I don't think I realized how badly I was doing until I read Grace's post about coming up short on your goals. Six months after I started blogging, it's time to reflect.
I have been blogging about six months. When I started this blog, I was $30K in debt. When I set my 2008 goals shortly after that, I believed I was going to get out of debt and save for the wedding in 2008. I could see debt freedom on the horizon. I could taste it. Six months later (that would be now), I was supposed to be debt free and start socking away huge amounts of cash for the wedding. Then I was going to start saving all that cash for a down payment.
I had a net worth of 8K and 30K in debt six months ago; now it's 3K with 45K in debt. To show for it, we have a ridiculous garage of cars (with a lot of equity, at least), a business that hasn't made any money (with a lot of equipment and inventory, at least), and a fat retirement balance. True we traded credit cards for secured loans, but none of those things will pay the wedding caterer.
What happened? Fiance is obsessed with the iPhone released today. We spent $500 on a few wedding gifts. I got a personal trainer. We started eating organic food. We went out to eat a lot (lots of sushi). We picked up some bar tabs here or there. We went on vacation to Haiti. We hosted some BBQs and parties. We paid someone to clean our house. We paid someone to clean our clothes. We went to some concerts. I bought a ridiculous bridesmaid dress. He bought a new suit. The money just went. And so, it hurts me to say it. I am close to exactly where I started six months ago. That's just embarrasing when you make over 150K.
I feel really discouraged about this. I thought that I would make smart decisions when I started blogging, that I would magically have all the money saved up that all these PF bloggers seem to have. Instead, I don't think I'm doing that great. And there's really no one to blame but myself.
Update: This post is in the third anniversary version of the Carnival of Personal Finance. Congrats to the carnival for three years!
25 comments:
your problem is that you refuse to face reality. gas prises are skyrocketing on the globe but you just shrug thinking it doesn't affect you because you only drive a few miles. you bought a ridiculous and unnecessary car. you went to haiti despite the fact you knew you couldn't afford it. you have a $2k engagement ring. your fiance sounds like a person who lacks responsibility and yet you want to marry him? i can go on and on about you.
but you know all these things. the truth is that a person needs discipline and restraint to get their finances under control. you don't even get real with th title of your blog: you blame the dog!
the good part is that you realize that it is your own fault. would you like to wind up like ed mcmahon? think it can't happen to you?
you make an astounding amount of money. the new government is going to term you 'rich' and tax you to death. literally. you'd be wise to get your life in order. stop the madness. you don't need a personal trainer. until you can do things for yourself, nothing is going to turn it around.
face the reality. you have a spending problem. either you get it under control yourself or the powers that be will be doing it for you. it's not going to be a pretty picture.
good luck.
I don't know you, and just started reading your blog a short while ago. I've consistently found your posts captivating. I'm sorry to read about your stalled goals. Maybe you've been waiting for that Eureka moment--if so, it sounds like this could be it.
The shame of it, is that your lifestyle sounds, well, a bit selfish. It's hard to sympathize with someone who makes twice what our family of 4 lives on. You need to understand life can change in a moment, and debt will destroy your options.
Good luck.
Maybe you should get the fiance to help you with your goals. It sounds like he is a bit into gadgets. If you make more money than him maybe you should set some limits on how much you guys spend together on entertainment. When I got engaged to the hubby I told him that we will spend just 2% on entertainment and he agreed, and so far it's going well. If your fiance and you are going opposite directions about money then it's not going to help at all. just my 2 cents.
It's hard to make millions when you are spending it. At least you learned now rather than later.
I am also sorry your goals are stalled, but I don't think reprimanding you or making you feel badly about it is going to help.
All you can do at this point, is make a change to your life, budget, start living frugally and make it a point to really clear your debt with a set plan. $45k may seem daunting, but believe me honey, it isn't.
The only problem is you have to REALLY be committed to live life to the bare minimum and I think in about a year or less you can clear that debt in no time - it took me about a year to clear $40k and I make $66k a year.
I'm rooting for you!!!!!!!
(Oh and PS.. just think of how awesome it'll be when you see your net worth skyrocketing instead of declining. I literally stare at my charts until my eyes are bugged out, to imprint that in my head)
It's not what you make, it's what you do with it that matters. I have read your blog almost from the time you have started it. I remember your challenge of not buying clothes for 6 months. Then you justified the spending and doing things like this isn't helping your situation. You’ve said it yourself that you make too much money to be this broke.
