Now and Then: How My Current Financial Situation Compares with a Decade Ago

I spent the 1990s addicted to credit cards. I was mired in debt.

Recently while cleaning the garage, I unearthed a box full of old receipts and bank statements. I spent a couple hours sifting through them, aghast at my former spending habits. It was like peering into the life of a stranger.

Addicted to debt
The oldest documents I have are from April 1994, less than three years after I graduated from college. Already I had $9,550.13 in credit card debt. (I also owed more than $5,000 on my 1992 Geo Storm.) Fifteen months later, in July of 1995, my credit card debt topped out at $19,965.74.

During this time, on a take-home pay of about $1,400/month (after taxes), I was deficit spending by nearly $700/month! I spent 50% more than I earned. I bought books and comic books and VHS tapes and videogames. I did not invest. I did not save.

[I spent a lot of money on books an comics]

How much of that stuff do I still have today? On a quick stroll the house, I found a handful of science fiction books I bought in those years. That’s it. Basically, I spent $25/day on nothing. I was an idiot.

From 1995 to 1998, my spending fluctuated. I’d dig myself a couple thousand dollars out of debt, and then fall back into the hole. It was as if I was compelled to use all of the available credit on my accounts. I can remember calling the banks’ toll-free numbers to find out which card had enough room for me to buy new comics. As I said, I was an idiot.

[$11.32 in credit available]

I also used every possible penny in my checking account. (I didn’t have a savings account.) A lot of times, I used more than every penny:

[I bounced checks all the time]

Running to stand still
During the time I was addicted to credit, I knew that I had a problem. I’m a smart guy. I understood the math. But my deficit spending wasn’t a math issue — it was a product of subtle emotional and psychological problems that I had to work through before I could get my spending under control.

One day, out of desperation, I cut up my credit cards. A local bank was promoting home equity loans, so I took one out and used the proceeds to pay off all my credit card balances. From the middle of 1998 to the middle of 2007, I did not use a personal credit card.

But getting rid of credit cards only provided temporary stabilization. I still lived paycheck-to-paycheck, spending every penny I earned. And I still had $20,000 in debt — only now it was in the form of a home loan. Eventually I discovered other ways to take on consumer debt. I financed a new car. I took out a loan for a computer. I borrowed from family. By 2004, my debts totaled over $35,000. Then, at last, I began to turn things around.

Addicted to saving
It took more than three years of focused intensity to become debt-free, but eventually I did take control of my finances. Since then, the financial inertia has helped me to save more.

During my quest to eliminate debt, I developed a positive cash flow of over $1,000/month. That continues to this day, which means I’ve managed to save $5,000 in my emergency fund, $1,000 in my Mini Cooper account, and an extra $500 designated for a future vacation. Plus, I’ve begun to save for retirement.

All of this feels great, of course, but sometimes I worry that I’m in danger of developing a different sort of unhealthy relationship with money. I’m addicted to saving. I feel like I’m perilously close to becoming a miser. It might be time to actually budget for fun.

Taking the first steps
How can you dig out of debt and begin to build wealth? First, recognize that it will take time. You won’t change your habits overnight. At first you’ll need to take baby steps, and even then you’ll fall on your face at times. Get back up and keep trying. Eventually you’ll move beyond baby steps; you’ll find that you can confidently make huge financial strides. Here’s some advice based on my own experience:

  • Set goals. The road to wealth is paved with goals. I spent like a fool when I was younger because I didn’t know what I was doing with my life. Find a purpose.
  • Stop using credit. You may not be able to do this immediately, but make it a priority. The longer you continue to add debt, the longer it will take to get rid of it.
  • Establish an emergency fund. Set aside some cash in savings as cheap insurance against life’s nasty surprises.
  • Practice frugality. Look for ways to curb your spending. Shop smart. Focus on quality and value.
  •  
  • Reduce recurring monthly expenses. Monthly subscriptions — to magazines, to web sites, to cable television — are like a cancer. Cut as much as you can.
  • Get out of debt. Find an approach that works for you, and begin to chip away at the deficit. Use the debt snowflake principle to make gradual progress.
  • Increase your income. Ask for a raise, or make money from your hobbies. Consider selling things you no longer want or need.
  • Try not to get frustrated. Don’t let your situation get you down. Don’t focus on the big picture. Do keep your eyes on your goal, but concentrate on taking small steps. Do the best you can at this moment. If you know you have problems in certain areas, work to improve them. Don’t expect to become perfect overnight.

The key is to get started. Looking back, I wish I had found the courage to begin digging out of debt in 1994. Instead, it took me ten years and tens of thousands of dollars to find the guts.

[I was paying interest rates as high as 18%]

This article is part of the MBN Group Writing Project for May. Here are stories from other participants:

 

 

What about you? How do your finances compare with a decade ago? Has your situation improved? What was your turning point? What was the most valuable strategy you found along the way?

64 comments

  1. I find it funny that I was just looking at my financial status when I was 30 (6 years ago). I wrote about the topic this morning in the context of Gen-X retirement saving rate. http://adventures-of-sam.blogspot.com/2008/05/gen-x-retirement-blues.html

    My biggest mistake was (similar to JD) taking out a home equity loan to pay of credit card debt. But even worse I went back to using my credit card (UGH!). My best move was buying a house even though I had student loan, car and credit card debt. 30 was when I made my first spending plan which was a good move because I started to pay attention to my money.

