Pizza is Not an Emergency, and Other Personal Finance Lessons I Learned the Hard Way

So, real quick, before we get started:

What this is: 
One human's unique personal life experience with money over the long haul.

What it is not: 
- A list of tips & advice for obvious money saving techniques (aka-"stop going to Starbucks so much!");
- A get rich quick scheme or advertisement for any particular money saving strategy; or
- Humblebrag about a "hashtag-blessed" life.

I entered college in 1998, the only child of two great parents who were blue collar factory workers in rural Missouri.  My folks didn't impart much money-knowledge on me, but they taught me how to be thrifty, have a savings account, balance my checkbook, work hard for the money that I get, and never burn bridges.  And that's about it. I didn't have a finance class in high school (or college), nobody taught me about loans or credit scores, taxes, 401(k), etc. I'm pretty sure I didn't even have a debit card at that point.

Junior prom: young, innocent, and completely unaware of what "compound interest" is.

So when I went off to college, I, like most college students, was inundated by credit card offers.  They showed up in the mail, and there were booths scattered across campus offering free t-shirts in exchange for filling out an application. Stupid Me thought, "hah, they'll never approve me, so yeah, I'll fill out your form and get a free shirt!" 

And then...the credit cards arrived.  Small at first--my first card only had a limit of $500.  And I said, "I'll only use these for emergencies."  And that lasted about 6 months.  Because to an 18 year old, pizza can be an emergency.  By the time I graduated in 2003, I had over $15,000 in credit card debt, a high interest $2,000 "rent-to-own" loan on a crappy laptop, a $4,500 car loan, $1,600 in "Stupid Tax" I'd accumulated by paying bills for roommates that never paid me back (despite taking them to small claims court), a judgment against me for a card I'd defaulted on, a credit score in the 500s...oh, and of course, now $25k in student loans that I needed to start paying on.  

Note: I went to a state school so my tuition was pretty reasonable, and my folks pushed me to apply for scholarships and fill out my FAFSA. My parents told me to "only take what I needed"--so each semester I only took out a subsidized Stafford loan which covered my books & tuition with a few hundred bucks leftover. My student loan debt could have been WAY worse if they hadn't given me that direction.  I worked through college to pay for rent and living expenses (usually 2 part-time minimum wage jobs at a time: errand runner, pizza delivery, retail/cashier, bartender, photographer for the student paper, etc.). Because I was working, I took a smaller course load (~12 credit hours) each spring & fall, and then also took summer classes.   But in retrospect, I wish I would have known more about community colleges. I had a really snobbish opinion about 2-year schools as a young adult, but I wish someone would have told me that they're a great tool for knocking out gen-ed classes at a deeply discounted rate.

After college, a coworker introduced me to Dave Ramsey's radio show (while I was working my second job as a pizza delivery driver, because surprise surprise, entry level jobs, even in your career field once you have a degree, still don't pay that great). I started my Debt Snowball, and threw every extra penny (after rent, utilities, groceries, and a little bit of pocket cash) at my debt. And I made a lot of headway in that year.

But then, I decided to move to Louisiana for grad school in 2004 (more loans & out of state tuition), had a bad breakup with a live-in boyfriend (so now paying all of the bills instead of splitting them), and lost my job and graduate assistantship to Hurricane Katrina in 2005 (buh-bye savings).  Back in the hole I go.  

Eventually I got a new job, graduated, started the cycle again. Lived on a cash budget for a while.  But in 2008, I decided that because I'd gotten a promotion at work and had the word "manager" in my job title that I needed a nicer car.  Got $15,000 in car loan debt with a high interest rate (because of my crappy credit score, then somewhere in the low 600s).  But otherwise, continued to live modestly and pay down the debts.  I can't say I had the best money management habits, though--I dined out for lunch with coworkers most days of the week and did my share to keep coffee shops in bankroll.  I was also horrible about keeping track of how much I had in the bank, and at one point had EIGHT overdrafts ($35/each) in one month.  Probably for purchases that were about $10-15.  Stupid.

In 2009, I finally paid off all of my debts except the car and the student loans. I decided to move back to Missouri for a job that paid less, but allowed me to be closer to my family.  I started dating a really nice guy, who was actually great with his own money, and who inspired me to be more responsible with mine.  He also inspired me to start tithing, which I know seems contradictory to throwing all your money at your debt, but I decided to go by faith....and got a promotion/raise at work not long after, so I 100% believe that's a God-thing.

At the 2011 World Series, Game One. Go Cards!

