(Navel-Gazing Alert: Be prepared to read the word "I" many times. Although this is a very self-absorbed post, if you are feeling discouraged about your financial situation, it is my hope that my little story will encourage you.)
For you young 'uns who may not know who Ann Landers is, she wrote a no-nonsense advice column that was published in newspapers nationwide for decades.....
Reading one of Ann Landers columns when I was in my mid-20's led to what Dr. Phil would call a "defining moment" in my financial life. I had forgotten about it until recently, when I was thinking about the state of my finances and pondering how I had gotten from where I was back then (anxious, had some nice department store clothes in my closet, but at a low point ate nothing but spaghetti noodles w/ ketchup for 2 days because I was out of money and that was all I had in my kitchen) to where I am today (contented and confident ... no Warren Buffet, but let's just say I'm pretty sure I'll never have to eat spaghetti w/ ketchup again unless I want to).
I don't remember what the reader had written to Ms. Landers about, but they were basically whining about how they were not good at something-or-other because their parents had not taught them properly. Ann Landers' reply was that the reader, who was by then an adult, had the responsibility to take charge of their own life, parent themselves, seek out the information necessary, and teach him/herself the needed skills.
Growing up, thanks to my parents and educators, I did learn some very important money-related lessons. I knew the value of hard work and earning my own money, to give to those less fortunate, to take care of (and refurbish) things to make them last, to make health insurance a priority, to balance my checking account, to pay off the balance on my credit card every month, and to build a good credit record.
However, I knew diddly-squat about comparison/bargain shopping, budgeting, saving, or investing. Emergency Fund? Retirement Savings? HAH! I knew nothing about any of those things, and I had an assortment of lame excuses, but the biggest one was that my parents had not taught me ... WAAAAH! So, Ann Landers response to that whining reader was a wake-up call to me ... I realized with quite a bit of embarrassment that I was just like that reader, sitting back and moping instead of taking responsibility for my own financial life.
I wish I could report that I immediately set out on a course of self-improvement and became a perfect financial wizard within 6 months. That wasn't what happened. Still hasn't happened, in fact! But I did start taking wobbly baby steps ...
The first thing I did was go to a bookstore and examine every single book on the shelves about personal finance. I don't remember how long I stood at that shelf, but it was hours. I ruled out books with a narrow focus (I was looking for good, general, broad advice). I also ruled out books that were offering pie-in-the-sky, get-quick-rich formulas or books where the author seemed to be hyperventilating (I did not want to add to my sense of anxiety). The book I ended up choosing was "Making The Most of Your Money" by Jane Bryant Quinn. I had seen Ms. Quinn in Newsweek magazine, and she seemed to offer very sensible advice in an intelligent but clear style.
I started reading that book and applying the principals. I did not do this as quickly or as systematically as I ought to have, but I stuck with it and made halting progress.
I started by "forcing" myself to save a bit from my paychecks. Back then, I was unfamiliar with the expression "pay yourself first" but it was what I did. When I went to the bank to deposit my check, I would put a bit away in a CD. [This was a comfortable first step for me, because I knew I could access that money, by surrendering some interest earned, in event of an emergency. I never did cash out a CD early.] This step was made more challenging by the fact that at the time I was dating a guy who was terrible with money, and he scoffed at my little attempts to save. [I told him about opening my first CD and he said it was such a small amount that it did not matter. Boy was he WRONG! It did matter!] I decided to keep my saving secret from him, and I kept at it.
Eventually, I saw my efforts at savings pay off. When minor emergencies arose, I was able to take them in stride. When I got married a couple years later (not to the guy who mocked my savings efforts but to my wonderful, supportive DH), I was able to pay for my own (modest but nice) wedding in cash.
I also started doing price comparisons, bargain-shopping, and buying in bulk where appropriate. I cut back on takeout food and started eating at home more and more (nothing fancy ... sometimes it was just the stereotypical single gal's sandwich eaten while standing over the kitchen sink). At that stage in my financial development, I still was not tracking my spending or working with a formal budget, but I was learning ways to cut back to make saving easier.
I really ramped up my efforts after I got married. I think it was the realization that I was suddenly responsible for a person other than myself that pushed me to become even more serious about securing our future. I started tracking every penny spent, and developed a budget. Many an evening after work I could be found sitting on our bed with the budget book (a green columnar ledger) and receipts spread out on the comforter. As time went on, we trimmed our spending more and more, gradually learning to spend less without feeling deprived. We budgeted ahead for irregular expenses (car repairs, taxes, pet illnesses, etc.).
We started saving for a down payment on a home, and I started reading up on home buying. When we did buy a home, we did not go for the amount the lender said we could afford. By that point, I felt confident in my own ability to "crunch numbers" and I calculated on my own what we could comfortably afford ... We ended up setting our sights a bit lower than originally intended and bought a condo.
When DH's company started offering a 401K, we began contributing to that. I don't remember the percentage we started at, but it was a small amount at first that we gradually increased. (A few years later, when my company started offering a 401K, we immediately started contributing up to the company match, and eventually raised the amount even more.) I started reading about mutual funds, and I chose 2 funds that required no minimum initial investments but we could invest in by having $50 automatically deposited each month. Neither of those funds were roaring successes and we ended up cashing them out in a little over a year, but they were part of the learning process. I read about a then-brand-new Treasury investment called TIPS and opened a Treasury Direct account. [That one was more successful. We still have our Treasury Direct account, and I still buy TIPS in addition to T-Bills.] I took a tax course at H&R Block.
Then, we started to prepare for DH to pursue his dream of owning his own business. I've blogged previously about the steps we took to prepare for him to leave his company and go out on his own, so won't bore you again.
That step has had the biggest payoff in terms of our financial life. It was a big step. But it was all of the little steps taken previously, learning to budget and save and invest, that made this big step possible.
Of course, we didn't stop there. When the internet became part of our daily lives, I started shopping around on-line for the highest-yielding bank accounts. We bought a house. We paid off our mortgage, while maxing out our tax-deferred retirement savings. We relocated to a lower cost part of the country. Our budget is a constant work in progress. I'm still trying to learn as much as possible about investing, and know I have much more to learn. I constantly seek out new sources of information (newspaper, books, magazines, on-line) that I can learn from and then apply what I have learned. Just this week at the library, I checked out another new finance book, "The Number" by Lee Eisenberg (note that I now check books out from the library instead of buying them!) ..... I joined the Saving Advice forum! .....
I know I still have much to learn. I want to find sensible ways to (legally) lower our tax bill. I must decide a reasonable amount to spend on our next house. I am trying to get a handle on how much we really should have saved by the time my DH turns 50, when he plans to try out for the senior golf tour. And there will be other issues that I haven't even thought of yet.
It's a never-ending journey that I assume won't end until the day I die.
When I think back on the girl I was when I read that Ann Landers newspaper column, I can honestly say to myself: "You've Come a Long Way, Baby!"
I read that financial knowledge peaks at 53 ... I'm excited to see where I'll be by then!
Thank you, Ann Landers! May you rest in peace.