My Major Money Problems
In Hindsight, my problems with money started early on, as they often do.
My parents felt burdening kids with money concerns was just that, a burden. And so, I grew up free of conversations about money. The money discussions hidden from me would only temporarily shield me from the stress to follow. En-route for me, were some tough, tough life lessons.
Bursaries and scholarships covered the cost of my first year of college. For my second year, I transferred to a University. It was then that my mom bestowed upon me, money she saved throughout her working career (roughly 17 years in the making) - an education fund. Sadly, I didn't comprehend the effort made to accumulate these funds. And worse yet, it was being handed to me - someone who didn't know how to manage money.
Over the Christmas Holidays, the first break from my first year at University, (and half-way through my second year post-secondary), my mom asked me how I was doing for money. I told her I needed more as it was all gone.
She thought I was kidding. I wasn't.
We never discussed what that money needed to do for me, or how long it should last. When my mom realized I was serious, she looked at me blankly and said, "you'll have to head down to the student loan office tomorrow."
I'm embarrassed to admit now that I had no concept of the effort required to save this money in the first place. I honestly just thought there would be more.
Before I received any money, there should have been a conversation first. Included should have been the length of time it took to save it, and its intended purpose. There should have been conditions on its use, detailing how long it should last.
I did end up securing a student loan and spent the remaining years post-secondary working nights and weekends to pay for tuition, textbooks, and rent. Unfortunately, earning more money wasn't the source of the money problem in the first place. It was the management of the money that continued to fail me. And even then, I didn't know what I didn't know.
After graduating University, I acquired my residential Real Estate License and began a career as a residential real estate agent - I was 25 years old. I knew nothing of operating a business and only textbook information regarding real estate.
I aligned myself with a mentor from the start. She was relatively new to real estate but had plenty of business experience behind her. In a short amount of time, she moved me from a mentee to her real estate partner.
Very quickly I learned how disciplined she was with her finances. She told me not to be fooled by the vehicles in the office parking lot at that time. She went on to say many of the fancy cars I saw, didn't reflect the financial state or earnings of those who drove them.
Unfortunately for me, she handled our partnership finances (as this was her strength, among others) leaving my weakness (money management) growing weaker.
Due to personal reasons, our business relationship faltered, and eventually we went our separate ways.
Following this, I ventured into project real estate where I felt the income would be steady, and the outgoing expenses lessened. I worked, and worked, and worked - only to dig myself deeper and deeper into debt. I kept the depth of this financial burden secret from most everyone around me. I worked harder in my job, and even more at pretending that I was a success. As you can imagine, pretending was almost as exhausting as the stress associated with my reality.
I began tracking my expenses and income. I used various apps and logged every single personal transaction. I recorded even the loss of a penny (pennies were in use at this time) reconciling all accounts - including my wallet - hence the name for this site. Oddly enough, this still didn't improve my situation - if anything, things kept getting worse.
There were many terrible, shame-filled, memories of this time in my life, but there's one that sticks out more than the rest. My boyfriend was heading out to golf for the day, and he asked me what I was going to do with my day. I don't remember what I said, but it wasn't the truth. The truth was on that sunny day; I would spend most of the day avoiding the bank. Then when I could muster up the courage, I would go to the only bank in the city that would cash advance my credit card so I could make my mortgage payment.
The credit card was a credit union card, and at the time, it didn't have a security chip; this meant that I had to physically go in and face the tellers when I asked for the advance.
So I did. I walked in and made the request, and squirmed awkwardly as the customer service representative looked at me perplexed. It seems this wasn't a routine request. She, then got a manager to make the approval, and after what felt like forever, handed me the cash.
Not lost on me was that the crafty solution I'd developed to solve my immediate problem was a ticking time bomb - not a sustainable solution but a quick fix with ramifications I'd deal with later. Even though it was an awful solution to a terrible problem, I felt relief when they placed the cash in my hand. For one more day, I could keep it together.
I was hemorrhaging financially. My metaphorical boat had so many holes; I was barely plugging one before the next one sprung a leak - eventually, I wouldn't be able to keep it up.
A few weeks later, my accountant called to say that I would receive a significant refund for my taxes but my payment method had been declined. I lied to the receptionist about why - sounded confused and agreed to head out and clear it up right away. The truth was all my credit cards (yes, plural, cards, not card) were maxed including two lines of credit. In addition, my checking account had a zero balance.
To get the refund, I needed to pay my accountant which left me with two problems to solve. The first was finding a source of money to pay my bill. The second problem was reaching my accountant's office (a 30 minute drive each way) which included replacing the fumes that were loitering in my gas tank.
To find money to pay the accountant, I managed to exceed the maximum limit on my credit card and transfer cash into to my checking account. One problem was solved.
I was terrified to fuel my car. In the event I couldn't pay, what would I do? Would the gas attendant accept my watch or something else as collateral? It would be completely mortifying. At that time, pre-pay gas wasn't required, so I fuelled and then prayed that my credit, once again, would allow me to over-extend myself.
Luck, if you can call it that, was with me once again. The payment was accepted, my car was running, and I was off to pay the accountant and wait for the refund.
