If your outgo exceeds your income, your upkeep will be your downfall.
Truer words were never spoken. My grandfather has said that to me many times, but for whatever reason it didn't stick properly. It would have been great if it had! The last year and a half have been a huge learning opportunity for me. It took me a solid month to write the last two posts, because it was a hard pill to swallow. I dug myself into $19,000 of consumer debt in 1 year. 1 STINKING YEAR!
I get nauseated just thinking about it, but I have to do it. If I didn't think about it, I wouldn't learn anything from it, and I'd be setting myself up to fall again. God only knows where the floor would be next time.
Thankfully, I have managed to learn a few things from this experience. Hopefully in sharing them with you all I can prevent someone else from having to learn it the hard way.
You Need A Budget
This is a surprise to no one. At least, it should be a surprise to no one. This doesn't mean that you need to be categorized and itemized down to the cent in a fancy budgeting program, this just means that you need to know how much is coming in, and where it is going. If your income just barely covers your costs, should you really be going on that ski trip or buying a new wardrobe? Probably not. But unless you know where your money is and where its going are you going to be able to turn it down? Again, probably not.
Be Aware Of Your Income
Different incomes can afford different lifestyles, this isn't a surprise for anyone. Readjusting to a lifestyle on a lower income when you've been riding high for a while... that can be a bit of a shock, and not a pleasant one. It requires being cognizant of how much money you have (budget anyone?), and what it will afford. Anyone changing to a job with lower pay, losing hours, or losing a job altogether will have to deal with this at some point, its best to walk into it with your eyes open.
Life Changes Require Buffers
That lifestyle adjustment I mentioned above takes time, and time is money. Getting adjusted before the change, or having some money put aside to help with the change, will be a HUGE asset. Likewise, if there is another major change coming, such as buying a house or welcoming a baby into the world, you'll want a buffer. Chances are it's going to cost you more than you expect.
Get It In Writing
I thought I had learned this lesson while I was working up north, but apparently I didn't. If it's not written into a contract, it's not guaranteed. Overtime, bonuses, and other perks sound fine and dandy when you're negotiating your wage, but unless you get it in writing you can't rely on it. You need to make sure that you can cover your bases using what's on the page, and what's on the page only. Anything else is gravy.
Distinguish Between Needs and Wants
This one really is a gimme.
I NEED enough food that my body can function properly.
I WANT that Starbucks Chai Latte in the morning because they're yummy...
I NEED enough clothing to keep me appropriately dressed for work and the elements.
I WANT that Lululemon top even though I already have a closet full of clothes
I NEED some way of communicating with people
I WANT an iPhone and MacBook Air.
See where I'm going with this?
If You Can't Afford It Now, Chances Are You Can't Afford It Later
What is actually different between now and later? Are you getting a raise? Is there an inheritance coming? Are you going to cut something out of your daily spending habits? Are your expenses suddenly going to drop?
Is anything different? At all?
If nothing is different, and you can't afford something now, how is it you expect to be able to afford it later when the credit card bill comes in? The easiest answer to this is you can't. Especially when the next payday comes around and there is something else you want...
Find Healthy Outlets For Stress
I use shopping as an outlet for stress. It's a horrible fall back, and I'm actually not sure when it started. I can pinpoint when I started using debt for consumer spending, but I can't pinpoint when I started using shopping as an outlet for stress.
I know there are many, healthier, ways of dealing with it. Exercise it one of the better ones, and I find going to a yoga class or going for a run definitely help me cope with things better. So does getting a hug from a loved one. Seriously, hugs are my emotional/mental saviour. I'd probably be a total nut case if it wasn't for the occasional personal contact.
If I don't deal with the stress issue, my spending goes through the roof. Funny enough though, I don't always have to buy consumer items to get that relief. A little while back I was feeling stressed about my finances, so I put a little more money on one of my debts. It's like I'm slowly buying back my freedom, and it worked to sooth my nerves. Any action that reduces the stress levels without getting you further into trouble is good in my books.
Chances are if you have/had a high paying job, you also have friends with high paying jobs. They may want to do things they automatically assume you can afford, because they can afford to. They're not going to know otherwise until you actually speak up that you can't afford it, so do it! You just might find that some of them are in the same boat as you, and are grateful you spoke up.
Control Your Impulses
And for that matter your daily habits. Do you cave and buy something every time you walk past a bakery or coffee shop? This week try just walking past it once. Maybe on a Tuesday. Just see if you can do it once (I know you can). Once you've done it, try it again next week. Maybe on a Thursday. The point of this is to show yourself that you don't NEED to cave every time you walk by. You are strong enough to say no. Willpower is like a muscle; the more you use it the stronger it gets. You might find after doing it for a while you won't have to make a conscious effort anymore and it will just come naturally.
Plan For The Future
Long story short: it's coming, so get ready.
Whether it's an old jar you put your recycling money into, or an investment account you throw half of your paycheck into, everyone needs to save something. Retirement, investments and emergencies all require money, and it doesn't appear out of nowhere. Despite how it may feel every little bit helps, so snowflake away. You'll be glad you did one day.
Anyway, that's what I've learned over the last year and a half. I'm sure there are more lessons in my future, but for now I'm doing my best to apply these ones.