Digging Yourself a Hole
A while back when I had my first financial hardship right after finishing college I learned a quick lesson that I needed to spend less money and I needed to tie leisure expenses to money that came in.
Less Responsibilities Less Expenses
While in college I had fewer responsibilities and fewer expenses. I lived with my grandma and my Uncle I had two to three part time jobs. I was working, going to school or sleeping. I was also part of the Army Reserves and a bartender so 95% of my weekends where spent working. Having very little responsibilities aligned with a few jobs that where dead end jobs but brought me a good amount of income while in college I got use to spending large amounts of cash on clothing, transportation, travel, and many other luxuries.
Better Opportunity Less Income
Once I started my first job in accounting after finishing my degree I realized that I was making a lot less money but with many opportunities that could grow and do what at moment was of my interest accounting. I in my first Accounting related job I was making significantly less than what I made with all my previous part time jobs. As a waiter sometimes I would make on tips in a few tables what I made in two days at my first job working as an accounts receivable clerk. The other issue was that since my job was about a 2 hour commute each way it meant I had other additional expenses I had to cover while my income was less.
Spending More than What I Had
At one point I forgot that my responsibilities where a lot higher than what I was making and for some reason I kept on spending more than what I made depleting my savings and running my first credit cards extremely high.
If I got a Raise I had to Spend more
I left that job as an Accounts Receivable to work for a CPA Firm that was a local medium sized firm in Puerto Rico. I ended getting a raise that was almost double of what I was making at my first job. Instead of thinking it through I got a new car, which cost a lot more than my previous car, and I made enough commitments and expenses to offset the raise very quickly. Instead of seeing the raise as an opportunity to pay off my credit cards and save money I saw it as an opportunity to spend even more of my income.
When I lost my job at that CPA Firm I ended up not having any savings to pay off my car that I ended up returning to the bank. Without a car I had no way of moving around which made it difficult for me to get another job so I had to move with my parents to Connecticut. The hardest part was leaving Puerto Rico since I love to live here. I went through many hardships that I did not even have enough money to eat much less pay rent so my dad did help me out with giving me a place to live and the basic necessities.
I found a job working for KPMG and I remember I did not even have a credit card active so I could stay at the hotel where I had to get my initial training to start at the firm. All these obstacles taught me to make it a priority to pay off my debt and use credit cards only when needed. For a full year and a few months I went without a car and many other luxuries so I could pay off my debt and credit cards. I was able to do it in around 8 months and after that decided to save money to return to the Island.
Getting on Track
Once I was on track with zero credit card debt and being able to save that money instead of handing it out to credit card companies it was rewarding to receive each paycheck. I knew I would pay my self first and save money while still enjoying life.
I learned many lessons during that first financial hardship that have stuck with me. Others I have learned after by other obstacles that have come along the way. Overall everytime I spend more than I make or have saved I get into trouble. For some reason as a human being I have made many mistakes in the past that I should have learned from previous lessons. I also have to say that every lesson has made me wiser and stronger towards future obstacles and bad experiences.
I guess I will keep on trying to make the best financial decisions especially now that I have a family.
What keeps you away from bad financial decisions and how do you motivate yourself to make better one?
I had my story with credit cards when at college. With my first credit card I had this *brilliant* idea to buy a laptop an pay a determined sum for a period of time. Instead of doing what I planned, I had other stuff that needed to be paid instead the credit card. So, with this and other situations, the balance grew and grew until I got serious with it and worked to pay it off. Not a nice experience but I learned to use (and not abuse) credit cards.
I could not agree more! I think we all learn best from experience!