  2. JD-Great story. It’s amazing to look back and see how far we’ve come.

    One thing I would like to add to your steps is desire. You have to have a burning desire to become debt free and live within your means. Without a driving “why” it is impossible to stick to it.

  3. Well 10 years ago I was debt free, although only because I was 13. Now at just under 100k in debt. My goal however is to have all of that debt gone within 5 years. And only have a mortgage to pay for. Hopefully 5 years from now I can look back with such positive results just like you have. I am also hoping all those student loans end up being an investment and not just a burden.

  4. Good article. I have always paid off my credit card debt on or before the due date so never had to accrue interest. However, I can understand the phychological need to acquire things that seem important at that time. I love electronics and home automation but would never buy retail and never purchase more than I can afford to pay off every month. I look for the item at regular stores online and then use google shopping or check ebay to see the lowest price. Then I think it over a few days before making the committment to purchase the item.

    Before my wife married me she had a lot of credit card debt from a previous relationship. I vowed that that would never happen in this marriage.

    I tend to err on the side of being almost miserly, but my wife makes me enjoy myself every so often without going into debt we cannot afford.

  5. I think I went through the same swing you did, going from an extreme spender to an extreme saver. There was a time when I entered my extreme saver phase that I felt like any purchase above basic living expenses was a waste of money. I found myself still feeling broke because although a large chunk of my money wasn’t going to credit card bills it was going directly to savings, leaving me very little “play money” and left me feeling like I wasn’t enjoying my money the way I should have.

    Two things helped me with this. One was picking a reasonable amount to pay into my emergency fund and rolling it into my “reverse budget” as I’ve heard it called. I figured that as long as I was putting $x into the emergency fund then any money left over was for me to enjoy.

    The other thing that helped was creating a separate fund for big “fun” purchases and putting a set amount of money into that each month, for me that was $200 a month. So when I found myself wanting an $800 big screen TV I knew that I could wait 4 months and pay cash for it. Knowing that I had a specific date that I could afford something made me more likely to curb the “lust” for new gadgets. Each new gadget that I wanted began to have a time value attached to it rather than a monetary value (i.e. iPhone = 3 months). Before, I would have just put the item on a credit card and worry about paying for it later.

    It’s a learning process and finding the right balance of saving versus spending is difficult but essential. But, hey, as long as you are spending less than you earn each month then that is progress in my book.

    This demographic of “ex-spenders now super savers” is an interesting one and I’d be interested to see how many people are out there like that.

    Phew.

  6. Funny, I wrote on my blog today the story of my wife and I trying to keep up with friends who were much better off than we were. We were newlyweds (ten years ago), and I was out to prove I was fiscally worthy as a provider, etc. We had older friends who lived on two incomes and had no kids. They had all the toys, and we wanted them, too! So, we charged them.

    It took nearly ten years to recognize we were just running on a hampster wheel. I like how you put it – “Running to stand still.” Approaching 30 was a wakeup call for both of us, and we have finally started to bring the ship around, but the damage was done and it will take some time to get back in the black.

  7. I did something similar when I sold a house two years ago: paid off all of my credit card debt, my car loan, everything except my student loans. Six month later, I was in debt again, and was spending more than I earned.

    I’m at the beginning of my own journey to correct my mistakes, but I can already feel that satisfaction of watching my savings account grow while my debt decreases. Instead of gaining a temporary ‘high’ from shopping and acquiring, I’m finding satisfaction in just the opposite. . . .

  8. Thanks for posting! I didn’t know you weren’t always so good about money. It’s inspiring to see that you were at one time financially unhealthy but you have been able to turn it around.

  9. The definition of frugal is not to “not” have any fun, it’s budgeting for all the fun you have. Good article. I don’t even want to look back to my past…

  10. On the bright side, it looks like bank overdraft fees have come down a bit since then. Aren’t they $35 now?

    Adjusting for inflation, what cost $37 in 1997 would cost $48.44 in 2007.

  11. I can remember the exact moment my savings turned into $0.00. It was called college. I remember calling my mom after emptying my savings to pay the college my first week on my own a state away, and her complete lack of sympathy for my expensive out-of-state tuition should have spawned a lot more concern for my own well-being, financially speaking of course. Then the credit card companies told me I could claim my scholarship money as income on credit card applications – AND get a FREE t-shirt and/or some fake Oakleys.

    So, here I am, 9 years later. I have my degree. I have my student loan debt. I have my credit card debt. But now, thanks mostly to this website, I have a plan. Please ask this question again in January, when I will have no more credit card debt! At the end of July I’ll have my E.S. account beefed up and I’ll be back at the top starting my debt snowball. My goal is to pay off all of my c.c. debt before my wedding at the end of this year. Wish me luck! I know I’m doing the best thing for my marriage – I just needed the right motivation.

