Here’s one of my secrets to financial solvency: I started my adult life with some money in the bank.
Now, what kind of a tip is that?! Having money is not something a person can just decide to do! I’m just lucky!
Well, yes, this isn’t a money-management tip you can apply when you’re already deep in debt and/or poverty. What I’m thinking about this week-before-Father’s-Day is the enormous advantage my family, especially my dad, gave me by not only supplying my start-up funds but also teaching me how to use money wisely.The idea of starting with something is one I’m asking you to consider if
- You just started your adult life, and you happen to have some money.
- You know a responsible young adult, and you have enough money to give him/her some start-up funds.
- You are the parent of a young child and are considering various ideas for his/her financial future.
- After struggling to make ends meet, you finally have some savings, and you want to sustain that.
- You recently got some money that exceeds your debt–like a big tax refund or an inheritance–and you want to get into a less precarious financial situation.
- You hope to find yourself in one of the above situations someday and are looking for inspiration.
I’m very fortunate to have gotten this great start, but once I graduated from college it was up to me to decide how to spend and how to save. It’s been 13 years and 6 months, and I’ve never once run out of money. I’ve never even tapped my last thousand dollars. There’s always something in the bank. This is sadly unusual in America, where many people (even some with fairly high incomes) live paycheck-to-paycheck.
How much money are we talking about? Well, in my case, in December 1995, $13,000 was more than enough. That’s what was left in the money market account my father had opened for me with the money I inherited from my grandmother in 1988. Her money paid for some of my semesters of college, and my parents paid for others, anticipating ten semesters because I started as an architecture major and that’s a five-year program. In my third year, I changed my major to psychology and wound up graduating after nine semesters. My parents could have demanded that I reimburse them for one semester, but instead they let me keep that money–and they stopped paying my rent, utilities, and groceries. (I had been paying my more frivolous expenses, like clothing, with my savings from summer jobs.) I didn’t find my first full-time job until seven months after graduation, and I didn’t find any paying work for three months. But with my savings, I was able to buy everything I needed, plus a few extras, without going into debt.
And I spent less than $5,000 of that money before I got my job and started saving. Earning $15,000 a year, I put 20% of every paycheck into my money market account and gave 5% to charity. Two years and two months after graduating from college, I paid in full for a new car–and that took away most of my savings, which was a crushing blow emotionally (I didn’t really want a car but was required to have one for my new job), but I still had some money and the car cost thousands of dollars less in the long run because I didn’t pay interest on a loan.
Here are some of the things you can do when you’re starting with something:
- Stock up on groceries when they’re on sale, or buy more items to get a smaller per-item cost.
- Pay for things in full, instead of taking out loans or carrying credit-carddebt and paying interest.
- Take a job that doesn’t pay really well but is exactly what you want to do.
- Pay the security deposit and first month’s rent on a new apartment before getting back the deposit on the old apartment. This takes a lot of the stress out of moving locally because you can take a whole month to move instead of trying to do it all in one day. If the truck-rental company jacks up the rates on the first and last days of the month just because they can (grrr!), you can rent on an off day and save money.
- Get medical care and home repairs done as soon as they’re needed, rather than waiting until you have the money and letting the problem get worse.
- Keep your pantry stocked with basic foods. This helps you resist the temptation to go out to eat or buy expensive processed foods.
- Loan or give money to friends in need.
- Buy good-quality things that last a long time, instead of cheap junk that costs more in the long run.
- Worry less about things like gas prices, because you’re not tied to a weekly budget.
The key to hanging onto some of the money you started with is to live a thrifty lifestyle. Just because you have some money doesn’t mean you get to spend money all the time!! Spend on things that are really important, cut corners where you can, and enjoy what you have. Track your money (in a spreadsheet, in a notebook, or with software like Quicken) to learn exactly how much you’ve been spending, and then think about where to cut back and where to go easier on yourself. There are a zillion Websites full of thrifty tips, so I’m not going to get into a lot of them here, just link to my articles on the subject: Shop carefully for furniture. Make your clothes last. Line-dry your laundry. Take advantage of free food. Learn to cook for yourself more, and enjoy thrifty foods like honey baked lentils, kale, and canned fish. Reuse stuff. Use up stuff. Quit buying disposable dishes and tissues and diapers and everything. Bring your own food. Exercise on your own instead of paying a gym fee. Drive less. Turn off unnecessary lights. Learn to recognize when it Tastes Like Somebody Loves You and beware the lure of stupid consumer products.
Don’t let eagerness to hold onto your money stop you from giving it away. Whenever you have income, set aside a portion to donate to charity, buy things to donate, give to friends in need, put in the church collection plate, give to beggars in the street, or whatever suits you. I’m not sure exactly how it works, but I’ve found that whenever I get stingy about giving, a lot of unexpected expenses come into my life with associated hassles . . . and whenever I can’t resist giving and then worry that I’ve overspent, somebody gives me a gift!
This article wouldn’t be complete without acknowledging that, as an adult, I’ve received some large gifts of money from various relatives. Sometimes when I look at my bank statements, I think, “Yeah, but how much of that did I earn?” I’m very, very grateful for my generous family, and I know that if they’d chosen to throw me out into the world with nothing and had given me nothing since, I’d be in a very different position today. The gifts often come with a note about how the giver is confident I will use the money wisely . . . and part of using it wisely is assuming that one of the reasons I’m saving is that when I’m older and richer I’ll be giving big gifts to my younger relatives, or even to the older ones if they need money. I’m at least the third generation to save for my retirement with money I got from my parents, and when I’m retired I hope to be giving money to my son to build up his retirement fund.
Starting with Something is a gift that keeps on giving. It works for me!
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