I am a Lead Software Tester in a telecom company. When my wife and I were married in 1991, I knew absolutely NOTHING about money management. I didn’t need to — I worked all through the last two years of college, and I had to spend every nickel I earned.
When we got married, we figured that since we had two jobs in the home (six and seven dollars an hour, respectively) that we were RICH! We promptly went out and got two shiny new cars. Rent and two car payments came to over 50% of our take home pay. We discovered the joys of eating out and indulging in the want it, get it on credit mindset.
One thing we were very serious about was paying our bills, even if it was only the minimum payments. We would have probably starved the first year of marriage if it had not been for my parents buying us groceries occasionally, and my job managing a pizza restaurant.
Hint #1. Stop buying processed foods, and learn to cook- men included! When we stopped buying as many snack foods, prepared or frozen dinners, soda and canned foods, our grocery bill was lowered. Cutting them out altogether is not realistic; just learn some basic cooking skills and you can prepare better, more healthy meals, for less money.
My wife realized that if we were going to have children, daycare would eat up what little we had left, so she found a job in a daycare that offered free daycare for employee children. Once we calculated it out, the savings we had on childcare made up the difference in the starting salary in her profession, Advertising Art, and she could be near the children all day.
By the time our second child was born, I had moved into a job with a telecom company, and could replace her salary. I had also been through two layoffs. We had decided that when I could replace her salary, she would quit her job to be a full time Mom. When I reached that point, she quit her job, and we eliminated her commuting expenses. We continued to pay at least the minimums on the credit cards.
Hint #2. Set up automatic payment deductions from your checking account to the credit card companies, even if it is for the minimum due. This insures that they get paid on time, and eliminates late fees. It also boosts your credit rating, because you pay on time. Make your credit cards work for YOU.
Hint #3. Get out of your car payments, either by selling your car and buying a cheap one outright, or paying yours off, and KEEP IT. I drove the pickup I bought in 1991 for 14 years and 214,000 miles. It was ugly, it was old, but it was dependable and it was paid for!
Hint #4. In 1993, we bought our first house. When looking for a house, pay NO ATTENTION to what the realtor and mortgage officer say you can afford. They are not your friends: the realtor and mortgage officer both make commissions on your purchase- it is in THEIR best interest for you to have the largest mortgage they can get you into, legally or otherwise.
When you begin looking for a house, get all your expenses out in front of you, and determine what YOU can afford. If you can’t find a house in that price range, you have two choices: stay in an apartment, or look in other areas, even different cities or states. If you can’t pay more than what you pay for rent currently, certainly don’t go looking for a house that costs more, as you have added expenses with a house, like maintenance, furnishings and insurance. Remember, a house is an EXPENSE until it is paid for. Only then does it become an asset.
We settled on a 1200-square foot, 3-bedroom home that had a payment that was equivalent to our rent. I have since purchased a bigger home, but used the same techniques to find a house that was within MY means. Needless to say, this will frustrate your realtor, as you will make them work for their money.
Here we were in 2004, where we were limping along with the same credit card mindset, until I sat down and realized we were $67,000 in debt at that point. That was quite a wake-up call. It was at this point when the hints I mentioned above really came into play.
Because I had paid our bills on time, the credit card companies began offering 0% or low interest rates for 6 months, or longer on balance transfers. I would move the max I could onto that credit card, and rebalance my payments. In the month or two before the offer was over, I would have by then received the same offer or better from a different credit card, or one I had moved my balance from previously, and would repeat the process. I knew where EVERY penny went, and pored over the expenses nightly. You have to stay on top of your finances if you have any hope of climbing out. When you can drop your interest rate from 9-18% (at the time) to 0-4%, you can really see the difference in your balances. We also didn’t take vacations, do expensive Christmas presents, and limited birthday expenses.
Hint #5. I read an article by Gary North who put it simply: “If you want to make 10% more, work 10% harder.” It’s as simple as that. I started half a dozen little jobs in my spare time, never making a lot of money, but putting us just a little further ahead. I put in the extra 10%. I built computers, sold knives, built a couple of houses, and did odd jobs, and did a LOT of praying over our finances. In the 17 years we have been married, we have had three children, I have changed jobs 8 times, been through 4 layoffs, and had some reverses, but always strived to move the balance downwards.
Hint #6. If you get an income tax return, don’t rejoice. That means that you gave the Federal Government use of your money for a year, interest-free! Review your withholdings with your employer to make sure you have it correct. If you do get a refund, don’t blow it- pay down one of your credit cards!
This brings us to 2008. All through our marriage, I had refrained from taking jobs that required traveling because I love being with my family, and it was not fair to saddle my wife with raising the children alone for 4-5 days a week while I traveled. When our youngest turned nine, we discussed it, and realized that if I traveled, I could make much more money for the same work I was currently doing, so that is what I did. Everyone had cell phones and computers, so constant communication between all members of the family was assured. I secured a position that takes me from my Texas home to upstate New York, twenty days a month. It is difficult on the family, but it is important to GET OUT OF DEBT AND STAY OUT!
Hint #7. If you are in an industry like telecom, software, or project management, explore the travel option. You generally are paid significantly more than a salaried position, and it opens more opportunities for further employment in the future. If you are willing to travel, you have a larger market to search for a job.
As a result of having tight purse strings, contracting and traveling, and USING credit cards instead of them USING US, we have dropped our credit card balances to $13,000.00 (67k to 13k in four years!), and they continue to drop. I have also been able to build a nest egg (something we had never been able to do before). You can do it- you just have to face your fears, bear down and work hard. Resist the easy credit temptations. Hopefully, this will be read by folks just starting out, and can assist them in avoiding all the bad decisions we made along the way.