In the interests of full disclosure, I would describe myself as terrible with money. You name a financial mistake and I’ve made it. Probably twice. So why am I here writing about saving?
Well, I am a cautionary tale, sent from the land of debt and sadness to warn you about what can go wrong when you take money for granted and make bad decisions, waste opportunities and live in denial.
Sounds ominous doesn’t it. Well, it is:
- I sold a house in a growing market for a huge profit and then completely blew the profit on buying a new car (a lemon!) and paying off credit cards to the tune of $22,000. I don’t know what happened to the other $12,000.
- Instead of cutting up the paid out credit cards, I just kept using them and then never opened the bank statements.
- To consolidate the credit card debt, I got another credit card and then just spent up big on that too.
- I took on a novated lease for a new car without actually knowing what that meant. Then I didn’t meet my minimum required mileage and got hit with Fringe Benefits Tax.
- I didn’t tell Payroll I had a HECS debt so that year my tax return was a bill.
- When I did get a tax return the next year, I bought a robotic vacuum cleaner for $799. Bye tax return.
- When I moved house, I sold most of the great furniture I had bought (on credit of course) and I have no idea what I did with the proceeds.
- When I moved house again, there was so much stuff (probably bought on credit, let’s not play dumb here), I had to hire a skip bin to get rid of it. 4 metres x 2 metres.
- At the age of 32, I had to borrow money off my Father to help pay for the house move because I had nothing saved.
- I spent pay rises before I got them and a couple I didn’t even get. Oh and I overestimated how much extra they would be EVERY DAMN TIME.
And so on and so on.
So 2 years ago, facing almost certain unemployment (which eventually went from “almost certain” to “actual”), I had a list of dumb financial decisions a mile long and significant debt. I wasn’t sure how much because I wasn’t really that fussed with opening the credit card statements. I decided I needed to get credit cards out of my life and consolidate my debt into a personal loan but to do that; I needed to look at the statements and add it up.
It was $30,000.
You know what’s worse than $30,000 in credit card debt?
Looking at the transactions and not even knowing what half of them were for. $65 at Kmart? $12 at Woolies? $500 cash advance. Ugh. Not only had I spent a tonne of money, I had barely a clue what I had spent it on.
Don’t forget, I’d already paid out $22,000 a few years earlier so I was beside myself when I’d realised what I’d done. When the shock wore off, I sent off my applications for debt consolidation loans and was horrified to get back rejection after rejection. The worst rejections were from the banks that I had credit cards with. It’s hard not to be a little bitter when the only time those banks wouldn’t give me a line of credit was when I actually needed it.
Eventually a bank run by industry super funds came to my rescue. Lucky they did too, as I was seriously considering bankruptcy. Anyway, I consolidated the debt, set my repayments to come directly out of my wage (while I still had it) and cut up those credit cards into tiny pieces.
I am still paying off that personal loan and waiting for my novated lease to end and learning to live without a credit card.
These are challenges and stories for another day but I have learnt some valuable lessons so far – ones that have actually stuck:
- Figure out why you are spending. Trust me, there’s a reason.
- Always open your bank statements and read them. If you can’t remember every transaction, you’ve got a problem.
- Always ask questions, get independent advice and read the fine print when you sign up for something. The salespeople are there to get your money, not to help you make a rational decision.
- Think about the long-term effect of putting off payments. If you don’t pay for things as you go, you’ll certainly pay for it in the long run.
- Don’t ever spend a pay rise before it is in your account.
- When an unexpected amount of money comes into your life (tax return, bonus etc), splurge some but aim to save at least half. Don’t spend it all on a robotic vacuum cleaner that pushes your favourite shoes under the couch and tries to hump the cat food bowl when you’ve got a perfectly excellent and expensive vacuum cleaner already.
- When you sell something big (eg furniture, whitegoods etc), that money should go towards the new item or onto debt. It is not fun money!
There are probably heaps more lessons I have learnt and even more I haven’t learnt yet that I can’t wait to discover. There are times that I’ve wished things were different or that I could just win lotto but honestly, that’s a cop out. I can’t wait to pay down this debt and start saving for real – that sense of achievement will make all the stupid, embarrassing mistakes worth it.
And if none of you make the same mistakes I did, that will be even better!