Then the nice guy proposes (in case you haven't figured out, this is now "The Hubs"), and we decide--we will pay for our wedding and honeymoon with cash, no credit card debt. Which we did.  And I also managed to pay off the car that year (2011, so 4 years after purchase).  Then two become one, and I moved into the modest 3BR/2BA house he had bought in 2004.  So now we share a joint bank account, his mortgage, and my student loans.  We made a budget (which included some monthly allowance for personal spending), and then we started throwing all of our extra money at the student loans and mortgage.  We still liked to dine out a couple times a week, and hang out with friends every Wednesday to play trivia at a local pub, go to the movies, and travel a bit, but otherwise, we lived pretty cheap. 

In 2012, a horrible tragedy... my aunt was killed in a car accident.  My family was devastated and completely caught off-guard.  My cousin & I decided to step up and become the executors of her estate, because our aunt didn't have a will and our parents were grieving and shouldn't have to think about money and all of the stressful little things that come with a horrible event like that. Unbeknownst to us, this Aunt had a life insurance policy...listing me & my cousin as beneficiaries.  As her executors, we used the insurance money to pay for legal fees, funeral expenses, and her outstanding personal debts, and after everything was said and done, had some left over.  I used part of my share to pay off student loans, we used another portion to pay down our house, and then the rest we put into savings until we could think of something to do that would honor her memory.  While I would rather have my aunt back than even a million dollars in the bank, I'm including this bit because that "inheritance" played a big role in our finances. 

Me & my cousin with our Aunt at her wedding in 1995. We miss you so much.

Later that same year, the owner of my company passed away in a plane crash...2012 was a really rough year. So maybe the Mayans were a little right.  But these things inspired us to make sure we had a will in place, because life is short and you really never know what could happen.  On the flip side of that--we paid off our house AND my student loans by the end of the year. But it was very bittersweet.

In early 2013, we had some savings amassed from being debt-free, so we decided to invest--in ourselves--and buy a business. We bought a small ice cream shop that was sold to us as a "great seasonal absentee-owner opportunity for side income" (this is HILARIOUS now).  We committed to a 2 year lease, paid for the business with our savings, and never had any debt on it.  Running that business was the most stressful time of my life (we were both still working our regular full time jobs).  It definitely wasn't a cash cow (and the "side income" didn't really off-set all the man-hours we put into it), but we learned A LOT, and we both have a much greater respect for the small business owners of the world.  After the 2 year lease was up, we sold the business to friends who are veteran restaurateurs in this area, and they've transformed that location into a hugely successful restaurant...which is a little bittersweet, but I'm glad for them.  The money from the sale of the business went into the stock market, retirement savings, and savings for fertility treatments, with the remainder to eventually go into a college savings plan for our (hopeful) future kid.

In late 2015, after 2 years of trying, we had our son--I was 35.  Since he was VERY much planned, I'd been working on a "baby budget" for years. I knew how much day care would cost, and what the best price point for diapers was, and had short-term disability coverage to help with lost pay during maternity leave.  We were incredibly blessed with hand-me- downs from friends and family, so his first year of life cost us very little (other than sleep, our sanity, and my ability to not pee when I sneeze.)

Now...here we are.  In our late 30s, "old but experienced" parents, but incredibly blessed.  I have a 6 year old car, purchased with cash, that runs well (despite having over 180k miles and the imprint of a deer on the passenger side).  We moved into a bigger house in November of last year, and between savings and a 401(k) loan (that we paid off once the old house sold) were able to buy the new house without a mortgage.  We have good paying jobs (for this area), but it took over a decade of work experience each to get to that point.  Lil' Man's day care is our biggest monthly expense (day care is stupid-expensive).  Since we have no debt, The Hubs & I max out our retirement contributions each year, contribute to a college savings account for the Kiddo, and I've recently started maxxing out my Health Savings Account (HSA) as well, which we can use down the road...because we'll almost be senior citizens when our kid graduates from high school, so we'll likely be falling apart and in need of new bionic 3D-printed body parts.  We also still tithe and donate, because we are supernaturally blessed and believe we should give back generously.  That all means that we still live very modestly--living on about 20% of our gross income for our 3 person family.

I don't dare take credit for this.  I KNOW I've been lucky. I believe my life has been blessed in supernatural ways. I hate that part of the reason we became debt-free when we did is because I lost someone I loved.  Yes, I've worked hard, but that's only a small part of this equation.  I married someone who was good with money.  We had a lot more to throw at our debt because we waited so long to have children. I've always lived in relatively "cheap" areas of the country (except the year in New Orleans, but it WAS considerably cheaper before Katrina than it is now). And there's the whole inherent "white privilege" thing. My situation is very unique.  And I know it can all change in a matter of seconds in the future.  But I'm no less grateful for all of it, the entire experience.

