I used to spend money recklessly. Working during what used to be the golden days on Wall Street didn’t help and this went on for a few years. Being an investment banking analyst had lots of perks, but most of the people I knew lived way beyond their means, despite the fact that even ten years ago many of my bosses, all under 30, made half to a million dollars per year – and they weren’t the top executives.
I didn’t even come close to that figure, but for someone out of college I had a good salary. I did have the growing suspicion that I should have had a better handle on my finances, but as a 22-year-old woman living in New York City, I didn’t try too hard to save up money.
My approach was disorganized. I wanted to spend as little as possible, but if I really needed something, I would just get it and pay with my credit card, which meant that each month I had more debt and higher payments. It wasn’t extreme expenses but a kind of lifestyle that required a maturity I didn’t have. It didn’t help that my friends and I convinced ourselves that this was just the way things were done – everyone had credit card debt.
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My sobering experience happened over time, after meeting my husband, becoming a military wife and having 6 children. Especially with a spouse gone so often, it was crucial that I had a plan to make it to the end of the month and leave a little cushion.
I took three steps to get my spending on track. First, as the expression goes, I had to “admit I had a problem.” It included spending two or three or five dollars a day on nothing important, maybe some candy, a snack, coffee or a new lipstick, and not keeping track of how much extra money was going out each day.
Second, I needed a plan, something practical to move forward with, but something that worked for me. I read several articles by well-known financial planners, but some of them just didn’t work for me. Third I just needed to get off my buns and do it.
I started by making a monthly budget and dividing it in major categories, fixed expenses, bills, children’s activities, groceries and a little extra for emergencies. I set up several of our bills with automatic pay to avoid ever incurring late fees. I also started using cash for my groceries which made me much more aware of how much money I was spending and less tempted to add an item here or there. When I finally paid off my debt, I was able to start saving.
It was difficult for me to stick to my plan, but a good lesson in learning healthy spending habits.
These days, I think about my finances more than usual because of the current economic situation and the debate over the bailout plan. I realize that no matter what happens many of us will have to work with budget constraints in the months to come. I hope that with reasonable work and planning it will be possible to manage tough times.
Now if only those Investment Banks and lending companies would give some of us average folks a call, we could give them some pointers for a very small fee.
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