You've pointed out the reasons you are in the position you're in right now: cars, his business, vacations, and saving a lot into retirement. Smaller things like eating out, clothes, buying 'toys' and such can really add up when you look at it over time. The most difficult thing we have to use to control ourselves is one simple word: NO.
Take the iPhone 3G as an example. It is $199 for the 8GB and $299 for 16GB. This is a lot of money alone for some people. Now add the service charge, cheapest plan is $39.99 plus a $30 data plan per month for two years. This adds up to near 2k when all is said and done. There's an extra catch though, the meMobile service you could also add is $100 a month, that's an extra 2.4k for two years of service. Now when he looks at that iPhone 3G is it worth spending 2-4.4k over two years to have it?
It sounds like you two need to work together. Take it from me as someone who thought they could figure it out without the other being on board. First figure out the basics like your cash flow, what is coming in and what has gone out each month. Once you have an idea of the amounts you’re spending, break them up into categories. When you establish boundaries on things you'll know what's left over to put towards saving for the wedding, and paying off debt.
My DH came into the bedroom this morning to tell me the iphone is $199 and kiss me to wake me up. Um, not how I wanted to be woken up, so I pretended to not hear him.
But you can't keep kicking yourself. Try to stay positive and look at the bright side.
You've saved $X for retirement? You've paid off how much CC debt?
By the way I'd talk with your fiancee about the spending. I still am reining my DH about stuff, but it's getting better.
Hey we're not perfect!
I definitely had some failures early on with my blog. But you just have to pick yourself up, dust yourself off, and keep going. Try creating a monthly budget and sticking to it. This is what really helped me keep my spending under control.
Good luck! I'll be reading!
A thought: If it seems that you are unable to control your day to day expenses, give yourself an allowance, have the rest direct deposited into an account inconvenient for you to access; then, set up your credit card payments to automatically be paid from this account. Other bills, you could set up a monthly TXR to your billpay account. Almost any banking entity has these capabilities.
Oh, of course you have to cut up the credit cards. As long as you know you're clearing enough to cover these expenses, you don't even need to check the "hidden" account and so will, perhaps, as a side benefit save plenty for your wedding.
This of course, is a bandaid, until you develop the self discipline to control you spending habits.
Your allowance might even have to be in cash, if you can see yourself rationalizing using your ATM/checks.
Discipline, [understanding] Cause & Effect, Accountability: keystones to being a successful adult.
BTW, Read Larry Wingate
Like me (except you started three decades sooner!) you are having some financial successes, particularly with retirement savings. Take a clue from that, and funnel some small percentage of your salary directly into a separate account, and apply that to your debt snowball three seconds after it lands in the separate account. Budgeting, sticking with it, financial restraint is all a learning process. Be grateful you are young enough to make mistakes and not have them completely mess up the rest of your life. OTOH, you are never too old to learn from past financial mistakes--do that, and keep blogging as you move forward. (Could I possible put more cliches into one comment?)
Do you have proof that you actually make 150k in texas in your 20's? I post a lot of proof on my site... would love to see one of your paycheck stubs.
HS
I think this sounds like your turning point. Good luck!
One thing that helped me get my spending under control was some pretty careful budgeting. I use YNAB, which isn't for everyone, but just a couple of months of tracking my expenses was VERY eye opening.
(Also, I'm amazed at the comments you've gotten to this post. Why should you need to prove your income to anyone?)
Stop spending, start saving ... TODAY!
No more buying anything unless you have it budgeted. You do know what a budget is right?
Another much "nicer" way to say it is "spending plan".
You have $X coming in, and $Y going out. If Y is greater than or equal to X, you're in for a world of hurt later in life.
I had 10 years of financial mistakes to teach me my lesson(s). But, your biggest lesson may be your business will not succeed if you don't know how to manage your own money. I don't think you're greedy, just a bit spoiled & uneduated in finance.....perhaps find yourself a fee-based financial planner to (literally) whip you in to shape.
This is not your lifestyle...even at $150K; this is some "Dream" life that's not even worth it. Give it up.
Best of luck!
Where did you learn to calculate your net worth? Net worth = assets minus liabilities. What you are describing is that you are $3K to the good and $45K to the bad. In reality you are $42K to the bad.
