OK, it’s said that those who don’t know history are doomed to repeat it, or something to that affect. Somewhere my father, a history teacher, is smiling. You’re welcome.
For me, that means knowing where I’ve come from financially. By reflecting upon my historic relationship with money, I feel that it will help better utilize the money I have now — and will earn in the future.
(Note: This history leads up to approximately September 2009, when I started this blog.)
Growing up, I started a savings account for myself when I was middle school age, around 13 or 14 years old. You know, the old school kind with the bank book that was updated by the bank every time you made a deposit or withdrawal. I used to put some money in there from family members who gave me monetary gifts for birthdays and other major holidays. It wasn’t until my junior year of high school when I got my first paying job as a clerk at Price Chopper, a supermarket, that I seriously began to contribute regularly to my savings account.
Being a teenager, I desperately wanted a car to drive. Unfortunately, this meant not only buying a car, but also car insurance, gas, upkeep, maintenance, fuzzy dice, etc. Imagine my teen angst and dismay when my parents told me that if I wanted these things, I’d have to work for them. Me? Work for things I wanted? Blasphemy. Anyway, I kicked my savings into overdrive, socking away virtually all of my income from working at Price Chopper the summer before senior year toward buying a car. By August, I had saved approximately $2,000 in my account — not bad for making $6 per hour.
While that in itself was an accomplishment, it was just enough to get a 10-year-old Geo Metro, according to the classified ads in my local newspaper. Not what I had in mind, but I was willing to buy the jalopy in order to fulfill my goal which was to drive myself to school my senior year of high school. Bless my parents’ hearts, they decided to buy another car, a newer one, to allow me to do that. They told me that I learned a valuable lesson, which was in order to get what I wanted in life, I had to have a plan and work for it. Since I did that, they rewarded me with a car. I had to pay all of the gas and contribute to car insurance, but the foundation for my financial plans was laid here. I worked, and worked, and worked, and it did pay off.
Then I turned 18. Ah, yes. Lottery tickets, voting, strip clubs, cigarettes, military service, and — gasp — credit cards. My mother immediately had me apply for a credit card with a small ($500) limit. She also had me open a checking account and taught me the basic principles of budgeting, which I will share in subsequent blog posts. I’ve had to adjust her basic allocations and teachings according to my needs, wants, and life events — but I have carried her lessons to now, and lived to tell about it.
Then, the fun part. After applying to several colleges, I decided on Seton Hall University, located in South Orange, N.J. While out of state, I was only an hour-and-a-half away from home, which provided me the independence I wanted with the closeness I needed in case I ever needed/wanted to come home at the drop of a hat. It was also only a half-hour train ride from New York City, which enthralled me in more ways than I could ever express here. During my time at Seton Hall, I held my part time job at Price Chopper while home and a work-study job at college to set aside money for books and other miscellaneous expenses I was to incur (no, not just beer) while studying for my communication degree.
At that time, Seton Hall cost upwards of $35,000 per year. I did not have a free ride, but I did have enough scholarships to take away approximately $25,000 of that cost annually. I had to make up for the rest in federal and private loans, though. My parents and I made a deal before I left for school — they would pay the interest on my private loans while I was in school, but would assume all of the principal and remaining balance once I graduated.
I’m the oldest of three, and we all agreed that I should pay in large part for my own education. Even though I would be saddled with approximately $40,000 of debt upon graduating, I felt a sense of independence knowing that my education was my own and that I was responsible for it. If I wanted to slack off … well, fine. I had to realize I would pay the consequences for it, though.
I kept my scholarship and graduated with honors in May 2007. During my time at Seton Hall, I made connections, forged friendships, and have lifelong memories which I would not take back for anything. I also learned that my parents and other family members had sacrificed to provide me, my brother, and my sister with a nest egg of matured treasury bonds. I also inherited stock during this time. While I was technically an adult and could do with the money what I wished, the intention for the nest egg was to pay off my education loan and help me to get started. I am forever grateful to my parents for leaving the decision up to me, and I wouldn’t have been able to be constructive with the money had they not provided me the discipline and foundation to do so. I’ve decided to not use all of that money to pay off my education loans in bulk immediately, and check out subsequent blog posts as to why that is.
After spending a few months looking for a job, I found a position at a mid-sized media relations firm in Manhattan in August 2007. With a salary of $38,000 per year, about $2,200 after taxes per month, I was making real money for the first time in my life. I was still living at home and commuting to Manhattan via mass transit, and while that was not particularly cheap, I was not paying for rent, utilities, food, and the other little things that you take for granted until you have to pay for it on your own. In sum, I had plenty of discretionary income. I decided to wait until after the three-month probationary period to look for a place closer to the city, which ended up being one of the best decisions of my life. You’ll see why (blatant foreshadowing alert).
Instead of spending all of my discretionary income (after paying for car insurance, gas, cell phone, and education loans) on myself, I decided to save a huge chunk of my paychecks. Don’t get me wrong, I did set aside a little bit for myself to go out with friends, etc. If I had to go back now, I’d say I was stashing approximately 35 percent to 40 percent away, in a bank-based money market savings account.
The job ended up not being what I wanted, and made a bold move — I quit without having anything lined up after three months. Now that I live on my own, I would probably be a bit more conservative should that situation come up again. That said, I felt it was the best move at the time, and looking back, I have absolutely no regrets.
I went back to my real love, writing, by taking an entry-level position at my current job back in December 2007. While it was a fairly significant pay cut (common going from public relations to journalism at my level of expertise, which was slim-to-none), I made more than $30,000. I also still lived at home, and saved the same percentage of money — albeit less — because of the culture of disciplined saving my parents drilled into me from a young age.
In September 2008, after a year of living at home, I found a spot in a three-bedroom apartment in Jersey City to move into. It cut my commute from two hours one-way to approximately a half-hour. It was closer to many of the friends I had made in college who still lived and worked in the area, and finally gave me the independence that I wanted.
Now I knew that I would have to stretch my paycheck much further — and I’ll show you how I did that. I saved approximately $10,000 in the time I lived and worked at home, and I put it to good use when I put down my first month’s rent and security deposit, among other expenses that I didn’t even think about when it came to moving to a new place. For example, despite my insistence that I could sleep on an air mattress forever, that didn’t turn out to be the case. Or living out of suitcases. Or cooking with imaginary utensils. Shocking, I know.
After this, I decided to take some of the money I had stashed in my money market and open a certificate of deposit and a Roth IRA. I was already contributing to my company’s 401(k), and wanted to start laying the foundation for future savings vehicles I knew would be important. Mind you, at this time I was now only saving 10 percent of my paycheck, which I think is the minimum that you should save. That’s all I still allocate at this time, but when my income grows, I expect that percentage to grow as well.
Then, the economy tanked and I felt the pinch, both in my financial accounts and at my job. While not getting into specifics, let’s just say I’m no stranger to furloughs, pay cuts, and layoffs that both I and my friends have experienced. While I had worked to create a cushion for myself — again, I’ll show you how I’ve done that — I was still extremely concerned and turned to the people I could count on, my family, to give me back a sense of sanity.
Now, here I am, and I’m ready to share my ongoing journey with you and how I’ve gotten to the relatively stable financial place I am today. I have a lot of friends who are still looking for jobs after being laid off and are robbing Peter to pay Paul in order to survive. I have other friends who had to move back home. Yet I have others, and this is the most important group, who have higher salaries than me yet are saddled with credit card debt and otherwise, looking to make ends meet. I’m proud of how far I’ve come, yet I know that I have a long way to go. I look forward to continuing this history, sharing my highs and lows, with you.