    Motivation Math = Financial Health

  12. good bit JD. it’s a good bit not only because of your progress, but demonstrates that you are constantly re-evaluating and putting your financial and personal life in perspective. you aren’t a miser if you are saving towards goals rather than saving for the sake of amassing cash in of itself. you should have spending outlets that are of course planned for and budgeted. a financial plan is for spending as well as saving, which sometimes gets lost in the goal toward saving. there is a balance as with everything else and you have to rebalance everything from savings/spending, asset allocation, work/free time, etc.

    i have a similar history as yours and i will say that since i’m debt free, going back into debt concerns me enough to continually re-evaluate what i’m doing. right now, we are in the middle of a move that has us expending lots of money which we have put on our credit cards for the cash rebates and have sufficiently saved for to cover to pay off each month; however, seeing the big bills is a bit disconcerting even though I know we have the money in our savings account and that we will be eventually reimbursed by work. to make issues worse, my investment check to a mutual fund was lost in the mail since 6apr and only reached its destination, so i was confronted by should i write another sizable check and have double money out or should i just wait and hope eventually it the other would arrive (which it finally did on 20may)? stepping back, though, you realize that there is no way that any of this would have been possible if i hadn’t made the decision to get out of debt just like you have done. i also have step back and see that i’ve been in the same situation as many people around me and not take on the higher than thou attitude about financial responsibility.

  13. I have a question for you.
    Do you think it was being the author of a financial blog that changed all these habits in you?

  14. Ryan, writing this blog certainly helped keep me on task, but I had actually begun to make the turn around before starting Get Rich Slowly. October 2004 was the real turning point, and I didn’t start this site until eighteen months later.

    Once I started GRS, though, I was able to become even more focused. During the first 18 months of my quest to reduce debt, I still struggled with spending. Having a forum like this made me feel more accountable. It felt disingenuous to preach about not spending and then to go out and buy a bunch of comic books.

    So, writing a personal finance blog helped me stick with the habits, and to work harder at them, but it wasn’t what actually forced the changes. The catalyst came because I was really unhappy with who I had become, and finally decided I had to change that.

  15. Good article. I like your style!
    Makes me think. My husband and I have been through alot financially in the past 10 years. We have certainly had our ups and downs.
    About twelve years ago we decided that I quit my job and stay home with our, then two children. I was babysitting for others and making more than I was when I worked out. Things were good and even. We were basically debt free, except for our mortgage.
    Then came babies number 3 and 4. Then came the big baby — my husbands home business. We did really well with it in the beginning then through a myriad of circumstances, like customers not paying, bounced checks and the high cost of advertising things took a turn for the worst. We found ourselves with 70+ thousand dollars in debt and had to claim bankruptcy. Hard times but now we a re starting over financially. Had to sell our house and give up the equity to creditors. But through some good advice we now own another home and vehicle and are working our way back out of “the hole” of debt that we had fallen into. I am now pursuing a work from home and hope to make a full recovery in the next little while. Lesson learned : be very careful with finances because it is very easy to get into trouble these days even through no fault of your own.

    Laurie

  16. I think what you are afraid of is “losing control”, fall off the wagon, that you don’t want to go back to the way you were. I think your savings habits are entrenched that is not a big worry, but again to feel better, again put your spending money in a separate bucket, one where you don’t feel it will affect your finances, and only spend up to that amount.
    I have to admit that my husband and fell a little off the wagon this month. The tax refund really did do a number on us; although we faithfully went ahead and applied the money (most to a heloc, rest to money market) I realize we spent close to $400 more this month (date with babysitter, new camera, clothes and boardgame for kids). We got alot of enjoyment out of those things and it’s not a huge amount of money in the big scheme of things, but it makes me realize how easy it can be for the purse strings to loosen.

  17. Boy, I always get so much out of your blog and finally I have something to respond to you on!

    You’ve made great strides! But I have heard a few times now about how you’re starting to worry over feeling miser-ish.

    I say redo the budget and decide on an amount for fun with a mind to a) the fun you’re planning with your vacation fund and b) the fun you’ll have in your minicooper . . . so you need CURRENT fun budgeted in – because then you’ll DO it. It needn’t be a lot, but you feel now that it’s taking awy from your laudable savings goals – budgeting it will let you enjoy it – if you don’t spend it all – add it to the vacation fund!

    I found myself in similar angst in the past couple of years – we’d worked incredibly hard to get out of debt and on the road to financial responsibility – saving etc. We were saving the max in our retirement accounts [times two] and my husband will receive a pension as well as make use of his ‘forced’ savings account at one job separate from the optional retirement savings. We had no cc debt, our cars were paid in full etc –

    Then, he wanted to start investing. Not foolishly – but rather in ways that he is actually quite expert in and successful at for OTHER people. He felt a strong desire to do something of his OWN. And I balked! Repeatedly! It’s still very hard for me – but he’s used a LOT of our ‘extra’ money to make these investments in the past couple of years and I don’t regret any of them – hopefully someday they’ll pay off big – but we’re not in any trouble if they don’t – and it IS investing so it isn’t really blowing the dough – but it STILL feels that way to me . . .

    Someday I fear I”ll be stuffing money in my mattress! Sigh But I applaud your successes – and I hope you enjoy some ‘fun’ soon!

