Looking back at my 20s my approach to money was really a non-approach. It just happened. I worked, money magically appeared in my bank account every two weeks and I not-so-magically spent most of it shortly after. I never spent more than I had, but I sure did spend most of it. I’m pretty cheap by nature, but all that means is that I like to spend as little as possible to do or have as much as possible. Frugal, on the other hand, is to save and steward well. I didn’t learn frugality until I hit my early 30s. The impetus that moved me toward frugality: fear.
Fear was a motivator for me. I woke up from the fog of the make it/spend it pattern of my 20s when I got married. We were flat broke and fear set in. Fear of not being able to provide. Fear of an inability to make it on our own. A fear of being stuck in debt for the rest of our lives. For me, fear was a motivator, a call to action. Facing fear led me to seek direction. So, my wife and I signed up for Dave Ramsey’s Financial Peace University. Like him or not, he does provide a model for managing money. We had no model, so it was exceptionally helpful. And we managed to pay off $60,000 in 20 months while tripling our income. I guess we just needed a kick in the pants. What we found was that with information, a model and an agreed upon plan we turned from fear toward hope. We turned from helplessness to agency. We turned from aimless wandering toward a clear direction.
In my 20s I wasn’t fearful of money, but I didn’t have a plan either. I was a fool. Anyone I’ve met who isn’t fearful of their finances either has a plan and a budget or is a fool and has their head in the sand. Ignoring problems is not fearlessness, it’s foolishness. I have friends in their early 30s that have done very well bringing in over a quarter of a million dollars annually and they are absolute fools about money. They live in a $750,000 house mortgaged on an interest only loan with a minimal down payment, drive two leased cars, vacation all over the world, still pay the minimum on their student loans, spend what would be a modest income on eating out every year and another small income on keeping their wine cellar stocked with nice wines.They talk about money being tight, but know they make enough to keep having fun. Retirement, giving and planning for their family is an afterthought. They have everything they want but have not planned for future needs.
Contrarily, I have friends who make 1/4th of the income of those above, but are fearless because they have a budget and a plan. They live below their means and routinely work toward their financial goals. They have a paid off house, two paid off cars and vacation with cash they’ve saved. They have no debt, cash in the bank, retirement savings and give generously. Oh, and they’re not even 30 yet. Not a bad start to the rest of their lives. They have everything they need and can now work toward everything they want.
Look, I was an idiot about money in my 20s, and I didn’t even run up consumer debt like so many others. I’ve spent these first half of my 30s resolving my early adulthood lack of responsibility and playing catch up. Here are some things I’ve learned:
- Be afraid. Seriously, you should be if you don’t have a plan. And let that fear lead you to find instruction.
- Learning about personal finance does NOT require a MBA. Trust me, I know. I made A’s in my finance, economics and accounting classes in my MBA yet I knew very little about personal finance.
- Most peers are poor teachers. My peers were making all the same money mistakes as me, some were far worse. Find someone who is handling money in a way you admire and learn from them. Note: this does not just mean they have all the stuff you like, but that they’re actually responsible, planned and intentional with their finances.
- Budgets create freedom not restraint. I think we all drag our feet on this one, but it’s a powerful reality once realized.
- It’s not an increase in income that eliminates fear, but how you manage and plan with the income you have.
Generally, in most of life’s dimensions I think fear is damaging. It can be limiting and paralyzing in most circumstances. But regarding money, I, for far too long, wasn’t fearful enough. Realizing fear heightened my awareness leading me to change my situation, to take action. In this instance, fear was motivating. Open your eyes to your financial situation. Find a mentor, a class or books to coach you through the process. And when you’ve put in place practices that bring you freedom then turn around and teach others what you’ve learned.