What Was Your Financial Fork in the Road?
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i_yudai Most of us have that pivotal moment or experience that shakes us from our stupor and resets our financial course. Maybe it’s a life change like bankruptcy or divorce. Maybe it’s something as simple as getting burned once by high credit card rates or finally ditching a car loan that had your budget on cinder blocks. What was your financial fork in the road, and what fate did it save you from? (See also: What's the Best Way to Get Out of Debt?)
Though I was raised by fairly conservative parents who made saving Priority One, I had my own money lesson to learn. Thankfully, it was quick and relatively painless.
As I was finishing my senior year of high school and preparing to start college, I decided that I needed a stereo system with a CD player. At the risk of divulging my age, let me just say that CD players were the pinnacle technology back then. To my 17-year-old mind, there simply wasn’t a higher form of musical entertainment.
I picked out my stereo and — drum-roll, please — financed the whole thing. Because I was 17, my credit score roughly matched the outdoor temperature in early spring, and the interest rate was astronomical. Money, especially during those lean college years, was hard to come by. Going to school full-time and working 20 hours a week for $4.85 an hour didn’t leave much room for fiscal error. That $400 stereo cost me roughly $700 in the end. When I finally — mercifully — grasped just how much labor and money I had forfeited in interest alone, something clicked. I was never quite the same again. That single event reset my entire financial course.
The interest, the worry, the sinking realization that I had been ripped off by a lender who saw me coming a mile away — all this imprinted on my mind permanently. The experience crystallized the simple lessons my parents had been teaching implicitly and explicitly my whole life. Though I didn’t shun credit completely, I would never again carry a balance or pay interest and fees on consumer debt. Decades later and still debt-free, I’ve never forgotten my “deluxe stereo” lesson.
But many people never have these watershed moments. They reach their fork in the road and continue along on the well-traveled path of easy credit and high interest. It’s easy to do. If you can pay the interest and never have a hiccup in income, consumer debt becomes a way of life. But if you’ve read this far, my guess is you’ve had your moment. What brought you to that financial fork in the road? Did you arrive early in life, or later? If you’re at that crossroads right now, how is it changing the decisions you make every day and how is it altering your relationship with money?
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Realizing that everyone around me was buying a first home, and I was still drowning in debt. Though it proved serendipitous and actually saved me from buying a hugely overpriced condo that I couldn't really afford, pre housing bubble, it made me wake up and realize that at age 26, excuses for my horrible financial mismanagement were no longer acceptable.
The financial fork in the road came early for my husband and I. Young married life is a crucible for many things including finances, don't get me wrong it's wonderful but it certainly has it's challenges. Our turning point actually came before our nuptials when we were in college and quite happy to spend our money let's call it...romantically. We went on dates, cooked schmancy food took off work and went on day trips with no thought whatsoever to the consequences should a financial "hiccup" occur.
Which it did, or should I say they did. You can read the full story on our blog but suffice it to say, we're MUCH more careful now. Financial lessons can be hard and embarrassing to learn but looking back I'm so thankful we did. Thanks for sharing yours!
@impulsesave
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After my ex left me for another woman with all our furniture one day while I was at work, and I ended up with all the credit card bills which took me three years to pay off, I was pretty close to cured.
A year later I went to see him about an acetylene tank that I had to return or end up with another $750 bill, he was sitting there, smoking cigarettes, with a cup of purchased coffee, complaining about money. That's what really got me started investing and saving, it was so pathetic to see him dreaming and pissing all his money away, 4 months late on the rent, telling me what a big shot he was, refusing work because it didn't pay enough. Since then, he's been evicted from a few rental properties and lost that commercial space and all the tools and equipment we accumulated in 10 years of a construction business.
It just crystallized that I didn't want to live hand to mouth and fritter money away on stuff with no value.
Great stories from everyone so-far. Rachelle - such an empowering conclusion to what I'm sure must have been a difficult time. That's what it's all about!
My financial fork in the road was trying to buy my first car in 2005 with a 525 credit score and I couldn't. No one would approve me. At 25 years old and I couldn't even buy a car, how was I going to take care of my disabled father? It was a long hard road from then on but I did it :)
Mine is definitely about my student loans and planning to finance my education. It's ongoing and I will probably be dealing with it for years, but I'll endure! And I'm sure you're credit score was better than a temperature outside, but that made me laugh.
My financial fork in the road is NOW. I just graduated college, debt free thankfully, but now I have to figure out how to, not only save for today but also, for my future. I'm slowly becoming more and more financially literate by reading blogs like these. I'm learning about investing, IRA's, better ways to handle my checkings and savings accounts, etc. I've always been good with money, but this is a WHOLE other ballgame!
I think the one I remember most was the first (and only) time I was denied for a credit card. I'd always had great credit, but carried balances as many people did/do. It was just a few years back at the height of the credit squeeze, and my ratio of debt to available credit was too high. It was a small wake-up call to know that even a free-wheeling, uncaring, anonymous bank thought I had too much debt! Frankly, it was also a little embarrassing, because I'd always thought I was 'doing just fine' with my money choices. It worked, though. I'm debt-free and now paying for my future instead of my past.
