Out of all the things you can do with money, the one I know how to do best is spend it.
Not that I'm a shopping addict or a spendthrift. It's that for the longest time I didn't understand money and it's value in my life.
I come from a (upper) middle class family. My parents are divorced so expenses were higher then if we were a single household, but we still were in a good place. They could afford to send me to private school, own homes (they each had their own), and take vacations.
As far as I knew, there weren't any money worries. This allowed my parents to never talk with me about money. Sure, I was denied the odd whimsical "need". (No little girl "needs" all of the American Girl doll accessories.) But money was never outright talked about.
Savings, budgets, spending habits - these were all foreign to me until I graduated from college. And then it was too late.
I had managed to get myself into $70,000 into debt without doing anything. Aka getting a college education. Aka student loan debt.
I was highly encouraged to go to college. And not just any college - the best college! I wasn't told that doing so would cripple me financially for decades to come.
My undergraduate degree cost $40,000 a year. So, on the bright side, graduating with only $70,000 wasn't the worst possible outcome.
But I also wasn't told that my parents were relying heavily on an academic scholarship that I ended up losing. I wasn't told that my chosen major only makes a starting salary of $35,000 so it would take me ages to pay back my loans even if I lived like a monk. I wasn't told that paying at least some of the debt while still in school could greatly decrease the burden after school.
The misinformation (or lack of information) continued after college as well. I had some money – mostly graduation gifts – which I used to move to a new city. I knew I wanted to go to grad school, but instead of starting right away I got a job, for which I was underpaid. Within 6 months (shocking that this coincided with the end of the post-graduation grace period) I was way over my head. I started living paycheck to paycheck.
I had gone onto COBRA under my father’s health insurance (what a waste of money!). I had rented a one-bedroom apartment I could no longer afford. I could no longer afford the monthly transit card (which saves you money) because I never had that much cash in the bank at one time.
Now, I wasn’t starving. I had (and still have) a wonderfully supportive family who I could have turned to it things really went south. I had chosen to move to a new city where I had fewer professional connections.
But someone somewhere along this path could have talked me through it, could have educated me on the benefits and pitfalls of my decisions.
Now I know.
I still occasionally live paycheck to paycheck. But I’m no longer ignorant. I am no longer naïve, blind, or worried.
Now, I have a plan. Now, I pay down a little more of my debt each month. Now, I put any extra money towards the highest interest rate. Now, I am actually trying to find a new job with better pay so that I will be able to save more.
This year, buying Christmas gifts didn’t choke up my finances for months. I can take vacations. I have reasonably priced health insurance.
I still have over $80,000 in student loan debt (that’s what going to grad school does to your loans), plus credit card debt and other debts.
So what do I know now?
You will always have to pay rent and utilities.
Treat your credit score well.
Never overdraft. You pay out the nose for nothing. Literally nothing.
Just because lenders aren’t asking for all their money back right now, doesn’t mean they won’t come knocking on your door one day.
You want that house, those kids, that jewelry/boat/vacation/car? Well, they won’t come cheap.
Are you freelance? Pay your taxes! If quarterly isn’t often enough to keep you on track, pay monthly!
Do you have multiple jobs? Make sure that your tax burden is fully covered by your W-2s.
I pay bills twice a month. This cuts down on daily interest your debts might incur.
I pay more than the minimum payment on every debt every month, so that no interest becomes capitalized.
I put extra money on my highest interest loan. I’ve already knocked out two out of seven. (See next point.)
I work extra jobs and use that money to pay down my debts faster.
I have a set amount I pay towards my debts every month. When one is knocked out, I shift its payment to a different debt.
