Not too long ago, a friend made the comment that people don’t really change, do they? At the time, I agreed with my friend but that conversation gnawed at me and now I feel differently. Like many, I spent a great deal of my life struggling with money management. I’ve improved that significantly over the last few years. Let me explain.
It’s all about habits
Habits, be they good or bad, determine how you live your life. I used to have some bad habits with money that left me in a situation where I never seemed to have enough. It was seldom an issue of not making enough money. I’m not too bad at that part. It was more a matter of spending money I knew was coming in before I had it in my hands. Then when the money did come in, instead of paying off the credit card I’d used, I’d find some other use for the money. That’s a bad habit to have with money.
About three years ago, I just stopped spending money until I had it. For the first 30 days, it was a struggle and took conscious thought. But then it got easier. While I continued to carry one credit card for business travel needs, all other spending moved to one of two debit cards. One card was for business incidentals and the other was for personal spending. The thing about a debit card is the money has to be there or you can’t spend it. So the habit change was simple. I took the credit cards out of my wallet and never carried them.
Positive habit changes have a payoff
I chose the example of turning my financial life around because the payoff is so easy to see. We went from living with very little safety cushion financially to having some extra money each month. We’re only three years into this makeover and the difference is night and day. When it came time to buy a new car, neither the down payment or the monthly payment was a problem.
I look at what our family does with essentially the same income we had three years ago and am amazed how much better of a lifestyle we live. We even ended 2010 very roughly income-wise but weathered that storm with money we’d managed to put away in 2009 and early 2010. The simple change of deciding not to carry or use credit cards allowed this to happen.
I changed you can too
I don’t tell this story to brag about where I am financially. I’m actually a little embarrassed it took me this long to figure out some of these financial basics. The point is I did and it started with a small change in a habit that then turned into a new habit. I just don’t spend what I don’t have anymore – ever. If that’s not change, I don’t know what is.
Thank you for this post, Jim!
After my divorce, I filed for bankruptcy, which I initially thought would be a death sentence for someone only in her mid-20’s. But I swallowed my pride and did it. And glad that I did. Since then, I’ve learned to live within my means and only spend what I truly have. Don’t get me wrong, I’ve stumbled along the way.
You see, they don’t teach you this stuff when you’re growing up, so I wouldn’t be surprised if more people than not truly don’t understand the meaning of “affordability” until they are knee-high in debt and have to fix the mistakes they’ve made. Some learn the hard way. Some are fortunate to get bailed out. Some never learn and die broke.
It’s been 6 years and I am mostly debt-free if we exclude my student loans which I actually consider an investment in myself. I got rid of all of the things I truly couldn’t afford to keep and didn’t necessarily need if I really wanted to sustain my business. So I got rid of my penthouse apartment overlooking Lake Michigan and my hefty car payment. A HUGE adjustment for what I was used to in my past life in corporate sales; however, I gained so much personal and financial freedom.
The fact that you were able to turn this around in 3 years after gaining awareness is remarkable! I commend you, AND Cheryl, for being able to do that and then being able to instill that lesson learned to your children.
Changing our habits to transform our lives to become what we really want to be and obtain what we really want to have is essential for everyone! Glad you got out of your own way!
Berni – I like the part about giving up the big apartment and nice car. Honestly part of the reason I keep holding off on an iPad is I just don’t need more stuff. So, the question is would it be one more thing or could I get rid or 2 or 3 other things. When I have that answer I’ll move forward.
Exactly. It’s about living within our means. And when it is within your means, by all means, do it! Besides, what fun is it when you work hard and you can’t even enjoy some of the fruits of that labor?
Sorry for my late comment Jim. Our household is cash only. Due to circumstances around the crash of the housing market, we were forced into a cash only lifestyle. I have also read a lot of Dave Ramsey and try to incorporate his recommended practices in my financial world and he recommends cash only. It has been a huge lesson in budgeting, but other than our mortgage and one of the cars- we owe nothing. So I agree we can change, even if there is some kicking, screaming and resistance involved.
P.S. An ipad is one of the greatest, if not the greatest, purchases I have ever made. I can certainly live without it, but I’d prefer not to 🙂