And honestly, I'm really proud. To know where I was 15 years ago, I honestly thought I would just always be broke. That broke-ness would just be my lot in life, because that's all I saw around me--everyone was broke and in debt.  Debt was normal.  Which sort of made it seem okay...sad, but okay.  Now, I can see how hard I worked, and that it didn't happen overnight.  It sort of snuck up on me.  And that's pretty amazing.  

Getting out of Debt: Part Deux.

So I got a few comments/emails on the last finance post which indicated that some follow up might be needed.  Primarily, it was pointed out that “sure, it’s easy for you to get out of debt:  you’re a two-good-income family with no kids.”  And while yes, that is true, as I mentioned in my last post, I had gotten rid of most of my debt before I got married.  And I had done it multiple times.  So I wanted to offer a “part deux” of tips that are helpful whether you’re single, married with kids, a college student, whatever.

1)  Bite the bullet & get a second job.  That was me, from age 22 to 26.  Three of those years I was also a college student (the latter year during my masters).  Yes, it sucks.  Yes, you will have no free time for fun.  Yes, you will get stressed because your second job will likely be something that might be considered “beneath” you.  For me, the second job was delivering pizzas.  Honestly, if you need a second job, this is the one I recommend if you have a somewhat reliable, non-gas-guzzling car.  I made minimum wage as my base hourly, but averaged about $15-20/hour with tips.  Granted—a lot of that goes back into your car for maintenance, but hey—extra money is extra money.  And pizza shops are open long hours, 7 days a week, which makes it easy for them to give you hours outside of your normal work schedule.  During my junior & senior year of college, I was working for the campus newspaper 25 hours a week, taking 12 hours of classes, and delivering pizzas about 30 hours a week.  After I graduated, I was working full time at a local TV station, and still doing pizza 30+ hours a week.  Was I exhausted all the time?  Yup.  But I was also throwing an extra $1500 at my debt every month, which to me made it all worth it.  (PS—you also get a lot of free pizza, which helps the grocery budget.)

Moi, rockin’ the PJ’s uniform, circa 2003.

Will you get frustrated?  Absolutely.  I can’t even count the number of times some customer treated me like garbage, to which I would smile, apologize, get back in my car, and then beat the crap out of my steering wheel while screaming, “I HAVE A BACHELOR’S DEGREE!!!!”  But, then I’d get a couple really nice customers, some good tips, and it would all even out.  You just have to keep your eye on the goal:  No. More. Debt.  And the harder you work, the less time you will have to do it.  Remember:  The second job is temporary.  You’re not going to be this stressed forever.  It is a means to an end—an end to your debt, which is the most overwhelming freedom I can think of.  It is 100% worth it.

2) If you’re married/have a partner, you MUST communicate about money & be on the same page.  Dave Ramsey says that every couple has one spender, and one saver—or, “one free spirit & one nerd”.  If you’re the one reading this, and you’re the one who’s motivated to get out of debt, you’re probably the nerd (no offense).  And these opposing views of finances are often what cause marital strife; did you know that approximately 45% of divorces are due to financial problems?  One person goes out & spends the dough, the other person gets mad, they fight, but nothing gets resolved. In fact, the spender probably goes out & buys something else to make themselves feel better.  Free-spirit spenders don’t like making budgets. It doesn’t sound like fun.  But you HAVE to find a way to get them on board BEFOREHAND, while making the budget, otherwise they will feel like the budget is being imposed on them—like it is something you’re doing TO them, rather than something you’re doing together.

Nagging WILL NOT WORK.  You need good, clean, open, honest conversation.  If you can, get a sitter (if you have kids), cook a nice meal for your spouse, share a drink, and then tell them that you’re excited about the idea of getting on a budget.  You’re scared about having debt for the rest of your life.  You’re nervous that you’re living beyond your means and that you don’t have enough savings to cover your butts if one of you were to lose your job.  Tell them your goals for the future, and ask them what their goals are—and then DISCUSS how being out of debt could make that happen sooner.  Did you never get to have a “real” honeymoon because money was too tight?  Talk about how once you’re debt free, you could finally take that trip.  Got kids?  Talk about how much more you could bless them by being able to travel, or help them with college, if you had no debt.  When you have no debt, you can do almost anything.  You can be charitable:  you could take money that used to go to the credit card companies and bless someone’s life with it.  We’ve all made a list of the things we would do if we won the lottery---try making a list of things you’d do if you had no debt and money in the bank.  It’s just as much fun to dream about—and it’s something you have far better odds of ACTUALLY DOING.