  18. It occurred to me that I should make it clear that I’m not actually miserly yet. I’ve stopped buying comics almost completely, I rarely buy books or movies anymore, and it’s been ages since I bought a book that wasn’t for this site or for my monthly book group.

    However, Kris and I do continue to eat out often. It’s less than we used to, but still several times a month. Also, I’ve been allowing myself to spend money on fitness-related items: new running shoes, a heart-rate monitor, etc. And I’ve purchased two games for the Wii this year: Mario Kart and Wii Fit (which it seems will never reach my front door — come on, FedEx!).

    But it’s so strange now when I think, “I should go see Iron Man,” only to talk myself out of it because it’ll cost ten bucks. Or I think about how it’d be fun to go play a round of golf on a beautiful spring day, but then decide that’s money I’d rather save. The thing is, these choices aren’t necessarily making me happy. If I were still in debt, these would be the right moves. But I’m not. I’m meeting my saving and investing goals, and I have money left with which I could let loose once in a while.

    I’m sure I’ll find a balance. It’s just going to take a little time. 🙂

  19. These are common sense point that, for whatever reasons, we all need reminded of sometimes. I ought to print this out and hang it up somewhere where I will see it every day.

  20. Thanks JD–I’m tracking to be debt free at about the same rate you did. About 10K a year, to get rid of over $30k in debt. I’m in one of those “I’m tired of paying off debt” ruts, and it’s nice to get these reminders. Three years isn’t that long, and I’ll improve the rest of my life by getting this debt paid off.

  21. It has taken me years to understand the root of my financial chaos. I just didn’t want to face it or own the reasons for it. Now that I have, I am three months down the road to a better, balanced life. I really enjoy your writings – I check in at least once a day. It feels good to know that when I think I’m the only one with problems, other people have them too and have stuck with their goals like you have for 3 years to turn it around. Moving from chaos to balance is going to take time and it sure beats the alternative of stumbling blindly down the same old beaten path.

  22. 10 years ago, I’d only been out of university for a year, although I’d been working for years. I was lured away from a fantastic job to work at a start up…that laid everyone off the day before we were due to start. So I started consulting. I didn’t have a ton of money at the time, although I didn’t have any debt. I had retirement savings, a good emergency fund and a paid-off car. Today, I’d estimate that my half of our current net worth is about 12 to 25 times what it was. Buying a home has been the best financial decision we’ve ever made — it’s probably been responsible for a large chunk of that increase. Other excellent decisions include my MBA, my marriage and my consulting business. I suppose those are financial too.

    My net worth would be much higher if I’d delayed having kids, even for a couple of years. But sometimes we’re told that window will close, so you have to stop thinking finances and start thinking about what you want from life.

  23. Saving is good, but savings accounts are mediocre.

    You get a 3% return, and then on top of that you have the insult of paying taxes on that return. So depending on your bracket, you’re really only getting a 1.6%-2.5% return, which is less than inflation.

    This means that you can buy *less* with your money the longer you wait.

    As such, I’d point out that once you have a small “emergency” fund together, you’d do much better by buying stocks or other similar assets. They have a better average growth rate than a savings account, and most importantly, you only get taxed when you actually sell them, instead of getting taxed every single year.

  24. 10 years ago I was earning a dismal $19k a year, supporting a dead-beat addict of a husband, and in debt to the tune of $18k on top of a $140k mortgage. I had no retirement fund, and was considering tapping my investments to live on. Today, I earn $50k a year, have reduced my mortgage to $114k, have no credit card debt, paid off my HELOC, have a 401k, a stock portfolio, a $5k emergency fund, and my net worth is approaching $400k.

    Thank you, JD, for your openness about your own situation. It was good to think back and see how far I’ve come.

  25. As many of us here do, I have a tendency to look back on my financial life and think I’d do things differently, if only I knew better. But screwing up is how we learn our best lessons.

    I’ve learned a lot, but two things I have learned this year is #1: Just when you think you know everything you need to know about doing your finances and feel you have a handle on it all, something new comes into light. Be open to the fact you still can improve. And #2: I haven’t used a credit card in 6 months. Is the secret discipline? No — I had my husband HIDE the card from me. Sometimes it takes more than discipline to meet your financial goals; it takes force.

  26. What a powerful, redeeming experience! My husband was over $70k in debt when we met and not a penny in savings let alone retirement.

    He did what you did (with my help) and for the 2 years after we married his whole paycheck went to paying it all off.

    He has the bug now though, and is addicted to saving, maybe more than me!

    He feels very empowered now that he understands the psychological reasons behind why he was doing what he was doing, and now that he understands how money works.

  27. This was a really timely article. Currently I’m paying off a credit card, which is slightly over $4K, while maintaining a $2200 emergency fund and I just opened an Orange savings account to start a down-payment fund. It has a paltry $130 in it right now. Looking at how much I have to pay off still, and how far I have to go to have even a decent-size chunk for a down payment, so I don’t have to dip into my 403B for so much, I got very frustrated and depressed about it all the last couple days. But last night I realized it was because I was looking at the big picture instead of concentrating on the baby steps. And like you, I have come a long way in the past few years; I paid off a car loan, paid off my school loans, and paid off my other credit card. I also have never had more than $1000 in my savings account, EVER, so that’s a big achievement. Rather than get so upset at myself for not being where I want to be, right this second, I need to give myself kudos for working so hard to put myself on the path to where I want to be. Thanks for reminding me of all these things, and that I am not alone in my struggles.

