I remember when I graduated from college a little over ten years ago. I was so excited to make money and close that chapter in my life. I was also tired of rationing my money, so I could enjoy and was happy to get a job that had benefits, a cube, a little bit of travel, but most of all a stable paycheck. It was fun working downtown Minneapolis and going to my daily coffee runs at Starbucks. It made me feel like it was important to grab a cup of coffee every morning from Starbucks, slide into my cube, and begin my day as an Audit Associate. I also remember going to lunch 2-3 times a week since I was still living at home and could afford to do so. I brought my lunch to work whenever there was a lot of leftovers, but most days, I paid for lunch to ensure that at least I would be eating well at work. On my breaks, when I wasn't catching up with friends over the phone, I was shopping and buying things I didn't always need. I was saving vigorously to move out within the next nine months, and honestly, if we weren't going to Nigeria to see family in December over the holiday break, I would have moved out faster.
When we came back, I quickly submitted my application and was all set on February 1st to move into my first apartment. I soon found out the reality of what it means to pay rent and not live a rent-free lifestyle. I was paying already $270 for a car note and my rent, although $705 took a large portion of my already modest paycheck. I was only contributing 2% to my 401K and mind you this was after working there for six months already. I knew right away; I would need to alter my lifestyle and budget carefully to make sure I could pay my bills. At this moment, is when I first learned what it means to pay your bills and save as a young person living on their own. I had a budget sheet that I had downloaded from a savings website that I started using when I moved out, to help keep track of my spending. I was not a perfectionist at it, but at least I was tracking what I spent on coffee and lunches. By the time a year had passed, I had already met my husband, and we were in full wedding planning mode, so I never got a chance to solidify those financial habits. I always had an emergency savings account, and even after the wedding, we made sure to pay off our remaining debts, add more to our savings account because by now our rent had doubled to what I use to pay at my old place.
Although I was making more money, my lifestyle had inflated quite a bit, and I was keeping up with new expenses with the new money I was making. The mistake I made as a young person, was not just living within my means, but not living well below my means. It was easy for me in my 20's to be too impressionable about what I thought I should have or what I thought I deserved. So much, I had to take moments to re-evaluate my spending and slash my expense by dumping my emergency fund into credit cards or line of credit debt. This cycle repeated itself over and over until the end of 2017. I had had enough with my overspending and bailing myself out. We also had just had our son earlier that year, and it meant a lot to me to be able to buy a home for him to grow-up in.. My husband and I buckled down, he often gave me the lead, sat down with me as we listed all of our expenses and the money coming into our bank accounts. I started destroying debt left and right, taking small amount debts and paying them off as quickly and then using that money to pay the next debt amount in line.
As I was doing this, I began thinking of creating new habits, so I could break this cycle and ultimately get to a place where I could live below my means. People often think the answer to these sorts of problems is to make more money, but the truth is no matter what amount of money you make, it will never be enough with bad financial habits. After going through that all 2017 into 2018, my husband and I were able to buy our first house with a 7% down payment. We didn't do the full 20% because we plan on moving out of Minnesota in the next five years, and we felt if we did end up staying, we would end up refinancing at that time for a lower mortgage rate. I had learned some valuable lessons in the last 18 months, and I wanted to share my habits of being frugal and ultimately building wealth one day. Here they are:
1. Create a Budget and Stick to it.
There were times in the last 18 months, where I created a budget and did not stick to it; however, I stuck to it 90% of the time. I give myself fun money to pay for outings with friends or items that I wanted to indulge in, like getting my nails done or buying a pair of shoes. However, I still stick to a budget and plan. I feel like it is relatively easy to fall off the train in the era of social media, but it's important to remember that do you want to work for the rest of your life or do want to enjoy your life with little to do later on. Creating a budget worksheet was something I've been doing for the past 2 two years. There are times where I don't stick to it because sometimes things will come up, but for me, it's an excellent way for me to have a projection on what type of money is coming and where exactly it's going. I'm not too fond of the thought of not knowing if I have enough money to cover things before my next paycheck being deposited into my account or what I should do. Having a budget eliminates all that anxiety because then you start to build buffers into your account to handle if something does come out of the left field.