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Did you know that we Americans collectively managed to hit an all-time high of $13 trillion in debt in 2017?
The majority of Americans carry debt. It’s all too common, and it seems like its normal to be broke. If you have credit card debt, school loans, car payments, and a mortgage, then don’t worry about keeping up with the Jones’ – you ARE the Jones’!
That doesn’t make our financial situations any less stressful though.
Did We Bite Off More Than We Can Chew?
Last August, we bought our first home as a family. We had been renting a 2 bedroom condo in an expensive area and had decided that we needed more space since we’d added two little boys to our tribe. We quickly realized we wouldn’t be getting much bang for our buck in the area we were currently living in, so we headed to Hunterdon County, NJ where we could get more house and more land for our money.
Although we were getting more value, our monthly housing payment was increasing by 50%. On top of that, we were going to have to put the boys in daycare for a few different reasons. Up until that point, our moms had been watching them so this was a big payment we were taking on that we didn’t have before. Oh, and our new house is 4 bedrooms and 2.5 baths – that’s a lot of space to heat in the winter and cool in the summer.
Our credit scores were decent, despite my school loans and the credit card debt we had, and we were approved for our mortgage. I received a promotion at work which would help a bit in offsetting some of the expense increases. But honestly, I was still really scared about taking on this mortgage payment.
Adam knew this and he worked really hard to figure out the state of our debt situation – where it was, the balances, the interest rates, the monthly payments – and he came up with a budget (sort of). Included on this budget were other monthly expenses, such as our electric bill all the way down to Netflix.
Now, I say this was a “sort of” budget because, yes, it had all of our expenses spelled out, BUT it didn’t take our leftover income after all the bills were paid and divide it among all of our remaining buckets (think eating out, entertainment, gifts, etc.).
Regardless, it was a valiant effort! He did this on his own for the most part. I hate thinking about money – it stresses me out. I take the approach of “outta sight, outta mind”. For months, he consistently asked me to sit down and look at the budget with him. I would agree that we would do it once the kids went to bed or at some other later time, and then conveniently “forget” about it.
The truth is that I didn’t want to know. Ignorance is bliss, right? We weren’t tracking our spending at all, so I would just buy something whenever I wanted it (within some reason). Subconsciously I knew that if we sat down together to look at our finances, that behavior would need to stop.
Fast forward to April 2018. Adam was stressed the eff out about money and I finally opened my eyes to see it. He had carried the burden of our finances on his shoulders for years, and it was wearing on him. It wasn’t fair to him.
Late one Friday night, I just decided that I needed to get my butt in gear. I walked into our home office where he was writing out his to-do list for the month. I sat down across from him and said, “Babe, show me the budget.” He looked back at me blankly – almost as if he couldn’t believe what he was hearing.
Then he immediately opened up his laptop and pulled up the spreadsheet. He had been waiting for this moment for a long time! I took the laptop and went through the entire spreadsheet, line by line.
It was worse than I thought. As I stared at our life in numbers and dollars, I couldn’t help but wonder, Did we bite off more than we can chew?
Rise Up and Attack
At first, I felt discouraged, stressed out, and kind of depressed. We had dug ourselves into a hole by not tracking our spending and it felt like we would never be able to dig ourselves out of it. What had we done?
Then I got angry. We’re parents, for pete’s sake! We have 2 little boys who are depending on us and we can’t get it together financially? What are we doing??
Finally, I took that anger and turned it into pure motivation. I would be damned if this was how we were going to live the rest of our lives. I was determined to show my boys that you don’t need to live life pay check to pay check. I don’t want to be a burden on them when it’s time for us to retire. I want them to be able to lean on us if they ever need to. I don’t want them to graduate college with school loans like I did. I don’t want money to equal stress in their minds.
In that moment, I determined that we were 100% going to buckle down and turn our financial situation completely around as quickly as possible. We were going to attack this debt with a vengeance and then build an empire (in savings)!
To say I became obsessed with personal finance is an understatement. I scoured personal finance blogs and read through books. I talked with friends and family about the best financial advice that they had ever received. I took Adam’s spreadsheet and handwrote every detail into a notebook so that I could constantly reference it. I set up a budget, a spending plan, and specific goals.
One of the most impactful resources that I came across was The Busy Budgeter blog (https://www.busybudgeter.com). I downloaded her 90 Day Budget Boot Camp, which I’m still working through. In this document, she talks about recognizing your triggers with money.
That’s when I had an epiphany – money is emotional!
The Emotional Load
The Boot Camp instructs you to write down what triggers your spending, which really got me thinking. Have I always been this terrible with money? Yep. Ok, so when did it start? Age 15.
I started working at 15 years old. I couldn’t wait to start working – it seemed like such a fun thing to me at the time (Crazy, right?! 20 years later of working and I obviously no longer feel that way!). So, I got my first job at the local CVS operating the cash register and stocking shelves. Guess what I did with my first pay check…
Um yeah, I spent it! It wasn’t much (maybe like $35), but it was gone as fast as it came. I did manage to save up some money for my first car, and that’s about it.