Is saying that you have a net worth of $3K at this point making you feel better? If you want to face reality, then face it front and center. You can not fix a problem unless you acknowledge it. You are making progress but even at this point, it doesn't really seem like you are 100% there yet. You make an excellent salary - take advantage of it and you can have no debt, the things you want and plan for the future at the same time. Really, you can!
Wow you make me sick. I am a single parent working on 25,000 a yr and own my own home worth 150K--you couldn't probably imagine owning a pair of shoes that costs less than 25,000. People like you with your 45K worth of debt contributes to the demise of our economy. You should more than be able to afford a complete lifestyle, but wake up sister you aren't some teenie-bob billionaire--quit acting like one.
Your own issues lie in your inability to say no to impulse purchases and letting your welching fiance get whatever he wants.
You are insane, thats a lot of money and you just blow it left and right. Stop spending on a bunch of expensive garbage if you want to get somewhere. If not you will go bankrupt soon and someone like me will buy your forclosed house on the cheap and make a fortune off your idiocy. Go ahead and spend yourself down the hole, just don't expect the taxpayers to bail you out when you do. When you self-implode, just crawl into a hole somewhere in the wilderness and go away.
Is your net worth really 3K or you are confusing net worth with assets? Net worth is assets minus liabilities. So if your net worth is 3K and your debt is 45K, you must have 48K in assets, right?
If your net worth numbers are correct, than your assets are greater than your liabilities. I assume you pay more than 3% in interest on your debt. So if you indeed have 48K in a bank earning taxable 3-5%, and you are paying more than that in non tax-deductible loan interest, why on earth wouldn't you take the money from your bank account and pay off your debt with one check? It is utterly ridiculous to waste money on interest why having money to pay it off.
There is no two buckets of money - savings and debt. Your debt is part of your net worth as are your assets. So if your assets earn less interest than you pay on your loan, your total net worth decrease every month. Pretty stupid.
Ditto about what other people said. Personal trainer is a luxury you cannot afford - go hiking instead, walking if you live in a city. It's free. Make your parties pot luck - let everyone bring food. Less expense for you, and may be more fun for everyone. People often bring pretty good home made food to pot luck parties, so you get to sample lots of different dishes. As much as cleaning lady is convenient you cannot afford her at the moment. Maybe in future when you got rid of your debt and saved some money.
All posters above gave really good advice, so there is little to add. Learn value of money, learn to like money per se. When you think about spending $X on something that isn't a necessity - e.g. food, rent or mortgage, utilities, medical - think "is it really worth $X?". "do I really need it?". What exactly this new gadget gives me compare to what I already have? Do I really need new clothes or maybe I have enough? If you really don't need the car you bought, why not just sell it?
Bottom line it - if you earn 150K, live on 75- 100K, not on 160K. One can live very nicely on less.
I agree with almost everyone above
1. stop spending
2. Make a list of what are a nessesity to live. Housing, food, utilities, cell phone, internet, loans, medical, retirement etc
3. trainer is a luxury not a need
4. I agree with Sara on this one
you need to wake up.
I earn 10k a year and support my self, parents, and little brother all the while going to college.
While your accomplishments are great. You throw away money for no reason! Your fiance seems to have a pension for throwing away on sensless things like an Iphone which will be out done by some other object next year when he can get something that is nice for 50-100 dollars or if he needs to have a pompilot then maybe that.
I just dont understand why is it that you can not simply make a list of your debts ie
Rent/house pay ment X
etc down the list pay all the Essentials to LIVE... then the rest split in to two .. one half go to the debt completly and the other half set aside an allowence for the month, food money and the rest go in to the 401k.
It is easier for you than I. I look at my check and think I have 40 for two weeks for 4 people and I cry.
IF you want to be out of debt then make a plan YOU have to be smart to have ONE gone to college , two amazing colleges, worked your butt off during college to pay for it and for your grades ... now use your brains to get you out of debt!!
Sorry I meant take your monthly
Make a list of what you need to live!!! NOT WHAT YOU want.
Pay for all you need to live. Take whatever is left and divide that in to two.
3/4 should go to pay off your debt the other 1/4 shold be divided in to two... 1/8 to be your allowence the other 1/8 to go to your retirement fund.
I admire your braveness for "putting it all out there" for the rest of us to learn from, thank you for that.
