When it comes to money, the word “comfortable” is a lot like the words “success” and “wealth.” There’s never going to be a firm definition, because everyone’s idea of what it means to be financially comfortable is different.
A few years ago I was financially comfortable, at least by my standards. To spare you all the mundane details my income was racing out ahead of my expenses. For the first time in my adult life I had some real money in the bank.
Within three years I was defaulting on credit card accounts, having my heat shut off, and eating a whole lot of Ramen. In other words, I was broke. And I shouldn’t have been. Because I didn’t suffer a catastrophic setback. I did it to myself.
It wasn’t especially exciting or cinematic, either. I had no lavish trips or expensive possessions to show for my bad money behavior. I just made four mistakes – mistakes a lot of financially comfortable people tend to make.
I didn’t pay attention
I moved from western New York to New England. I had plenty of money in my checking account (and it was all in my checking account, not my savings account, because stupid). I spent pretty normally. I took a very low-paying job with a non-profit, because I thought it would be a good experience, and hey, I’ve got all this other money saved up.
In reality, my income and expenses were secretly upside-down, but I didn’t know it, because I had the money to support my un-budgeted lifestyle. At least, I had the money to support it…for a while.
I’m sure I’m not the first person, faced with an adequate bank account, who didn’t think they needed to look at their statements, or make a budget, or do anything at all. When basic money management isn’t an ingrained part of your daily routine, you tend to avoid it – unless, of course, things get tight, and you can’t afford to look the other way.
I wasted money
It’s amazingly easy to waste money. When we hear about people failing financially, we assume they must have spent their money frivolously. Fur coats! Big screen TVs! Marble EVERYWHERE! We equate wasteful spending with buying excessively expensive stuff that you can’t afford.
But there are so many insidiously small ways to waste money every single day. Little mistakes add up. I lived with four roommates. Refrigerator space was at a premium. Solution: eat out. A lot. I wasted money in practically every budget category. I overpaid. I never bought in bulk. I took poor care of the things I had (including myself).
None of it felt like wasting, though. I just spent what it seemed like I should be spending, without any consideration for how each purchase or expense fit into the larger financial picture.
I didn’t use credit productively
Good credit takes work. That’s not something you know unless someone explains it to you, and unfortunately no one explained it to me.
When you have money, it seems unnecessary (and perhaps unwise) to use credit. If you can pay for a thing outright, why would you ever borrow money to make that purchase?
But you have to use credit to get credit, so to speak. Using credit in a controlled manner – borrowing within reason, following through on your debt obligations – is how you develop the kind of credit history that will come in handy down the line, when you don’t have the cash on hand you need to make your major (and sometimes minor) purchases.
I avoided credit largely, except for the one card I used a few times and forgot about. (Yes, I really was quite bad at this whole money thing.) After all the dust had settled and I was largely back on my feet, my credit still had many years of catch-up to do.
I took money for granted
Money has never been more convenient than it is right now. Most of us go days or weeks or even longer without even seeing physical money. Everything is phantom transactions – digital transfers from one account to another to another. It’s incredibly handy, but incredibly dangerous if you’re in the habit of taking your money for granted.
I suppose for myself, if there had been a large pile of cash on top of the dresser, and I could see how much smaller it had gotten every morning when I woke up, that might have triggered something for me; something in the vein of, “Oh no! I’m almost broke!” Instead it was as if I woke up one morning and all of my money had run out on me in the night.
Having money doesn’t excuse you from needing to manage your money. Having money simply means you can get away with developing bad money habits for a lot longer than you could otherwise.
We sometimes need to come to the brink before we can see the light, but it’s really not necessary (and it’s definitely not much fun). If you’re financially comfortable that’s great! But it doesn’t mean you can stop paying attention. Everyone, in every financial situation, can benefit from thinking critically about their money.
I made the mistake of assuming that having money meant I was good with money. But I was not good with money and soon I had no money because of it. Wherever you are financially, you can get better. Spend a little time every day reviewing your accounts, planning your spending, and setting goals. The payoff will be well worth it.