  28. Now that I know better, my biggest financial regret, from about eight years ago, was not signing up for my first employer’s 401(k) plan. They had a *very* generous match, but I was too scared to really learn anything about how investing worked, so I let the signup form sit on my desk, and then eventually filed it away in the circular file.

    Thankfully during that time, I was focused on eliminating a lot of high-interest credit card debt that I had racked up during college, so it wasn’t a complete loss…but now that I know better…AAAAGH! 🙁 At least now I’ve been able to get started with funding my retirement. No better time like the present to start fixing mistakes, I guess.

  29. This article is like looking in the mirror. I got my first post college paycheck 3 weeks before I turned 22. Then the downward spiral began.

    Question: Did your parents instill in you wise money management strategies?

    I’m not looking to pass blame, but I eventually learned money management on my own. My wife, however, learned it from her parents. As a parent now, I’m determined to teach my son money management so he hopefully won’t follow the same path I did.

  30. Hey, Ben.

    No, my parents did not instill wise money habits in me. They didn’t know the strategies themselves. I talked with my mom a little about it recently just to see if my memory matched hers (you know how a kid sometimes stretches things out of proportion), and she said that yes, we were poor, and no they did not save.

    I don’t blame them, either. They did the best they could. And dad *did* pass on a passion for entrepreneurship, for which I am deeply grateful.

  31. JD,

    One of the keys to our success in getting out of debt was to budget a ‘blow,’ or ‘spending’ category. This is where a lot of miscellaneous entertainment purchases came from over the three years we did the debt snowball. We went to movies, bought DVDs and video games and went to the Zoo, Museum, etc from this category.

    Now that we’re out of debt, we simply make a plan for our entertainment expenses each month: books, movies, games, activities, etc. Not only is it nice to know what we’re going to do, but its nice to just pay cash for it and not worry.

    We’ve found we can be frugal and have fun. Budgeting is the key to this. Because we also have children, spontaneous entertainment doesn’t fit with our lifestyle anyway. If something does come up, we always have the ‘blow’ category :-).

  32. GRS – re: Paying your mortgage w/o paying $11 fee. Does your bank checking account offer online bill paying? I pay my mortgage (currently held by Citi…there’s no charge for me to submit my payment electronically via a service other than their automatic bill pay…they of course charge you for their service if you use it) automatically every month. I just scheduled the payment through my free bank bill payment system.

    If your bank doesn’t provide free bill pay then, since you’re an ING customer, think about an ING checking account. I’m pretty sure they offer free bill payment and they’ll give your interest on your account to boot!

    Cheers,

    JZ

  33. I decided to post something similar on my blog, J.D. — great idea, and I enjoyed reading the various bloggers’ contributions, as well. What would I have done differently ten years ago? Probably skimped more, and definitely tried to buy land. Back then in this area of Colorado (south of Denver), you could buy 5 acres for $10,000. I know, because we daily passed by a sign offering just that. Today, that same land is going for $10,000 or more AN ACRE. Darn it.

  34. J.D.,

    Thanks for sharing such details of your financial life, and congratulations on the great changes you’ve made in a decade! This is truly an informative and inspirational blog.

  35. One of the things my spouse and I do is to give ourselves an allowance. We’ve basically added a budget item and transfer the funds into our individual “savings” accounts.

    Put simply, if I’m going to splurge and buy “comics” (read: video games) I pay for it from my allowance. It worked when I was 12, still does.

    Cheers,
    Brad

  36. J.D.,

    I really appreciate this blog. I had horrible credit spending habits in my early 20’s with no control. My balances were never that big, but big enough. Maybe 2k in total balances. Then I never accrued any more debit because my credit score was bad. In fact my credit score was a factor in my psyche for asking girls out for some reason, like there was shame in it.

    I really made an effort in my late 20’s and early 30’s to get my credit on the right track. I did it, but then started to slip again. The real atom bomb occured when my dad passed away overnight unexpectedly in 2003 and I inherited about 13k. I paid some old debts off with it, but the worst thing I did was that I bought brand new 30k Honda Accord with 5k down. I think back to that mistake 5 years ago and I was completely unresponsible and that I spent money I didnt have to try to feel better. I paid 550.00 a month (insurance not included)for 2 years to pay for this vehicle on a 31k salary. It was the most financially painful experience. I tried selling the car for a solid 12 months before I finally brought it back to the dealer and broke even on the loan in the summer of 2006. I paid over 16k with my car payments and nothing to show for it. I also accrued about 13k in unsecured debt while paying for this car. Since then I have been doing little things here and there and my current car loan will be paid off in september and my student loan will finally be paid off as well. Freeing up a total of 300.00 a month. I have to mention that this experience has so totally burned me I will never look at debt or spending the same way again. i am now 38 and like you where I so want to start saving for myself and get empowered from it. I will get there. Other things that have changed is being smarter about needing things vs. wanting things. I look back to that time now and am realizing that I may have had to learn by that mistake otherwise I may have never learned.

