Money Matters, part two: lessons learned.
It has been about six 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.