My Mistake to Make.
In my last post Failing to Plan is Planning to Fail I spoke of making your own mistakes. Today I’d like to address one of the two areas where I needed to make my own mistakes to learn from them.
Money, I think everyone has a love hate relationship with money. We love the things it affords us but hate the fact there never seems to be enough. I dislike the fact that there is no education on managing your finances in school. Everything is so abstract that no one can relate it to the real world. Especially as a child who doesn’t know what the real world is like. What upsets me further is that ever since school Ive heard people complain that there is no finance education in schools and nothing has changed.
Children rarely listen to their parents on these things and to be fair many parents don’t have the right information to educate their children anyway. So what’s the answer? That is a post for another day today I want to talk about how it changed for me.
I came out of school with 9 grade C GCSEs including Math. I was by no means stupid but I’m no genius either which means I am the average Jo, very much like a majority of the population. I have been in and out of debt for the last 18years. However, this time I know I’m getting out and not going back. This time is different.
Now I bet you’ve lost count of the number of times an addict has given up there vice and said this time is different and how many times was that true? Addiction comes in many forms, some only recognise the “normal” ones, drugs, cigarettes, alcohol. But I see addiction as also repeatedly putting yourself in the same position again and again, even if you don’t want to be there, you are compelled by something in your subconscious.
For me I was addicted to being in debt. Sounds strange right? I had come from a typical working class English family. You know the one where they tell you money doesn’t grow on trees and we can’t afford it. I’m not blaming my parents they did what thousands of parents do when their kids are constantly saying I want, I want. I’ve said it to my daughter for years too. My point is because of this I’ve always felt uncomfortable with having any money in the bank. Money doesn’t grow on trees who am I to have any. I’ve never thought I deserved to have money in the bank so my subconscious made sure I didn’t.
That and the fact I didn’t know how money worked. I didn’t know how to separate money, to pay bills, to save, to work towards what I wanted. All I knew was money came in, money went out and everyone else seemed to be able to afford more than me. I also had the instability of being in and out of work a lot at the beginning of my single parenthood, which meant on and off benefits. So every time my head broke the surface of the water I was pushed back down.
Now what I needed was the information in the books I’ve recently been listening to and what I needed was someone to help me manage my finances so that regardless of being on or off the benefits I’d have a steady constant income. Instead what I got was my fantastic hero Dad. I mean that too, he saved my bacon over and over again and I will always be grateful because at the time I didn’t have the knowledge to do anything about my situation. However, as with any addiction, until you learn to save yourself you are likely to end up right back where you were. That is exactly what I did.
My dad’s help ranged from paying my phone bill on the odd occasion to completely clearing the credit card debt I had. Every time I was clear I’d breathe a sigh of relief but because I hadn’t learnt anything new about finances old habits resurfaced and balances increased. I hated myself, why couldn’t I sort this out? How come everyone else had fancy cars and a mortgage and I was stuck not even being able to afford a holiday or proper Christmas presents for everyone.
This year however things changed. I listened to some books, I’m slightly in love with audible as I rarely have time to sit with a book but I drive a lot and I hate that wasted travel time so listening to books has been a great solution. I have realised from this that not everyone else has it together and that most people are like me but worse. In that they not only have the credit card debt but their fancy car isn’t there’s its on HP that they have their mortgage and that allows them to put themselves in more debt. Not everyone is like this of course, those who have educated themselves have those things free and clear and they deserve them because they’ve worked hard and reaped the rewards.
These books I’ve read, which I will list below, taught me three golden rules.
- Pay yourself FIRST. (Max out your pension contributions not only do you save more because it comes out before tax, but you have more money earning you interest for a longer period and compound interest is very powerful)
- Automate your money (the less you have to do with it the more control you have, strange but true)
- Invest (make your soldiers work for you)
These books have saved my finances when I started listening I was well on my way to being back at the bottom. I had three credit cards with balances, I had a mail order catalogue with a balance and an interest rate of 49% seriously if you have one check what you’re paying. And I was still paying off a loan I got out for my car.
I say I was heading down to the bottom but this was because of my lack of education not because of my spending. I had stoped spending and I was paying off sums for each balance. But I hadn’t realised the interest was slowly dragging me down. At 39.9% for every minimum payment I made I was only every paying around £10 off my balance the rest was interest. I couldn’t believe I’d been paying it that way for so long.
I was so proud that I had auto payments set up and knew I could just leave it and eventually it would have been paid off. I just worked out that it would have taken 4 years and cost me £873 on top of my balance that’s more than my balance was. Imagine what that £873 could buy and all it was destined to do was be a charge for borrowing money to have things NOW. This is how they work they hope you don’t look at the big picture and you end up paying things off and paying so much more for the privilege. It’s CRAZY!
The thing is, it wouldn’t have stopped there because the Mail Order company are always throwing out buy now pay later offers and we all need things from time to time and my money was tight. I always thought this was a good way to use my catalogue. However, don’t pay it off before the BNPL period ends and they slap the interest on you would have had on it if you’d started paying it straight back. Lose, lose, get rid of your catalogues if you have them.
I have now paid off my Mail Order balance and I will be debt free by a date in 2019 as long as there is no change in my income. Any change in my income will change that date but wont knock me off track because I now know how to structure my finances. I feel lucky because I know what it’s like to be at the bottom of the barrel with not even two pennies to rub together and I have educated myself to understand the structure of personal finances. I know that this time because I know where I’ve come from and because I’ve worked so damn hard to get myself out that I won’t go backwards.
I’m grateful to my dad for helping me out when I needed it. I’m grateful to my parents for teaching me I don’t need everything I want and I’m grateful to the authors of the books below for showing me the light and helping me take hold of my addiction and kicking it firmly to the kerb. I do deserve to keep my money. I do deserve to have it work for me. As long as I work for it it is mine to keep.
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>>>books that taught me personal finance in order that I read them
- The Richest Man in Babylon George S. Calson
- I Will Teach You To Be Rich Ramit Sethi
- The Automatic Millionaire David Bach
- Start Late Finish Rich David Bach
I would say read the first two then age dependant read one of the other two. Under 28 read the first one over 28 read the second one. It’s really aimed at those in their 40s and up however if you’re over 28 you like me have already missed out on a lot of the opportunity so boost your chances by reading the one.
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