When I went away to University I received alot of scholarship/bursary/loan money for my first year. I spent it all - $250 a pop on clothes, shopping, etc. Had to move home for the summer between 1st and 2nd year, because with no job I couldn't afford to stay. I didn't have as much money from those sources in the years after, which really taught me how to live on a budget. I still splurge sometimes when I probably shouldn't now, but I never regret it.
Just to be clear - the only debt I have is government student loans - I didn't get myself in too deep, never spent more than I had.
Anyway, lesson is I could have had a few thousand dollars left over after my first year, but didn't. Caused me to think about all spending carefully since, and I save alot.
Mine was when I inherited my husband's credit card debt. I had always been responsible with money, and couldn't stand the thought that we were paying so much interest on purchases that we no longer could enjoy. So, we both made the decision that we weren't going to continue this lifestyle as a couple, and we paid off his CC debts, as well as our cars and my student loans. Been debt free (except for mortgage) for three years.
My fork in the road came on the day that my teenage daughter's best friend was killed in an auto accident. While trying to be available to the many people who needed comforted at that time I was receiving collection calls and harassing letters. At the exact moment we learned of her death a neighbor came to our door and told us that "someone" had called her home and left a message for us to call him-it was a collector trying to get us to call him every way he could. I was so overwhelmed by my financial mess that I couldn't be there to help my daughter heal.
I drew a line in the sand that day and said "whatever it takes, I will get out of this mess!" Three years, one bankruptcy, two job losses, and one nervous breakdown later, I'm nearly out of debt and more free than I've ever been in my life!
Mine came fairly early in life. I was 19, in college and without a job, and had a bank account over $100 in overdraft. I was flat broke and in credit card debt. That was my wake-up call that I needed to be an adult and get my act together. I got a job cleaning classrooms and slowly worked myself back into the black and paid off my credit card.
I am 25 now and while I still make mistakes with my finances every now and then, I am grateful that I started to understand it all at such a young age.
I wish I had learned by lesson at age 17! Age 17 is when I first realized what credit was. I bought a car - my dad co-signed and the credit union also gave me a credit card, thankfully with only a $250 limit. I had NO idea how credit cards worked. I actually thought that they put another $250 on it every month for me to spend. Talk about clueless! This didn't stop me from getting more cards and maxing them out. Around 19 or 20 I actually paid off all my debt - around $3000 worth. To celebrate I went to the mall and spent $1000. Oops! It took me the next 10 years and a failed marriage to realize how to be financially responsible. I am HAPPY to say I will be debt free in 3 months. :-)
Last year I was dating a man who refinanced his mortgage for another 30 years (he had paid almost 10 years of an original 30 year loan and only improved his interest rate by .5%), took on a 7-year car loan, and then a 4-year motorcycle loan. He also was trying to maintain fees on keeping a sailboat that was out-of-state. When his sister fell on hard times, he had to take out a cash advance from his credit card to loan his sister & she was indebted to him for $200. I realized he had no liquid cash and was living paycheck to paycheck, barely. This explained all the time we went dutch on dates (because he said he believed in women's equality), why he gave me 2 plastic tumblers for my birthday present the previous year (when I gave him Bose headphones for his), conveniently "forgot" my next birthday and told me "he just didn't believe in giving presents." I ran for the hills: he was 62 and I am 49, debt free except for my mortgage (which I refinanced to a lower rate and shorter term). His sad situation was an eye-opener and made me do things like keep up my already-paid-for car, keep adding to my emergency fund and savings, and pay off credit card bills in full in month--I didn't want to be in his situation when I got to his age.
My mistake was being young and dumb and not knowing what I wanted to study at college. Not knowing much about finance and credit cards got me into the most trouble at that time. I think I racked up about $10,000 in credit card debt mostly from just paying the minimum balance and didn't understand compounding interest. (I didn't read or understand the fine print). However, a credit card is the easiest means of establishing a credit history, so it is a necessary evil in the credit history world.
After I got my first job, I hired a lawyer (I knew) to negotiate with the my creditors that I would pay off the remaining balance without compounding interest and cease using their cards, or file for bankruptcy. All my creditors choose the prior option.
The result of the negotiation was that I would pay a fixed monthly payment (fixed monthly sum of all my credit cards) to my lawyer, who would then have the hassle of dealing with the creditors. In the end, the negotiation stipulated that I had 48 months to pay off all the debt I had accrued.
I would've never been able to pay off my debt if the compounded interests wasn't waived. For two years, I sacrificed a lot of not going out and staying in, but I learned a valuable lesson about the hard knocks of life no college class ever taught me. Most importantly, I learned a lot about finance and learned how to budget and save.
I'm actually at my fork, or at least was about six months ago. I'm going through a divorce, bankruptcy and am now the sole provider for my amazing three-year-old little girl. I'm not even thirty. But I've realized the life I've led is not the same one I want to share with my daughter.
There are some inspiring stories here -- both from people looking back and those in the middle of their defining financial moments. Keep 'em coming and thanks for sharing!
Getting into a car accident with a 5,000 deductible and realizing i only had 2,000 in the bank. I might as well of not had any insurance, but the low premium appealed to me. It taught me about insurance and always to prepare for the unexpected