Plain Advice

I want to talk about money. I have had some significant problems in this area of my life, and I have learned quite a few things. I am still not where I want to be financially, but I am in a better place than I was even a year ago. So I want to talk about some of the issues I have faced, and what I have done to resolve them. I want to share the things that have and haven’t worked for me.

This topic will most definitely have to be presented in a series, because there are so many subtopics to be addressed. So be aware that this post is only the beginning of many articles sharing my ideas and experiences regarding money.

My Background

First of all, let me give some background. I was raised in an upper middle class family. My father is a lawyer. For as long as I can remember, he has worked as a court administrator. We were not “rich”, but he brought home a decent salary and there was never any financial stress that I was aware of growing up. If we needed something, we always had it. If we really, really wanted something, we usually had it also. My parents talk about being poor when they were students, and living on army rations that my grandparents gave to them. I was five when my dad graduated from law school, but I don’t remember anything like that.

Even though my dad made good money, I was not spoiled in the sense that I didn’t know how to work for things. I had a job starting at the age of 14. I worked as a courtesy clerk in a grocery store, and eventually became a cashier. The money I made was mine to use as I wanted. Of course my parents encouraged me to save money and be frugal, but I don’t think I actually ever saved any significant amounts.

When I turned 18, I went away to college. The first year, my parents paid all my expenses. For my second, third and fourth years, they paid my tuition and books, and I got a job to pay for my rent, food, and other living expenses.

My financial problems started early on in college. Looking back at how easy I had things financially as a student, I regret many of the unwise choices I made regarding money. There are two mistakes I made while in college that I can see contributed significantly to my financial problems:

1. When I received offers for credit cards in the mail, I took them. I used the cards as if they were free money. I did not really take into account how I would pay them off as I used them.

Because the cards had low limits, I felt they were manageable. I got 3 or 4 cards that I used regularly when I was in school. Each card had a limit of approximately $500, which I regularly maxed out.

These cards are not a direct problem for me now (they are long gone), but with them I created a pattern where I was using credit for unnecessary purchases, and I was often late on the payments. A few of the cards went to collections when I was unable to make the payments. This was the beginning of my bad credit.

2. Because I changed my major midstream in school, it ended up taking me 5 years to graduate. My parents had budgeted to financially support me for 4 years of college. Therefore, I was responsible to pay my tuition and books my fifth year, something I had never done.

This was the year I decided to take out a few student loans. This, in and of itself, was not a bad decision. The mistake I made was in taking the maximum amount that was offered to me, even though I did not need that much. For only one year of tuition and books, I ended up taking out about $12,000 in student loans. My tuition that year was approximately $3000, and my books were about $800. I took $8000 above what I needed! I have nothing to show for that money, except a payment I have to make every month to pay it back.

It has been almost 9 years since I graduated from college, and these loans are still not paid off. I am not even close to having them paid because I have taken forbearances (allowed breaks from making payments) for various reasons. During these breaks, the interest has compounded. I now owe roughly $20,000 on these loans.

By the way, just so you know, it is not easy for me to write about all this… to put it all out there for people to read. It’s embarrassing to air dirty laundry, especially when it comes to finances. So many people are “hush hush” about these things. But I truly feel that others may be able to learn from my mistakes. If that is the case, my temporary discomfort will be worth it.

So what can you learn from these mistakes I have made?

If you are a young person, with a fresh clean financial slate, CONGRATULATIONS! I would love to be able to go back in time, and be in your position, knowing what I know now.

Start by educating yourself all you can about the world of credit. The most important thing to keep in mind is that the decisions you make now regarding money will affect your life for years to come. I know many mothers of young children who don’t want to work, but are forced to put their children in daycare just so they can make monthly payments to creditors for purchases they made long ago. It is tragic, and far too common.

Also, know that damage you do to your credit now will show up on your credit report, and affect your score for years to come. When you damage your credit report, it is much more difficult to buy a house, car, or any other large purchase. It may even make it difficult for you to get a job!

A third thing to realize is that right now you are establishing patterns of behavior in your life. It is much easier to start doing things right, and maintain that direction vs making lots of mistakes now and having negative behavior patterns to change later.

If you are a parent, teach your children all you can about how to manage money and credit. Regardless of what type of financial failures or successes you have had, your children deserve to be armed with the knowledge that will help them avoid costly mistakes. Don’t assume that they will automatically understand and know all about this when they turn 18. They will be bombarded by creditors who want to loan them money. Talk to them and teach them about it before this time comes.

My parents are wonderful, and they did a great job raising me. They managed their own money well and always provided a good example of financial stability and security for me. My grandparents have also been wonderful examples of perfect integrity when it comes to money and credit.

Even though I was surrounded by financially successful people, I do not remember ever specifically learning how to handle credit and debt. I now believe it is one of the absolute most important things parents should be teaching their children. So make it a point to talk about these things with your kids!

If you are like me, and have already screwed up, have hope! It is not an easy process, but things can turn around! Stay tuned for further articles in this series, which will address things that have and haven’t worked for me as far as improving my financial situation, and more specifically, my credit profile.

As always, thanks for stopping by. Please leave a comment if you have anything to add!

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This entry was posted on Tuesday, July 24th, 2007 at 8:44 pm and is filed under Finances. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.