    Thanks for reading my rant! 🙂

    Chuck

  37. Thanks for the helpful tips and motivation. We are more purposeful than ever with our money and paying off debt, thanks in large part to your blog.

  38. I’m 25 and I’m addicted to saving. Everytime I spend money, I feel a little sick inside – seriously. I asked for a raise at work and I scored. I landed a 25% raise. Now, i just save even more. I feel like I can’t have any fun because of this problem. Any help or words of advice? I know I’m only 25, but I can also say, “I’m 25! Time is on my side!”

  39. Hi J.D.,

    I’ve been reading your blog for a while and I really enjoy it. One thing that I often wonder about when I read posts like today’s is how your wife dealt with your previous spending habits and your transformation. From previous posts it sounds as if she was more financially responsible than you were. Did she influence you to change? Did she become even more responsible as you took on more financial responsibility? Was she worried about your debt? Does she think you are a miser now? 😉

    I understand if you don’t want to talk about this, it’s not just about you, you have to consider her privacy too. I am just interested because different money management styles can be a challenge for a couple and you seem to have managed it.

    Keep up the great work!

  40. I don’t see *too much* saving as an issue – a modest “spend on anything I want” budget item was enough for me.

    Were I 25 again, I’d *max out* my plan at work (in my last corporate job I had money returned to me because I exceeded the 401k cap)

    My 10 years ago story:

    In my late 20s, I left a Fortune 500 career to care for my mom whose illness finally claimed her a few months ago.

  41. 10 years ago I owned my own house with $80,000 principal remaining on the mortage. I had some money saved but no income. My money was rapidly being eaten up by a graduate degree program that I would attain, but would not end up using. I put $8000 into the house, and sold it for $6000 more than I bought it for in 2000 (or just before real estate starting taking off in the area). Two years later, I wouldn’t have been able to afford that house. I was $24,000 in debt with no savings, and no retirement savings.

    Today, however, I have $25,000 in savings, $57,000 in retirement savings, no debt but for the principal of $112,000 or so on the mortgage, and much equity in my current house. Wish I had learned my lesson earlier, but it was a lesson that needed to be learned.

  42. JD,
    Hopefully you kept your old comics you could sell them and make a fortune.
    Maybe that is what I should try to do with the 6000 that I have in storage or maybe I’ll just pass it on to the kids and they can use them to buy their first house.

  43. Ten years ago today I was 18, fresh out of high school with no debt. Two months later i received my first credit card with a limit of $500. The first night I bought a fake chinese vase on e-bay, a pair of expensive shoes, some oakley a-frame sunglasses, and a “talking” watch. I had already reached the limit.

    Ten years later and after reaching a total balance of $5,600 on various credit cards, I am now one month away from having all of it payed off. Thankfully, I was able to roll over most of that cc debt onto 0% offers, so I didn’t pay much in interest and all of my payments were made on time.

    I do have $80k in student loan debt, but it’s all at a good, fixed rate and I can easily make the payments every month.

    My savings rate is around 40% of after-tax income, with 10% going to roths and the rest to soon go into an emergency account.

    I only make $25k a year, which is far less than I expected when I was in college running up the student loan debt, but it’s an amazing job which I love with good benefits.

    I’ve learned to be far more frugal than I was as a college student and am so much happier for it.

    Don’t worry about feeling too miserly J.D., sounds like you spend far more than I do! My idea of work-out equipment is a pair of 5-year old sneakers and a steep hill.

    Thanks for sharing.

  44. Ten years ago I was dropping out of highschool, broke, and starting college at the age of 17. I had no money or job, so personal finance was pretty much not in my mind. However, I was a very good budgeter. My parents offered to pay for my rent if I took care of bills and food and such. I had about 100 a month for these things after everything was said and done. I ate a lot of rice and still managed to buy books and pay my electric bill (which I kept down to around 15-20 a month). I didn’t have a credit card, or even visa on my debit card (which one time meant I couldn’t buy medication at 3am because they only took visa at the convenience store and I couldn’t use the ATM because I had less than 20 in my bank account, so I had to suffer through a fever/flu alone until the grocery store ten blocks away opened the next morning)

    I got into debt due to school, which I then worked 70-80 hour weeks at two jobs to get paid off. Now, ten years after being a broke high school dropout, I’m debt free with two college degrees and going back for my MA. Which we’re paying for out of pocket by putting away a third of our after tax wages into savings for it.

    Best financial decision I ever made? Marrying my husband. I know you don’t have to be on the same page to have a good marriage, but damn it helps. He and I have complete transparency with our budgets, desires, and incomes. We support each other’s goals and talk over everything. We both dislike debt and responsibly use our credit cards to reap rewards.

    By the way, JD, I know you dislike credit cards, but there are good ways to use them that aren’t evil. I actually have no idea what the % rate on mine are because I never put charges on card that I don’t have cash for in my checking account. So far in the last year my husband and I have gotten about 400 dollars in rewards. I think if someone is able to use it responsibly, there is plenty of money to be saved there and being automatically allergic to credit could mean missing out. I think of my credit card as umbilically attached to my bank account. If the money isn’t in the account, then it can’t go on the card (even though I have thousands in my credit limit). This practice keeps me from overspending while allowing me the safety of knowing if I had to I could make a big emergency purchase (and transfer emergency funds later to cover it) and that all the while I’m earning rewards.

