I started my adult life in debt, and turned it around to build enough wealth so hubby and I can both retire by 55. Here’s what I’ve learned.
TLDR:
- Live within your means. Hard stop.
- You are responsible for your financial security
- Track your income and expenses to truly grasp your full financial situation
- Do NOT make financial decisions with your emotions
- Learn how to save, and have the discipline to do it
Let’s Begin at the Beginning
After my father lost his job in the 80s, my mom needed to stop being a stay-at-home mom and (re)enter the workforce. We ate food from food banks, and money was tight.
Because I saw firsthand how scarce resources can be, in my adult years, I was tired of feeling like money was something to fear. I fortunately married someone with solid financial habits (#ProTip), and together we decided to develop financial discipline to create stability and build wealth.
This absolutely changed my lift for the better. I am no longer afraid of money; I have a full account of where our finances stand, and feel secure that we can handle life events as they come.
Lesson #1 – Live within Your Means
It’s as simple as this: Your expenses cannot exceed your income, or you will accrue debt.
If this is out of balance, you have two choices:
- Increase your income
- Decrease your expenses
What does this look like? To raise your income level, it either means you’re actively seeking a higher paying job (which may require “upskilling” as they say), or you’re taking on a second job.
It could also mean retiring from government service, collecting your pension, and then becoming a contractor to create an influx of cash (five ⭐️, highly recommended).
Or, it means you’re taking a hard look at your expenses and reducing them. This looks like:
- Living in a smaller apartment/house/etc
- Driving a less expensive vehicle/driving a vehicle as long as you can before buying the next one
- Eating out less, or not at all/cooking your own food
- Taking fewer vacations/cheaper vacations/shorter vacations/none at all
- Minimizing expenses on entertainment (streaming services, etc)
- Reducing your (unnecessary) clothing purchases
- Reducing/eliminating impulse buys
- Reducing/eliminating luxury purchases
Honestly, Gladys, this is all about being willing to do without, and to be willingly uncomfortable at times.
Lesson #2 – You are Responsible for Your Financial Security
One of the key things to remember is you possess more control over your finances than you may want to admit. First, I am not talking about a situation where you genuinely lack the ability to control your income due to some type of disability/devastating medical situation. I’m talking about someone with a steady job where someone has reliable income.
As soon as you take responsibility for your financial security, the better off you’ll be (and the happier/more peaceful). I’ve personally had moments over the years where I felt like my spending was getting too high, so I had to sit down, pour over my bills, and take stock about things I was buying that I didn’t need.
And then stop buying the things I didn’t need.
Lesson #3 – Track Your Expenses
Babe, you can’t possibly know where to go unless you know where you are.
If you’re walking through life and ‘have no idea’ why you feel strapped all the time, you’re not doing enough work (can you tell I’m #GenX?). I’ve used Intuit’s Quicken software for over 20 years. It keeps me honest about where my money is going, and helps me keep everything sorted. There are a lot of budgeting apps out there, and you should find one that works for you.
Of course, a basic Microsoft Excel spreadsheet (#ILOVESPREADSHEETS) works well, but an app can quickly run reports for you that you’d have to do manually with Excel.
Lesson #4 – Do Not Make Emotional Decisions with Money
Have you ever made a financial decisions with your emotions? Maybe you bought an expensive car because you were getting pressured at the dealership, or you got in over your head with a house you couldn’t afford because ‘it just felt right when you walked into it.’
Yes, it takes a lot of mental fortitude, but you need to enter each financial decision being as fully informed so you can resist any emotional influence you may feel. I get it; I’ve felt it, and in my younger years, allowed my emotions to drive financial decisions.
¡No bueno!
But as I get older, I don’t have the patience to get in over my head financially because the finance person at the dealership tried to upsell me on an extended warranty, or the bank approved me for a mortgage I actually couldn’t afford because I looked at homes beyond my budget.
Lesson #5 – Learn How to Save
This one personally took a hot second to take hold in my life. While I did at least contribute the match to my 401(k) (government version) when I started working full time in 2000, I didn’t have the discipline to save cash along the way for things like vacations, planning for car repairs/etc.
This created A LOT of stress for me.
Around the time I got promoted to a GS-15 in 2018, I made the decision to establish that as my baseline financially. That means I’ve essentially been living at that income level for years and saving or investing the rest.
This has allowed me to:
- Increase my retirement contributions ‘without feeling it’
- Save for vacations every year vice going into debt
- Weather the storm of unexpected financial events (e.g. car repairs, high medical expenses, etc.)
- Survive December every year, when I play the role of Santa Claus in my house, and when both my husband and son have birthdays
It’s never too late to get your act together! Find at least one of these lessons and implement them today!
🐝 That’s the buzz for today – now go forth and make good financial decisions!