Then I turned 18 and the credit card offers came rolling in like wildfire. Not understanding the concept of interest rates, credit cards felt like magic. I applied immediately, despite my mom’s warnings. And I maxed out my first card prettyyyy quickly.
So began the abyss of debt that I still find myself struggling with to this very day. But WHY??
Ok so at first, I just didn’t get it. I didn’t understand the insane interest rates I was being charged on my debt, I didn’t know about compound interest if I were to put my money away instead of spend, etc, etc, etc. I just didn’t really know how to manage money. They didn’t teach me that in high school and my parents tried to tell me, I’m sure, but I was a teenager so of course I knew better than they did.
At some point though, I learned the basics. I knew the importance of 401k accounts, rainy day savings, the consequences of debt, and spending within your means. Yet, I continued to spend and rack up debt.
I’m going on 35 and I’m finally sitting down to think about why this is. There’s a psychology behind why we spend what we do on what we do. Unless we identify what that psychology is, we can’t break the cycle. Many times, spending is based on emotion. We feel down, we buy something, we feel good. It’s temporary. We go back to feeling down so we buy something else. So on and so on.
The million dollar question then becomes – So what’s getting us down?
Money Does Not Define Your Self-Worth
The answer to that question is going to vary for each person based upon individual upbringing, innate traits, and social experiences. That’s why figuring out what your spending triggers are is really a personal journey.
For me, I’ve discovered that I measured my self-worth in dollars. This could have gone one of two ways – the higher my savings, the higher my self-worth OR the more well-off I appeared, the higher my self-worth. Neither of these circumstances is healthy, but if I had to choose one it would be the former. So of course, what played out in my life was the latter.
Both of my parents have always been super hard workers. Even so, money was a bit of a struggle for them during my childhood, as it is with many people. We moved around a lot from rental to rental until I was 8, when my parents purchased their house that they still live in today. Its a modest house in a small, blue-collar town.
It was a huge win for my parents to buy a house. It’s a huge win whenever someone is able to buy a house, and now that I’m older I completely understand that. However, growing up, I didn’t appreciate that. In elementary school, I didn’t give it much thought. In my grade of 30 or so kids, I fit right in economically. None of our parents were well off, we all lived in small houses, none of us had expensive clothes.
That changed when I hit high school. Our high school was regional so we were combined with two nearby towns. Looking at these towns now, there aren’t huge socioeconomic differences between them, but it felt like there were at the time, and my town was at the bottom of the chain.
I was already a highly insecure person. My clothes weren’t brand name and I was picked up in an old, used car everyday. I was embarrassed.
When I started earning my own money and I was able to drive myself to the mall, I began spending all of my money on clothes that my parents usually didn’t splurge on. I bought expensive clothes that I was never able to afford before – and that I wasn’t able to afford at that time either, actually! But wearing them made me feel better about myself.
I know that’s ridiculous. No one else knows the brand of my clothes or how much I spent on them, nor do they care. Most people don’t decide if they like someone based on what they’re wearing or how much they paid for their outfit. No one at school cared how much my clothes cost. I had created a story in my mind that my worth was defined by how much money I had, and even though I didn’t have any, I could make it look like I did.
As I reached my 20s it got worse. If I had plans on the weekend, I would go out and buy a new outfit. I didn’t feel confident unless I had brand new clothes on. I’d drive to the mall and leave with my hands full of shopping bags. It felt great – in the moment. The thrill that I’d get from shopping would quickly dissipate and I’d find myself back at the mall the next week.
This eventually spread into other material things. Now I don’t focus too much on clothes for myself, but I still impulse buy from Amazon, Target, CVS and other stores!
So there you have it – in a nutshell, my poor spending habits stemmed from low self-esteem. Buying clothes made me feel temporarily better about myself, but because it wasn’t coming from within, it would always fade away and I’d have to buy more to feel good again.
I managed to figure out why I feel the need to spend money on things I don’t need. My trigger is feeling bored or unhappy. This is big. Now I can come up with a plan for those times when I find myself in that frame of mind.
Epictetus, a Greek philosopher, said, “Wealth consists not in having great possessions, but in having few wants.” This is exactly the mindset change I’m looking to make. In my weaker moments, when I want to buy something that I think will make me happy, I am going to stop for a minute and think of this quote. I’m going to ask myself, Do I really need what I’m about to buy? Why am I really buying this? In a week, a month, a year from now, will I care that I have this thing?
I’ve only been disciplined about my money for the past couple of weeks, but I already feel a million times better. I feel like I have some control over my finances, even though we have a long road ahead of us.
If you’re feeling that you’ve lost control over your money or you’re stressed out about the state of your finances, take a step back and do some soul searching. Be brutally honest with yourself. Think about how you got to where you are and why. Then come up with a plan to change your habits.
“It is not the man who has too little, but the man who craves more, that is poor.” -Seneca