I spent many months like this; plugging holes until the next crisis. Always on the brink of the worst. Having nightmares of the Sheriff knocking on my door to foreclose on my condo, and the disappointed faces of those close to me as they began to learn the truth.
And then, a chance encounter with a friend, timed perfectly with the complete dissolution of my ego, changed my life forever.
One afternoon, I met a client, now friend, at her home for coffee. We started talking casually, and somehow finances came up in conversation. I disclosed to her that I was in a terrible place financially. Between my words, she must have sensed the emotional baggage in my body language. It was then that she handed me a piece of paper and a pencil, and told me to write it all down.
"Write what down?", I replied.
With authority, she said, "Everything you owe. Write it down now."
Initially, I was offended. Who did she think she was to inquire about something so private?
She kept pushing me.
"Kelley!", She said. "This problem will never improve until you tell someone. You need to take it off your shoulders and set it free. Keeping it inside is doing just that, keeping it inside YOU - stagnant. You need to unburden yourself and tell someone else." "Tell me," she said. "Tell me how bad it is."
Reluctantly I began to share with her. I wanted to preface the whole thing with, "it's not as if I'm out shopping and being irresponsible." I felt like a child as I shyly started to unload to her the debt I had accumulated. Every line item I listed, I would pause and look into her eyes searching for the judgment I was so scared of. Her reaction was such that she'd heard this before.
She told me I could beat it; that I needed to change my mindset, and get moving. Enough of hiding behind it. I needed to tell those close to me, and most importantly, my financial advisor.
With enough persuasion, I took the pencil from her hand, seated on the barstool in her kitchen and wrote out the debts I currently owed. The date, September 9, 2012.
Student Loan -$333.96
Mastercard -$7,869.30 (interest payment $134.06)
RBC Visa -$10,805.84 (interest payment $177.18)
TD Visa - $4,941.41 (interest payment$81.45)
RBC Unsecured Line of Credit -$11,000.00 (interest payment $100.72)
Owed to a friend -$3,300.00 (interest payment $0)
Car Loan -$9,441.57 (interest payment $26.07)
RBC Secured Line of Credit -$29,999.24 (interest payment $140)
The total was $77,691.32 - with monthly interest of $659.48.
It was humiliating!
After writing down my debts, my friend then asked me what my monthly expenses were. I didn't see the point in revisiting these; I knew what they were. Like I mentioned before, I tracked every cent I spent. I am still embarrassed to admit that I couldn't figure out how my finances got so out of control when I was careful to log everything.
And then, using the pencil she handed me, I started to write out my expenses. When I finished, she took the list from me and scrutinized it. Item by item, she critiqued each cost with the sole purpose of eliminating or reducing my overall expenses. She forcefully told me to cancel my cable. She said it was a privilege that I was in no place to have. I felt like she slapped me in the face. It was so obvious once she said it, but why hadn't I already taken action in this regard?
She said I could have the internet, but I needed to call around and find the cheapest available, even if that meant dial-up. She told me to cancel my gym membership (I refused as this was my sanity). She asked me to call MSP (BC Medical Services Plan) and negotiate subsidized rates because I was poor. She had me totally scrutinize every expense, to eliminate or reduce where I could to slow the leak in my boat. Finally, she said I needed to go to the bank and consolidate the debts to reduce the interest payment and free up more money for the principle.
I left our coffee visit that afternoon and felt partially relieved paired with embarrassment to have someone finally know I wasn't who I had been pretending to be. And, to my surprise, I could feel she still respected me. My ultimate fear, of being unworthy, judged, and less-than, was unfounded. My fear of telling her was just that, it was False Evidence Appearing Real = FEAR.
Her ability to confront me respectfully, yet honestly, helped spur me to find a second job. With only two job applications submitted, I found a second stream of employment as a waitress in a pub at a new five-star hotel.
I started to crunch numbers to determine approximately how long it would take me to repay my debt - I saw two courses of action. The first included working one or two nights per week, and taking five years or more, to repay the debt. The second and my ultimate choice was to give up my social life entirely and work like crazy, paying the debt as quickly as I could.
During this time, I'd work my real estate sales job during the day, and sprint to the hotel at night, with only 30 minutes between each shift. I worked like a dog. I did nothing but work. I decided if I put my head down for a short time (a blip in my whole life), I could eliminate my debt, and start to save.
In addition to income from an extra job, I started googling money management - trying to assess why my money tracking methods weren't helping me. It was then; I stumbled upon YNAB.com (or You Need a Budget.com). It changed my thinking about my finances entirely. In a few days of learning through YNAB, something clicked. I knew this was the tool I needed to relearn money.
In exactly one year and 10 months, I paid off $77,691.32. The last debt payment was in July 2014 and was the same time I disclosed to those closest to me where I was (financially) back in 2012, and what I'd accomplished since then.
I have been debt free since 2014, and have never experienced financial stress in the same way since. With the achievement of a goal so large, I'm left feeling empowered and unstoppable. I now wish the same for you.
One of the worst, rock bottom parts of my life, was the pivot point that became the most valuable lesson for me. So how can you do the same? Where does someone start when faced with a task so huge, and an ego so shattered? In the following posts, I'll walk you through exactly how I moved from embarrassment to pride and everything I've learned along my journey so far.