. I got to the point where it was no longer possible to make credit card payments *and* pay my rent, and I defaulted on several loans. I mastered the art of reducing overdraft fees by making one big overdraft instead of a bunch of little ones (take out all but a dollar or two from your checking account, then withdraw $200 [or whatever the maximum is] and live on cash till your next payday). I realized things needed to change, badly.… Read more »

Paul in cAshburn
Paul in cAshburn
11 years ago

@Adam #8. The credit card companies’ business model is NOT based on abusing poor beat-up customers (no matter what vote-seeking pols try to tell you). I’m pretty sure Amex makes a couple of cents for every dollar I spend – even though I pay my balances in full every month – because they charge a fee to the merchant for every transaction. I get 1 to 5% in cash rebated to me on my no-annual-fee Amex Blue Cash card because Amex is making more than that on each transaction fee. If the merchants offer cash discounts greater than the rebates… Read more »

Trendy Indy
Trendy Indy
11 years ago

JD, I liked the part which mentioned -Get rich slowly, I think through a slow/balanced recovery process we learn alot of life lessons that will be us with till the day we die.

clayton
clayton
11 years ago

I think the ‘starting point or ‘disposition’ is much like it is with genetics/environment and obesity. For some it is easy, for some it is not. Some never struggle with it. But you will get nowhere unless you recognize what you are up against. Luckily the money thing is only on the environment end (unless…. a frivolous gene?) But the point of the comparison is that diets, and diet blogs, rarely work for those entrenched in deeper problems. I think that’s probably true for personal finance blogs too.

clayton
clayton
11 years ago

I forgot to add the important part of the comment — Good post! Relevant and necessary.

Wilhelm Scream
Wilhelm Scream
11 years ago

A very interesting post. I often find it hard to understand other people’s financial habits and outlook, but am trying to be more considerate.

Ruth
Ruth
11 years ago

My problem is that I set monetary spending goals, but when the market tanks and I see my goals retreating, it’s very demoralizing. Last year I saved thousands of dollars but still ended up with a net loss for the year because of the market crash. And it’s not just a number; it’s the number of years I’ll have to keep working full time. I’ve stayed the investing course and know that things will improve, but it’s a punch in the gut. I am thinking of having some more conservative investments just for the psychological satisfaction of seeing something continue… Read more »

nickel
nickel
11 years ago

JD: Twenty years with consumer debt, no savings account until you were 36, and yet here you are, light years ahead of where you were just a short while ago. It’s really amazing what a bit of focus and fire can do, isn’t it?

Daniel
Daniel
11 years ago

Hey JD, My story is not quite as bad as some I hear on here, but it’s not that great, either. I’ve gone through a rough time or two in my life, and tend to write off the debts from those times. I just now truly realized how much it is going to hurt me in the long term and ordered a copy of my credit report. I have five bad debts. One of them is about as much as all the others combined. It’s also rising, and has some of it written off (more written off every month, though… Read more »

ColdFrenchFries.com
ColdFrenchFries.com
11 years ago

This is a great article. Everyone starts their financial journey from their own unique situation. However, with some sound financial principles anyone can improve their financial legs with increased financial literacy. I especially love “not comparing oneself to others” and “asking for help.” As a 15 year veteran of the money markets and banking industry, I’ve learned the one’s that ask the most questions are generally the more “successful.” Collective knowledge leads to wisdom and better decision making on money matters. Keep up the great work. -ColdFrenchFries.com

DDFD at DivorcedDadFrugalDad
DDFD at DivorcedDadFrugalDad
11 years ago

Solid advice.

The first tip is invaluable– stop the bleeding.

Unfortunately, it is the hardest step for many people to take.

Sarah
Sarah
11 years ago

Thanks for the comment about not judging others based on their financial decisions. It drives me crazy when I read commenters on blogs rip someone to shreds about a purchase they made or other financial decision. I think being understanding and supportive of folks goes a lot further in helping them make better decisions than harsh criticism does.

icup
icup
11 years ago

We officially killed our household credit debt this month. Looking forward to living ‘debt free’* from now on. Literally could not have done it without this site.

*Of course we still have a mortgage, but we just refinanced it down below 4.75% this month.

Cara
Cara
11 years ago

“Thanks for the comment about not judging others based on their financial decisions. It drives me crazy when I read commenters on blogs rip someone to shreds about a purchase they made or other financial decision.” A thousand times yes! I hate this too, especially when it’s clear that commenters (or bloggers) don’t know the whole story. I recall one example when I was taken to task on another blog for admitting that I owned a luxury item that the blogger considered frivolous. What I didn’t mention at the time was that I also have close to a seven-figure net… Read more »

T in DC
T in DC
11 years ago

I got serious with my “starting point” at 34. My achievements in 2 years- 401K went from 5% to 21% contribution. Car loan of $17,000 paid off, credit cards of $6,000 paid, emergency fund increased from $4,000 to $14,000 and Vanguard index fund opened at $10,000. GRS and personal finance books were my inspiration and co-pilot. Here’s today’s challenge- I’ve found it’s easier to stay focused on paying down debt than on building wealth. It’s a bit like running a race. You seem to be more focused when you’re chasing someone than when you’re leading everyone. Now that I’m in… Read more »

Kristen
Kristen
11 years ago

JD –

Thanks for this post. Your sensitivity and ability to serve sound advice and hope at the same time are refreshing.

Kristen
@filife

Amber Warren
Amber Warren
11 years ago

There’s something really comforting about knowing that you aren’t perfect when it comes to finances. I think that’s why we all like you – you’re real. Thanks for the great post.

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