Sunday, March 14, 2010

Money troubles, and why I love my mom

My mom has influenced me in many ways that I'll always be grateful for. She instilled in me, early on, a lifelong love of reading. Most recently, she's given me the invaluable gift of straight talk.

In January, I mentioned to her that I would like to move into an apartment with a friend of mine in April. She sat me down and showed me how to create a budget in Excel, and how to figure out how all of my expenses would stack up next to my income. The problem was (and is) that I have a student loan. And also something that I had failed to mention to her — make that, had purposefully hidden from her — credit card debt.

Without these debts, I could have been saving up tons of money to use toward striking out on my own. Instead, I was throwing as much money as I could (I thought) toward paying down my credit card debt, while not saving anything and not really keeping track of my frivolous spending.

I broke down and told her about my credit card debt — nearly $5,000, on top of my relatively modest $2,800 student loan balance. She didn't flinch. Instead, she helped me craft a plan to aggressively pay off the debt, and immediately checked out a book from the library for me: Dave Ramsey's Total Money Makeover.

I was skeptical about this Dave Ramsey thing. I didn't want to be preached to about money (although, obviously, I needed to be). But my mom put the book right in front of me and asked me to read it. With two hours of free time each day on the bus, how could I not?

I devoured the book. Everything made so much sense. Pay off all your debt, Ramsey said. Secure a $1,000 emergency fund as soon as you can. After that, build up a 6-month emergency fund in case you lose your job, or something worse. And after that, you're free to save, invest and live a life free of money worries.

I crafted a strict budget for myself and carefully planned out all my payments for each month. I decided to take out all my spending money in cash each payday — a small, fixed amount for groceries/toiletries, another for eating out/fun stuff. The cash would have to last me until the next payday, but that was it — no more mindless spending with my debit card. All the rest of my paycheck would go toward aggressively paying down my debt and dutifully paying my monthly bills (cell phone, car insurance, etc.).

I'm very lucky that my mom got to me before I dug myself into even worse money trouble. I'm lucky that she sat me down, set me straight and didn't make me feel terrible by berating me for getting into debt. Instead, she gave me the tools to get myself out. And that, I believe, is just one of many signs that she is both a remarkable woman and mother.

If I continue with my written debt-payment plan — and I will — my credit card will be paid off for good in May and my student loan will be paid off in July. After that, I will be proud to save my hard-earned money to start a nice nest egg, and be able to move out on my own as a debt-free young adult.

That'll be sometime around November or December, not April — but it'll be worth it to have a nice chunk of savings, to not be scraping by paycheck-to-paycheck in constant fear that I'm just a car repair or illness away from serious financial trouble.

Don't get me wrong — all this financial security is still far in the future. Technically, even though I have a steady paycheck, I'm broke. I have no savings to speak of, and most of the money that comes into my account goes right back out to pay my creditors.

Creating a budget and sticking to it is simple, but not easy. (I first learned from Julia Child's Mastering the Art of French Cooking that "simple" and "easy" are two very different things.) I feel like many people (myself included) look for the easy way of doing things, when the best solution is often only a matter of doing something that is very simple, but hard to stick with.

It's not fun to stay home on a Saturday night instead of going out to a bar with friends. It takes some planning to make my lunch every day instead of running to the nearest sandwich shop. And it's definitely a chore to make sure I don't have more food in my cart than I have cash in my wallet.

But I'm excited to have this knowledge about how to manage money, and managing it well is actually exhilarating. One of Dave Ramsey's quotes that resonated with me is this: "Rich people tell their money where to go. Broke people wonder where it went." It's a powerful feeling to be able to tell my money where to go, to have a say in what I want it to achieve rather than feel helpless and confused when it's all gone.

I'm now slowly but surely filling in the financial hole that I dug for myself these past few years, and I'm looking up to the sunshine rather than staring down into a once-bottomless pit. I have my mom to thank for that.

I'd like to be able to offer my future children the same things that my mom has offered me: the gift of knowledge; the special brand of patience and kindness that can come only from one's mother; and a safe place to come home to when they're ready to fly away from the nest, but don't quite know where or how to land.

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