Alaina Tweddale, of the personal finance website Wise Bread, recently interviewed me about how my wife, Cheri, and I paid off $165,000 in debt and saved $20,000 in just 15 months.
When our discussion turned to the topic of “What I wish I’d known then that I know now,” I knew this edition of Money Savvy would be about avoiding the money mistakes I made.
Let me go back to the beginning of our story. When Cheri and I decided to get married, I was a young entrepreneur financing my start-up software company with credit cards.
Mistake 1: Over three years, I had maxed out two credit cards, totaling about $10,000 in debt.
Lesson: I should have continued to live like I did in graduate school when I took a full load of classes, studied like mad and worked weekends as a bartender.
I relied on credit cards and debt because I was taking home only $12,000 to $18,000 annually. If I had picked up a part-time job when I started my company, I could have lived frugally and relied on the extra income instead of my credit cards.
Mistake 2: We never discussed our money beliefs or our spending habits, and we didn’t consider getting any help with our personal finances.
Lesson: When we were making significant financial decisions that would affect us long-term, we needed the guidance of a personal-finance professional.
In the year before Cheri and I were married, my income had risen dramatically. That, combined with Cheri’s income, allowed us to qualify for a mortgage. We closed on a condo in the weeks before our wedding.
To do so, we sold the small stock portfolio Cheri’s grandfather had started for her. With the proceeds, we paid off my credit card debt and put a small down payment on the condo.
We made two major financial decisions – selling a significant asset and making a major purchase – without talking about our personal finances. We should have sought help from a personal-finance professional. We didn’t, and 18 months later we had accumulated $18,000 in credit-card debt.
Although we paid off the $18,000 by selling our first condo and were able to buy a larger condo in an up-and-coming neighborhood, we didn’t change our behavior.
Mistake 3: Over and over again, we ran up credit-card debt and rolled it into our mortgage.
Lesson: We were trading our dreams for debt.
We were caught in a cycle of unconscious spending, unaware that we were making choices that were steering us away from our dreams. Had we been more intentional and explicit about our choices – saying “yes” to one option and “no” to another – I believe we could have avoided the trap of unconscious spending.
Ultimately, the big lesson is about choice. We must step back from our everyday lives and examine our choices honestly. How are we choosing to live and spend our money? Are those choices helping us realize our dreams? If not, it’s time to change course and move toward our goals.
matt.kelly.durango@gmail.com. Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance. www.personalfinancecoaching.com.