  45. JD, thanks, I always enjoy your writing style and like Moneymonk (comment #38), I appreciate the visual aids. I’ve read a few of the other MBN articles about this and yours was interesting because it gave detail which made the story more compelling for me.

    Thank you for sharing, it is really appreciated and valued, even in far off lands!!!

  46. Great post! 10 years ago I was graduating high school. I did not have any credit cards or any money to spend. I remember taking my cd’s to the pawn shop so I could party one night. How sad. The credit card issue for me started in 2001. CITI gave me the first taste of credit and it all went downhill from there.

  47. This is what turned the corner for me.

    1. I maxed out my retirement 401k contributions.
    Never seeing it in my paycheck made it easier.

    2. I married a financially disciplined and frugal fella who makes a decent salary and has serious savings habits.

    3.I automated my savings and debt payments. When squeezed, I used to think that savings and extra debt payments were optional. Now I don’t. Now they’re more important than ever.

  48. Wonderful blog, J.D.!

    So true about ‘relationships to money’… As soon as something clicks, you start to realize just how important capital really is. As soon as the concept of compounding is understood, and the discipline to save (rather than use credit cards) kicks in, one can really set the stage for a great come-back and amazing returns. Today’s pennies will be tomorrow’s dollars…

    I saw a few of your comments above and some readers were surprised about your earlier issues with debt. Well, I can say, we’ve all definitely been there, I’m sure! The key to pulling yourself out definitely lies in a big change of MINDSET more than anything else (especially, home equity loans, which only cover up the problem)!

    Congratulations on the positive cash flow! I’ll be checking back often.

    Cheers,
    EffJay

  49. Many congratulations on freeing yourself from the credit trap. I’ve spent the last five years doing the same thing.

    I fell into the same trap the moment I became an adult and could get a credit card. At 21 I found myself $10k in debt with barely $10k in yearly income. I had to go through a credit program to get out – and I still struggled with reduced payments and reduced interest.

    From that point on, I was never cavalier about credit, but I did use credit to get things I wanted and cover large expenses. I learned early not to overextend, but still carried enough debt to make it a burden.

    Save for a reasonable payment on student loans, my debts are gone as of tomorrow. I focused on paying off one debt at a time.

    I just paid off my car two years early. I’m in my late thirties and have owned just four cars. I’ve driven them all until they were practically dead.

    Then, I focused on credit cards. They’re gone now. I didn’t do it in the most advisable way. I put money into a saving account and periodically made big payments against my credit card debt. Along the way I made payments well beyond the minimum. I realize it would have been better to apply more money earlier, but I found it more satisfying to take away big chunks. It also made me feel more secure with money in the bank.

    I’m now seeing a positive cash flow of $1,500 per month.

    My next goal is to build savings for short-term security. I want to have enough cash to be secure for at least 6 months, preferably a year.

    From there, the sky is the limit. Minimizing your spending and erasing debt is truly a liberating experience.

  50. As a regular reader for 1.5 years, this was my favorite article yet! If you ever write a finance book I think it should be the first chapter.

    10 years ago I was 17, had worked PT for three years and had decent savings which I thought I would use for a car. I’ve always been a saver but I only thought in the tunnel-vision short-term. I blew my car savings the next year on a trip to Europe, and decided to go to a college that required loans, which I really didn’t understand at the time. I tried to save for a car again in college but (again) spent it on Europe. After discovering personal finance online in the last few years, I understand the significance of long-term savings in addition to short term, and the need to pay off my student debt.

    PAT: If you ever check this again, here’s my advice as a recovering savings addict: listen to your friends and family. It goes against all the advice you read online about not giving into “peer pressure” or the Jones’, but if the people close to you have ever said anything like “live a little” or “don’t be so cheap all the time” then really try to follow their advice and know that it’s ok to spend on what’s most important to you. For me, this means travel and social occasions. For everything else, stay stingy, but pick at least one or two categories to loosen up a little and see how you feel.

  51. I have also recently learned about the psychological aspects of saving money. I’ve come up with four questions to protect yourself against with impulse buying, which you can find here.

  52. 10 years ago, I didn’t have debt. Since then, I’ve multiplied my net worth by about 8 times. I think I’ve only gotten more extreme in saving as time goes on but I’ll loosen the purse strings when I have enough to retire on.

  53. Ten years ago we were seven years from paying off a townhouse, had $30K in funds, 8K in the bank and growing with no credit card or auto loan debt.

    Then we bought a single family home a year later. We really had to stretch to get it but it was a great deal. Then soon after the car got totalled, the furnance went, etc., same old sob story many others have perservered through.

    Technically our net worth has doubled, but that’s because of the 401K and equity in our home (which hasn’t shrunk as much as it’s gained).

    I don’t have the liquid assests I had, and have struggled over the years to really get on top of the debt my wife has accumulated. Oh, was that a Freudian slip? I meant my wife and I have accumulated :-). I’ve managed to meet certain goals and fail miserably at others. My wife has met most of her goals. If things work as planned, we’ll be out of debt (except for the mortgage) in six months.

