Earlier this week, I put on my favorite pair of boots. I smiled as I thought about how many autumns and winters they got me through, and they still look almost brand new. I need to buy another pair in case they ever get ruined, I thought to myself. Then, it dawned on me that I had no idea where I bought them from.
As special as they are to me, I knew not from whence they came. However, I can vividly recall where and when I purchased every crappy pair of shoes I have owned. Why do we sometimes remember what we should forget and forget what we should remember? This can also happen in our financial lives.
Like everything else in life, our financial life also has ups and downs. There will be periods of financial prosperity and periods of financial setbacks. Even Warren Buffet has had financial losses. When I think about my most financially prosperous periods, there were certain habits that I consistently employed that aided my prosperity. When I think about my financial setbacks, they typically came as a result of me no longer employing or slacking on employing those habits.
Many who have embarked on weight loss journeys can probably relate to this dilemma. You start to lose weight, so you feel like there’s room to start eating a bit more or skipping a few workouts. We forget that eating less and working out more was the reason that we started to lose weight in the first place. It’s easy to go from eating a bit more to eating a lot more and from skipping a few workouts to not working out at all.
When I was in college, I made sure to only charge small amounts (i.e., typically less than $100) on my credit card that I could pay back in full when the bill came. This habit helped me get comfortable with owning a credit card, and it also resulted in me having a high credit score by the time that I graduated. The tide turned when I started shopping for work clothes for my first job after college.
I didn’t own any quality professional clothing, and I wanted to look the part. I went to the mall and charged a bunch of clothes and shoes on my credit card. I told myself that I’d pay off the balance after I got my first paycheck. No biggie, right? If only the story ended here. During my first week on the job, the clothes that I purchased didn’t feel good enough once I saw how most of the women dressed. This resulted in another trip to the mall and another swipe of the credit card.
My first paycheck did not arrive for another three weeks, and when it did, it was not enough to pay the bill. It was the first time that I could not pay my balance in full, so I was freaking out. Remember my previous article about personal finance being personal? This was a lesson I had not yet learned at the time. I had a conversation with my some of my friends about the issue, and they said it was not an issue at all. Everyone has credit card debt, they said.
They advised that I keep building a corporate wardrobe and worry about eliminating debt later in my career. Instead of holding fast to the habits that had worked for me, I took their advice. I figured my original habit of paying off debt was old-fashioned, that I needed to change with the times and/or grow up. After all, I was now making more money than I did as a college student student.
A little debt never hurt anyone, right? Wrong. The debt didn’t seem too bad at first, but the amount continued to rise. By the end of that year, I was uncomfortable with and overwhelmed by the amount. It didn’t help that I also left corporate America to work for a nonprofit that paid me once a month. Therefore, all of the clothing that I went into debt for was no longer needed.
I decided that I wanted to return to my roots of not carrying credit card debt, but I couldn’t do that until I paid off my current debt. Using the tool that I referenced in my How Can I Fund the Future if I’m Broke Today? article, I created a plan to pay off my debt. I followed the plan religiously. Once the debt was gone, I made sure that if I used a credit card I only charged what I could pay off in full when the bill came. That was over a decade ago. In the years since then, when got tempted to charge more than I should (by my personal standards), I remembered what it felt like to be overwhelmed by credit card debt, and it was a feeling that I did not want to experience again.
If you have good financial habits, hold fast to them. Don’t forget or underestimate the value of them. If your habits are reaping good results for you, it doesn’t matter if your habits are not the same as “everyone” around you. Many people are in debt and have little to no savings. If that’s not what you want for your life, then they are not the model to follow. What are some financial habits that have helped you prosper?
Zikora is a Certified Public Accountant (CPA) by day. When not assisting and advising clients, she can be found writing, singing, songwriting, exercising, cooking, and or plotting her next move. She is a sounding board for friends and family and enjoys showing people that they can indeed do things that they believe to be difficult or impossible. Send questions and/or topics that you would like Zikora to cover in future articles to firstname.lastname@example.org.