Let them know that you need their help to make this work.  Make sure they understand that they’re not the only one who will be making sacrifices (and make sure that’s true:  when it comes budget time, make sure you’re giving up things that you care about as well).  Don’t point fingers, because often even “the nerd” has bad spending habits.  (Example: “I know I’m causing us to spend too much on our cable package just because I wanted all those movie/sports/news channels.”  ‘Nerds’ also have a tendency to like having the faster internet package, or a better data package on their cell phone, etc.)  Also, find out if a Financial Peace course is being offered somewhere near you.  I just did a quick search and there are 15 of them in my area.  They’re often hosted by churches, so it’s a good neutral ground.

When it comes time to make the actual budget, do your best to make it fun.  This will be tough—because budgets aren’t fun.  BUT, you can use apps and online programs that create bright & colorful pie charts, which are almost fun…but you should probably get a bottle of wine or a 6-er of their favorite beer to share as well.  :D

3) Know the Basic Budget Ratios:  When you start building your budget, first, calculate your family’s average monthly net income.  Then multiply that by these percentages to see what the maximum amount you should be spending in any category is.  If you’re paying off debt, you should probably aim for the the minimums on most of these because that gives you the most amount of leftover $$ to throw at your debt—and because obviously—you can’t go with the “max” in every category, because that adds up to more than you make.  These are intended to be ranges.  If you’re single or a two-person family, you can easily go with the minimums on food & clothing, for example.

Category	Minimum %	Maximum %
Charity	10	15
Savings	5	10
House (mortgage, insurance, taxes, maintenance)	25	35
Utilities (lights, water, gas + tv, phone, web)	5	10
Food (groceries & dining out)	5	15
Auto (loan, insurance, gas, maintenance)	10	15
Clothing (plus makeup, hygiene, etc.)	2	7
Medical (including FSA/HSA)	5	10
Totals	67%	117%

And whatever you do, don’t cut out that first one.  I’m not gonna get preachy on you, but if you’re a church-goer, please tithe at least 10% of your net income.  If you’re not a church-goer, find a good charity that you care about and donate that same percentage there (I am personally a HUGE fan of the Modest Needs program).  Blessing others is part of having a healthy financial well-being.  Pastors love to say “God can do more with the 10% than you can with 100%”, and it’s true.  I started seeing infinitely more blessings (both financial & personal) come my way once I started tithing and giving.  Getting out of debt does you no good if you are selfish with the money you now have, and giving a percentage while you’re on your budget gets you into the habit of being financially charitable.  Because while you’re helping yourself, you’ll also see the difference you’re making in others’ lives, which will make you feel twice as good about your decision to get on a budget.

Also, you may want to build in a “miscellaneous” category in case of emergencies or variable expenses that change from month to month (like utilities, vehicle fuel, gifts). I’d recommend about 3-5% for this category.  Here’s a really great article on budgeting for non-fixed expenses.

Your budget should account for EVERY SINGLE DOLLAR of your income.  If you’re hourly and your paycheck fluctuates, look over your last 4-8 paystubs and calculate your average.  If you finish your budget and you have $52 left over, that needs to be assigned somewhere in the budget (probably to debt payoff).  Spend every dollar “On Paper, On Purpose” before the money even comes in.  This is how you take control of your finances instead of letting them control you.

4) Plan a reward (and fund it):  You know what’s a lot more fun than making a budget?  Planning a vacation!  Get together with your family (or by yourself if you’re single) and brainstorm ideas for what you would like to do together once you’ve paid off your last debt.  Maybe it’s finally going to the Grand Canyon, or taking a Disney Cruise, or simply a long weekend at the beach.  Maybe it’s a new HDTV, or a DIY kitchen remodel.  Or, if you’re a newly married couple w/no kids—maybe your reward is finally have kids (assuming you want them).  A friend of mine said she & her husband used that as their goal after they got married & combined their debts.

Then get together & plan it.  How much will it cost?  What hotel(s) would you like to stay at? How much will you need for meals/gas/airfare? Plan it all out on paper, and figure out roughly how much it will cost. (Add 5% to that for a good pad/inflation in case it takes a while to get to your goal.)  Once you have your budget, you should also be able to calculate out about how long it will take to pay off your debt. 