    Just keep on planning (to include some of the fun stuff), keep on going. Surprises happen, that’s what the emergency fund is for, don’t be scared to use it.

  54. 10 years ago I was 21, had been working 3 years and had a net worth of $30k…by the end of this year when I turn 32 I will be worth $1 million. I still rent, missed out on the real estate boom(bought one but sold too early – relationship breakup), made a few bucks in the dot com bubble and lost it again!…I have simply saved alot from an early age, lived with my parents till I was 25(cheap!) and invested in my career (doing a good job, working overtime, studying new subjects in my own time) – I’ve been fortunate to hold ‘quite good’ jobs from an early age (IT industry) and was earning $60k a year at 22, $250k a year at 26/27 and am back down to $140k a year at 31. Now that IT work is going to places like India, I think my 30’s will not be as ‘easy’ as my 20’s – I’m going to have to re-invest in my carear etc again. I didn’t even go to University so I consider the last decade or so, pretty good – I have managed to ‘live’ aswell, taking many good holidays etc along the way.
    Make money, invest (your money and in yourself), don’t waste money on stupid things!, live within your means and don’t take things so seriously! (though I was a decade or so ago). Good Luck.

  55. 10 years ago I was finishing the tail end of a prison sentence for credit card fraud.

    My approach prior to that was to get what I could, how I could, damn everything else.

    I had nothing. I was working for a horse trailer manufacturer, making $7/hr. No prospects of a bright future.

    $20K of debt, and $6K of restitution to make. I had to work my way up from nothing.

    Now, 10 years later, and MUCH wiser and mature… I am just shy of $10K in the bank, and in a very good job.

    I wish I could have said I learned things quickly, but at that point in my life, I had to take the long circuitous routes to learn things… bang my head on the wall a few times.

    I’m just thankful that I *have* learned the lessons that I did.

    JD – I’m a lot slower to spend now, as well.

    After reading “Debt is Slavery” I keep thinking of spending in terms of how many hours of freedom I’m giving up to buy the latest and greatest doodad.

    It gives me pause.

  56. thanks for this great post. i’m a new reader to your blog but have enjoyed it very much so far.

  57. Hi J.D,
    Like others, I have to say that this was really a very helpful article. 10 years ago I was 30, had been married for 4 years, our sons were 9 and 4. I was making around 30K a year in a job that I enjoyed, but did not have much prospect of moving up ( I was doing software application support, and really wanted to move into the actual development ). In July of 1999, I took a big risk and took a contract job in Columbus, Indiana ( I talked it over with my wife and we figured that if it did’nt work out, I could always come back to Tucson and finish grad school). It worked out well. I would’nt say that we’re well off, but we have done OK. Today we’ve owned our home for the last eight years, we’ve reduced the mortgage by 12K. Our retirement accts have close to 100K combined, our cars are paid off. Our emergency fund is anemic, but we have very little CC debt (maybe around 1K or so ). In the ensuing years, both my wife and I have managed to finish grad school — yeeah !! ( that was tough with two kids, working full time). I have to say that in the last couple of years or so we have gotten a lot better about managing our money — thanks in no small part to you, and Trent over at The Simple Dollar. I think the big wakeup for me was when I was doing our taxes one year and I realized how much we made, and how little we were actually saving outside of our retirement accts. For us, we started off small, like not giving the bank so much money in overdraft fees (that leaky faucet will kill you !!), then getting a budget, and finally we’re at the point to where we can budget for most of the expected stuff and we’re starting to save for the unexpected. The managing money deal is a constant process. Like many here, I wish I had started a lot sooner. Oh well, better late than never !!

  58. In my experience, in the grand scheme of saving, budgeting for fun is super important! Not that fun has to be expensive, but it’s important to put aside “fun money” so that – should you want to spend the $ – your first thought won’t be about what you “should” be spending your fun $ on, but on how much you will enjoy your purchase!

  59. You know, I would really like to know more about this:

    “But my deficit spending wasn’t a math issue – it was a product of subtle emotional and psychological problems that I had to work through before I could get my spending under control.”

    This is the KEY. Would you please consider writing an article to the emotional aspects you had to heal before you could come clean, so to speak?

    🙂

    Thanks!

  60. This post gives me great hope. I am beginning my journey towards being debt-free, and though I don’t have that much debt, I still recognize that I have an unhealthy relationship with money. One book that has really helped me dive into the emotional/psychological aspect of this relationship is “It’s Not About the Money: Unlock Your Money Type to Achieve Spiritual and Financial Abundance” by Brent Kessel. It’s a great book talking about how our subconscious and our emotions play into how we spend (or obsessively save) or money. I highly recommend it to anyone looking to understand the root of their money problems.

  61. This is inspiring … my wife and I started on Dave Ramsey’s plan, ‘The Total Money Makeover’ last September. Since then, we paid off one of our two cars and have paid nearly $10,000 in student loans. We’re on a good path finally and we need to be with a 2-year-old girl and hopefully another one on the way in the next year. We have redefined the word ‘stupid’ with finances and needed to get smart. It’s a long process but we’re on the right path.

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