Once a upon a time, there was a naive college student who lived a normal, happy life. At times, this young girl was organized and meticulous about everything. But other times, she was not so organized and meticulous. In fact, she could be completely oblivious. And let’s face it – she was a college student, so irresponsibility was not too far of a reach. And unbeknownst to her, she still had many a life lesson to learn. This was just how it was.
Beginnings of Trouble
This girl had a steady income from a part-time job, and earned a bit more money than the normal college student would. Twice a month, she would deposit her hard-earned money into the bank. And throughout each month, she would also spend. A meal at a restaurant here, a cup of coffee there. Yet, she was not frivolous nor lived a luxurious life. She was just a typical college student.
However, it seemed that she became more oblivious and paid less attention to some important details in her life. She thought her spending was not exceeding the amount of money in her checking account and the amount of money she was putting in twice a month. She had never balanced a check book in her life, nor did she keep up with her online banking registry. She thought she had it all straight in her head, how much money goes in and how much money goes out. She didn’t even feel the need to open the envelopes from her bank that had begun piling up on her desk. Surely, she thought, these are just statements that are telling me what I have been spending, nothing more. I already know this!
So that pile of envelopes slowly got taller, each month.
The Dreadful Phone Call
One day, she received a phone call from her bank. Then fear overwhelmed her, shaked her to the core and the tears welled from her eyes. Ma’am, you have overdrawn your account, in the amount of $1,500. Those words kept ringing in her ears. $1,500?! Panic set in, she wringed her hands and thought about how stupidly she had handled her money. She also thought about the impending doom that would come when she called her parents. That was it, she would be disowned.
Fortunately, this story had a happy ending. I was that extremely naive and irresponsible girl who overdrew $1,500 (!!!) and lived to tell about it. Thanks to the kindness of a friend who lent me some money and the support of my parents and brother who stepped in, the charges were paid and my bank continued to keep me as a customer. (Most importantly, my family did not disown me.) I received a long, stern but loving talk from my father and on that day, I learned a very valuable lesson: Check your bank statements, online or on paper, and make sure your expenditures are not exceeding the amount of money you actually have! This should be a simple, “duh” kind of thing right? To my twenty-seven-year-old self, yes. But six years ago, it just didn’t sink in.
The 3 Lessons Learned
It has been about seven years now since I made the huge mistake (lapse of judgment, stupidity, what have you) of overdrawing $1500 from my bank account. Six years of undoing bad financial habits and learning good ones to help me be a sound manager of my money. Add to the equation the fact that I have been married for three years now and have had to learn about partnership in money. So, what are some lessons that I’ve learned since that fateful month of finally opening up all those bank statements and getting slapped in the face with a $1500 bill?
1. You have to live within your means.
I am of the philosophy that it is good to live simply and within your means. To put it plainly, don’t spend money on something when you can’t afford it. Know what your financial limits are. My husband and I have been blessed with jobs and incomes that help us tithe and give to those less fortunate than ourselves, pay the bills and have the basics of life (food, shelter, clothing) covered and save up for a rainy day and our financial goals. However, we know that we can’t afford to spend beyond a certain amount so we’ve learned to make do without some things, like brand new cars (the only car purchase we’ve made to date was a used car) or fancy cell phones. We use the most basic internet service beyond dial-up and are satisfied with only having access to the local television stations (unfortunately, even with our rabbit ears, the reception is bad where we live so television is pretty much out) and rent movies from the local library. We’ve made do with the secondhand furniture that we’ve accumulated since the beginning of our marriage and have been careful to take care of our things so they last a while – for example, our boombox (yes, we have a boombox and not a stereo system), VCR, DVD player and TV are all at least a decade old. We know what we can and should spend our money on; we also know what we can’t afford, and we’re okay with that.
2. You have to pay attention to those interest rates and pay off your debt in a timely manner.
I know, I know – that’s a pretty “duh” kind of statement but my dumb college-age self did not know anything about interest rates and could have cared less about them. Thankfully, my husband is financially-savvy (and actually took the time to research the evil that credit cards are) and taught me about the particulars of interest rates. The biggest “trick” that he taught me? Never pay just the minimum that you owe on your credit card! According to Money Girl:
Many people make the mistake of thinking that paying a credit card’s minimum payment is good enough. The problem with just making minimum payments is that they go mostly toward interest and don’t reduce your actual card balance very much. Here’s an example: Let’s assume your credit card has a 15% interest rate, you have a balance of $5,000, and that you never make another purchase on the card. If your minimum payment is calculated at 4% of your balance, it would take you 10½ years to pay off the card. And here’s the worst part – you would have paid almost $2,400 in interest!
Also, I was able to finagle a lower interest rate (a 7% drop) from my credit card company after convincing them what a good customer I was and that I was going to cancel my account with them and move to another company with a slightly lower rate. Anyways, through saving, knowing which high interest debt to tackle first and being wise with our money, we have eliminated our credit card debt and have just recently paid off our car. What’s left? Thankfully, just the good ol’ school loans and nothing else.
3. Budget, budget, budget!
My husband is blessed with a good mind for finances and generally knowing how much money is coming in and how much is going out. I, on the other hand, have a much harder time keeping such things straight. With that problem and the lack of confidence I have with numbers and basic arithmetic, I would tend to worry that we did not have enough money to buy what we needed and certainly not enough to save. I would even feel bad spending several dollars on a cup of coffee because I wasn’t sure if we could afford it or if I should be saving those dollars for something else. Solution? A budget. Through the use of budget software, we were able to list all our expenditures, plus our incomes and see where we stood financially. Once the numbers were crunched, I could see that we had more than enough money to pay the bills and other necessities, plus save up money for our emergency fund and future house. We use a system called “You Need A Budget” which works great for our needs but I know others who use systems like Quicken, Mint, and Financial Peace University and have been blessed by these tools.
This list is by no means exhaustive as I am continually learning about money (such as better ways to budget, savings and retirement), plus I still have a long way to go in my quest of financial knowledge. But these are some of the things that have worked for our family and we’re all the better for it. We’re certainly not perfect but knowing that this money is really not ours to begin with, my husband and I both want to do our best with what we’ve been given – to be good stewards of the money that God has given us.
Michelle Hurt (The Cooking Life) is a wife, a daughter and a friend – and by the sacrifice and love of Christ, she is also a child of the King. By day, she is an administrative assistant at a large university and by night, she juggles her hobby of running and half-marathon training, hanging out with her husband and friends, tackling household duties and attempting to cook healthy (but tasty) meals. So grab a fork, lace up your sneakers and follow her journey at The Cooking Life.