That One Time I Almost Went Bankrupt...
" Half of being smart, is knowing what you are dumb about."
You are probably wondering why I am writing this? A fashion blogger talking about money? Finances? Responsibility?
Well that is exactly why I am writing this. The problem is that our generation spends more time spending money than having responsible conversations about money with each other. We don't teach each other how to properly manage money, or how to be smart about saving, but we sure as hell teach each other how to spend it. We give each other advice on boys, shoes, travel destinations and restaurants.. so here is to changing the conversation slightly.
After all, I figured that It would be best to give financial advice from someone who almost went totally bankrupt this one time a year or two ago...
Now before you start taking notes for your gossip agenda for church this Sunday, note that when I discuss finances...I solely discuss MINE. (this does not include my family, boyfriend, friends, or anyone else). So I do not want to get any calls from Ghana saying " Oh Hayet, I hear you are broke..."
Rather than tell you a long story about all my financial irresponsibility, I will tell you about the things I wish I knew about money...with the help of strategically placed Kanye Lyrics. And I will tell you how I overcame them. Hope it helps.
1. "I want to act ballerific like it's all terrific, I have a couple of past due bills, I won't get specific." - All Falls Down
One of my biggest challenges has been backing down from doing things for the honest reason that, I simply cannot afford it. How many times have you ever said to your friends that you cannot hang out that evening because you could not afford to? Well definitely not me. Not the African girl who's every word is a representation of her family, neighbors, ancestors and their cousins. Rather than appear broke (or actually responsible), I always found myself making excuses, eg. I have to do so much work/ my head hurts etc.
It wasn't until one day where I went to a brunch with friends ( knowing damn near well that the brunch would cost $50 and I only have $75 in my account). I finally texted another friend who skipped the events to ask why he hadn't come. He then told me that he had maxed his budget for entertainment for the month and would have to hang out some other time. Imagine how stupid I felt.... Budget? What was that? Why did he have one? Why didn't I have one? Why was he so okay saying he didn't have enough money to hang out? Why couldn't I do that? To be honest, I actually envied him...because he was super smart with his money and wasn't afraid to say it.
Today, I try to set realistic budgets for things like eating out. I allow myself to eat out once a week and budget $50 for each outing. If I don't spend that money, then I can carry it over to the next week, or month. I have found that the Mint app is the best to help me set budgets, and allows you to see how you are doing. Just don't forget to be realistic...you are fooling no one but yourself by setting a $50 monthly restaurant budget when you know each time you go out you spend $80. It is also totally acceptable to tell people that you cannot do something because of money. It does not make you look bad...you actually look smart. It also does not mean you are asking them to pay.
I have tried to be more honest about budgeting with my friends, and it has led us to all start to rethink how much we spend out, and look for other things we can do together that cost very little. (hang at the park, go bike riding, watch movies at each other's houses.) Once you initiate the money conversation, you all start to hold each other responsible...and it is great.
2. " I have a problem with spending before I get it." - All Falls Down
I for one was the queen of saying, I cannot afford this now...but with 8 payments on a credit card then I surely can. Sure, it sounds like a plan, until you start to think this way everyday, about everything and end up with thousands of dollars in debt. ($7,568 to be exact...in a span of 8 weeks. sigh)
We all do it. We see something in the store and calculate how many payments we need to be able to take it home. Most times, we fall on a credit card and kind of pretend that a credit card is someone else's money. Honey, it is the money you will still have to pay.
The truth is, if you cannot afford something today...then you absolutely cannot afford it and shouldn't be buying it. ( except a house). This thinking has helped me change the way I spend. But do not get me wrong, there are times when I want something and know that I am getting money coming in on a specific day in the future. The trick is to go ahead and swipe that card, but set up an automatic payment for the day you will receive the money. That way you are spending within your means....kinda.
"All I want is what I can't buy right now" - Blood on The Leaves
Last year, I had 8 credit cards. ( Jcrew, Chase Freedom, Chase Slate, Anne Taylor, American Express, Banana Republic, Nordstrom, Barclays credit). My wallet was fat...for all the wrong reasons.
At one point, I considered switching my phone number to avoid the number of payment request phone calls. Just imagine getting 14 calls a day to the beat of "bitch better have my money". I have definitely learned that while you may want fancy credit cards from all your stores (because of discounts, it isn't worth it.) You will end up paying more in interest than the actual discounts you got.
What they also don't tell you is that no matter how much you think you are paying, the number will only continue to rise. I would make a $50 payment on my Loft card monthly (as I was making payments on 7 different cards), and by the next month...the interest rate had canceled out the payment I made. If you have this problem and need help sorting it all out to be able to pay this realistically, I suggest you get a debt consolidation loan. They basically pay off all the debt so you owe just one person at a fixed monthly rate over a specified period of time (eg. 2 years).
I used a credit union to fulfill this, and paid off the last bit of that loan early last year. And trust me when I say, I did a happy dance when I sent that last payment.
"Having money is not everything, not having it is" - Good Life
Once I got a hold of my finances and started paying stuff all the way off ( I am currently 80% debt free), I faced a new challenge. I am no longer broke, but I am one bad financial decision away from getting back there. I still get into the bad habit of just swiping my card without thinking (at least it is my debit card this time).
One of the painful things I do now is to review my finances weekly, and in some cases daily. There is something about seeing the numbers change that gets you to whip yourself into shape. This involves waking up each morning and checking your bank account and deciding what you can/should spend that day. It really sucks...but until I trust myself...this is the way it will go.
Another way is to set weekly budgets whereby you take that cash out the atm and spend it physically. Seeing the physical money in your wallet go down definitely helps you to spend smarter...especially when grocery shopping.
"Laaaa la la la , wait till I get my money right." - Cant Tell Me Nothing
Today I am probably more money smart because I made the decision to ask people how they managed their money. I needed to understand how people I made the same salary as, were buying homes and I was sitting here buying shoes. Remember everyone's case is different, but I have done a few things I learned.
1. Set up automatic transfers to your savings on payday. (I save 10 % of my salary to my savings account at a totally different bank. This way I actually have no access to it, unless there is an emergency).
2. I swipe my credit card and pay within two days. Try to tell yourself that your credit card is your debit card. As soon as you spend money, set up a payment to clear it. It may be a week later or a month later...but setting automatic payments helps you be more responsible.
3. I only have four credit cards...not eight. It took a lot of work to close all the cards down, but it was very smart.
My first card is one that I had since I moved to America. It is actually cut up, and sits at a zero balance just so my credit score looks good.
My second card is my work card, I use this for all work related things but still goes towards my credit score, so I am learning to be just as responsible with it.
My third card is my personal credit card, I asked them to drop the limit of the card (yes you can do that). I always want the card limit to match my monthly salary. That thinking means, if anything goes wrong, I should be able to pay the entire card in one month.
My fourth card is my blogger credit card. A couple days ago, I revealed that I spent almost $11k investing in my blog last year. I try to keep my money entirely separate so have a blog expenses card, which also needs to get paid off like any other.
I set a goal when I was 21, to buy a house when I was 30. Two years ago, I had to wake up and realize that I was very very far from that goal. I had to have the hard conversations about being an adult and spending wisely.
Today, I don't get to spend money like a crazy girl...which I wish I still could..but it is actually a better feeling to live within your means. This has actually allowed me to travel more, and save more.
Over the next few weeks, I will be doing a few more posts on finances etc...so I would love if you leave a comment about things you want to know or have questions about.
Thank you so much for reading this. I know it isn't fashion, but since I cause so many of you to spend...it is only right I teach you how to responsibly spend.