Also, from the tongue-in-cheek way you say some things and the fact that you weren't raised with a lot of money, I think you probably pretty much know where you're messing up, maybe you just haven't reached a point in your life where it's all that serious to you, and so you continue with the extras and luxuries even though you know the deal. Probably a smart lady like you will find yourself thinking differently later on, for example, when and if you have kids or get older. Right now, you have a nice single urban professional type lifestyle. However, good times with big incomes can end without notice in any number of ways you might never have dreamed of, and it seems like you're assuming the the money will continue at this level, which is too on-the-edge for me. Then again, as the years go on, you will hopefully have time to accumulate more assets than you and most young ones have. Still, if I were you, I'd get and keep it all on level- even if you don't save at this point, don't owe, shouldn't be too difficult if that's what you set your mind to.
That said, my spouse and I make about the same as you, and let me tell you, $150k won't put you on Easy Street. We are raising a family, but then again we've had years to accumulate assets, so it's a somewhat similar situation overall, I guess. But we've worked up to this level, we didn't start out with anything like it. And of course we've made plenty of mistakes along the way.
As some of the other posters have mentioned, I too detect plenty of jealousy in some of the comments made to you, when the simple fact is, higher income people do tend to have higher-dollar spending habits and mistakes than those with lower incomes. The one who makes $150k will have some extras that would be downright bizarre for one who makes $25k, that's just the nature of the game.
What I will say is that personal trainers, trips out of the country, expensive vehicles, and so on, don't exist in our world. I don't feel that we're at an income level that allows for all that and a secure future as well.
We have no debt except about $50k left on our mortgage. To achieve this and have a nice accounts for retirement, kids' college and some savings, we still do have some fun money but the level is more like out to a mid-priced chain restaurant about twice a week, one week-long (domestic) family vacation per year- Motel 6 style, family membership to the YMCA, new lower-end car every 8-10 years, cleaning our own house, which needs repairs, updating, and new furniture but gets it only as we have the cash. We keep the day-to-day lower than it needs to be, but then if we really want something,even if it's extravagant, we get it-but only when we have the cash. I love this easy, no-worries way we've finally come around to, and absolutely wouldn't want to trade it to live with more luxury.
Our cash flow is plenty higher than the bills, and while it might sound hum-drum, we really enjoy getting to buy, free and clear, whatever we decide to get next with the extra cash that keeps piling up.
So, I guess it's really simple- either you save and invest your money, or you spend it, or you spend more than you have and go into debt. You then live with the results of your choices.
One more thing I'd like to mention for you to take or leave as you see fit, I wouldn't mix my finances with a fiance, especially when I was on the downside of the deal, as you seem to be. There's a world of difference between "married" and "almost married", legally speaking. Just my opinion.
Just wanted to ask you, if your finance's business is not making money yet, with what is he planning to buy the iPhone? Second question, shouldn't he pay you back what you invested in the business before he buys anything new? Or before you take trips to nearby B&Bs?
My younger sister has a similar problem. She graduated college and landed a $70k job immediately after, which is pretty good money for our area. She bought a car that looks nice, but gets crap for gas mileage. Having a car is a necessity to cover her 750-mile per week commute to and from work. You're probably thinking 750 miles?!?! Why not move closer? She is neither financially unable nor willing. Three years after landing this job, she's still bunking up at our folks because she 'can't afford' her own place.
Like the trap you seem to have described, she lives in the mindset of paying bills and treating what's left over as spending money. And if she doesn't have the money but wants something right now, she will finance it on a credit card or loan... to have it right now as opposed to saving for it.
I live in an area with a very similar cost of living to hers. I work a 35-40k/year job, have a decent apartment in a well-to do neighborhood, go to school full time, and hate to cook. By using some restraint and seperating wants from needs, in a year's time I've managed to reduce my debt to $5k (school, credit cards and automobile combined) and continually build a savings to which I'm contributing roughly $500 per month. All of this has been achieved on my income only.
I wish you the best of luck in finding and maintaining some financial responsibility. Especially for your fiance.
This is actually the first time I have read your blog so I don't have a lot of background on your situation. Don't beat yourself up about the past. Start with today.
Write down everything that you want to spend money on. Look at the list next week and see what is still important to you.
Assume that your current situation would be worse if you didn't start evaluating your situation. We used to be dual earners and always needed more money. Now we are working with a significantly less amount of money (one income) but we are able to pay down more debts and have extra money.
It takes time but you will get there. Just try to get future hubby on board soon.
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