For the sake of example, let’s say you need about 1 year to pay off your debt, and your reward is going to cost about $1000.  Now get a jar: a nice big pickle jar, and let the kids help decorate it.  Name it whatever inspires your family: “Our Debt Free Trip!” or “Our New TV!”; something to that effect.  You then put (in this example) a $20 bill in that jar every week (make sure to account for that when you’re building your budget) until you’re out of debt.  If the kids want to help, let them throw in change or leftover allowance if they feel moved to do so.   Every so often, get together with the family and talk about the things you want to do on your vacation so that your goal stays fresh in everyone’s mind and keeps everyone motivated.  Let family members write down their suggestions for places to eat or fun things to do & drop those into the jar too.  Remind them that once you are out of debt, you will be free to do more things like this (providing you save up for them, of course).  Then, at the end of that year, if your debts are paid off, you should have at least $1040 in the jar for reward.

5) Sacrifices:  You’re going to have to trim the fat for a while until you get your spending & debt under control.  How much you trim depends on you, but remember—the more “luxuries” you cut out right now, the faster the debt goes away, and the sooner you can possibly start getting some of those back.  Do you need both a data plan for your phone AND internet at home?  Could you get rid of cable/satellite for a year and just watch shows on the internet?  Do you really need three cars in your garage---and is it logistically feasible to possibly go to ONE car for a year?  Instead of packing up your family of 4 & going to dinner and/or a movie every weekend, could you switch to once a month, and have family game nights the other weekends instead?   Can you survive the summer by opening the windows & using box fans instead of keeping the house at 69 degrees all the time, or use space heaters and extra blankets in the winter?  Could you maybe go to the salon every 8-10 weeks instead of once a month?  Can you do your own pedicure instead of paying someone $20-30?  Can you have a garage sale?  Maybe sell some items on Ebay?  Can the kids take a cut in allowance (say, go to $5 instead of $10/week) while you’re paying off debt?  Could you curb your bi-weekly shopping trips to once every other month until the debt is gone?  Can you switch to generics and clip coupons and do price matching to save on groceries?  These are just examples and they may not all be applicable to you.  But take a look around your house and look at the luxuries that can go.  It will sting.  But much like ripping off a Band-Aid, that stinging is temporary, because your DEBT PROBLEM should be temporary.  Once you conquer that, you can bring back some of those luxuries, within reason.  You don’t want to go into debt again.  And who knows?  You may find that your quality of life improves with some of those sacrifices.

6) Stay on Top of Your Budget:  Once you have the budget, you have to constantly check on it to make sure it’s working.  If you go with an all-cash system like Dave Ramsey’s “Envelope System”, this will probably be pretty easy—if you run out of cash in that envelope, you’ll know pretty quick that something’s gone awry.  But it shouldn’t get to that point.  Be aware of how much is left in each category.  I recommend checking in at least weekly.  If you’re doing an online budget tracking like Mint.Com, get together with your spouse/partner once a week and review where the money is going and how much is left.  That way, there are no surprises. 

7) OBEY THE BUDGET: If you know you have $40 left in your Clothing fund, then you get to the check out and you have $45 in purchases, don’t just say “ah well” and pay the extra.  PUT SOMETHING BACK, or you’re defeating the purpose of the budget.  If it continues to happen—say, you can never make it to the end of the month with your grocery budget, even though you’re clipping coupons and down to “beans & rice, rice & beans”, then your budget probably needs some adjusting. And that’s normal.  If this is your first time making a budget, you can’t expect to get it perfect.  But give priority to the “necessity” categories (utilities, food, roof over your head).  If those budgets are short even after making drastic cuts, cut from your “luxury” categories to move more money into the necessities.  Maybe it means turning off the internet completely for a while (you can go to the library or other spots with free wifi). Maybe it means your kids’ next round of school clothes have to come from the thrift store or hand me downs.  Again—remember the sacrifices are temporary and serve a bigger purpose, and once your debt is gone, the budget won’t be so tight. 

8) Try to Keep it Fun: Instead of thinking of it as a sacrifice, think of it as a Challenge:  your personal challenge to make yourself and your family the thriftiest sale-finders on the block.  Earlier this year, I decreed my own Fashion Challenge to update my closet on a budget. Last year, I revamped our Christmas Tree for under $20.  Get the kids involved: spread out the sale ads & see who can find the best deals on groceries.  Who can find the best coupons (and stores to double them)?  Who can put together the cutest outfit at the thrift store for $10?  If your kids are older & can help with dinner, organize a cooking challenge—who can make the tastiest meal on the smallest budget?  Give out awards like “the winner gets to pick this weekend’s movie/tonight’s TV show” that don’t cost extra cash.  Finding a good bargain always feels good, and if you’re involving the kids you’re teaching them about money and how to be conscious of their own finances.