I can’t answer whys or wherefores until I double down on this: Money is NOT your master. Money makes fools and hamsters running on wheels; money is why it took an emergency admission to the hospital for me to finally understand a lesson I’ve been running from for nearly ten years.
You’re not going to get lots of dollars and sense in this post. Well, maybe you’ll get sense, but not advice on how to stretch a dollar. There are plenty of bloggers to find that can explain it all so much better than I can. What will you get is a full confession. I’ve had more than a few friends tell me to write this: I dive in with trepidation.
When my husband and I were married, we entered into our marriage with absolutely zero understanding of how money works. We came from a legacy of bad money management in both sets of our parents (and they would freely admit this, so I do not worry about mentioning it here): both sets are now entering retirement with no real savings and a legacy of high debt. As far as money education went, we had only the basic ideas of how to balance a checkbook. Budgets sort of made sense, but we’d never seen how one worked- we were pure babies.
We met in college. Herein is where the lesson lies- if you leave this page with any take away- this is it. TEACH your children. GUARD their finances, particularly as they enter college. LET THEM TRY in a safe setting, where the consequences aren’t catastrophic. KEEP HELPING until they get it. DON’T make money emotional; if they blow it on a Wii game, teach them to try again until they get it, while they are still safe in the harbor of YOUR finances. KEEP IT SMALL, and then let them try at bigger things, like paying the household bills from your checkbook as you watch over their shoulder.
Why?
Because I’ve been walking this road for ten years, and I’ll be dogged if I’m not gonna put some road signs up for travelers following after me.
I’m not blaming our parents; they had as little money education as we had, so it’s no surprise they made many of the mistakes we were doomed to repeat. The only mistake our parents made was to make money an emotional thing, but hey- it’s a mistake we all make because we all forget that money is NOT our master. Money is heavily laden (pun intended)- it represents us, whether we want it to or not- we measure ourselves by its dollar signs- are we worth it? It is mine, isn’t it? I want to drive that car, I need this house, because my worth is measured by the money that I (or my husband) makes. We cringe to realize we don’t make as much as Joe; we smile to realize we make more than Jane. It’s so ingrained. And frankly, I am not sure how to break that cycle- and I’m preaching to my own self here…but…in both our parents’ case…money was a deep dark mysterious thing that One Never Talks About. It’s kind of right up there with the Birds & The Bees talk.
By the time my husband and I married, two years into college, we held around $20,000 dollars in student loan debt, and about $3000 in credit card debt. Neither of us had held more than a part time job. The scary thing is? This happens on every college campus in America, every day. Looking back, I can’t believe how absurd this is. Seriously- could you or I walk into a bank right now and get a loan or a credit card with no credible income? Do you know that college students walk into Financial Aid everyday and sign their lives away, often to the tune of often $50, ooo plus? It’s a shiny little thing called the Stafford Loan, subsidized by the government. It’s got really decent rates- usually 4 or 5%- and a LONG lifetime. Terms start at 20 years. You can’t ever lose it, either- it stays even through bankruptcy proceedings. You’ll be on the hook for it no matter what.
When we graduated, my husband and I had over $98,000 in student loan debt. That was combined; ours is actually kind of low for your ‘typical college grad’ these days. It’s not unusual for one student to have those kind of numbers. Our mortgage was less than that; it was $94, ooo at the start, and by the time we sold the house, it had worked into the high $80s. We held nearly $10,000 in credit card debt at absurd rates- 24% was the average. I can still walk on my old alma mater and get accosted with credit card offerings in about ten minutes. The temptation is absurd and the balance offerings high.
Without getting into the nitty gritty details, which no one wants to read, I’m sure- our debt to income ratio upon my husband’s graduation was over 80%. Imagine a pie chart 3/4ths full and then another fourth- that’s the money we actually lived on; the rest of the pie went straight to student loans. Our car payment, mortgage, food, gas and everything else came out of the last little chunk. Does it make your stomach spin? Imagine what your finances would look like, those of you who have been around for a while- if you carried that kind of load? BUT that is precisely what is happening to college students on a daily basis. They have no idea that they are signing their lives away. Well, some lucky few might, but they still feel like they HAVE to because everyone needs a degree to get a job. I laugh sardonically as I write this, because has anyone seen the economy lately? Thankfully, my husband is in a good field with decent pay; I can’t imagine what it would be like for your run of the mill student with a humanities degree (not teaching) , or heaven help them, a business degree…
If I were to walk in a bank right now, prove my income, have my credit checked (and the same probably goes for you, dear reader) what loan or credit card you received, if at all, would be directly dependent on that little debt to income ratio. They’ll turn you down or charge you extremely high fees if that ratio is too high, because there is a real danger that you might not be able to pay. Why on earth, then, do we give students absurd high loans- with payments that might run into the thousands at the end, when they have NO idea what they’ll be making after graduation, or if they’ll even have a job? Even now, our student loan payments together are almost double our rent, and we’ve been paying the loans for five years or more.
We would have never, ever, ever, taken out those loans as students if we had even the smallest inkling of what they actually meant. And I hope, by telling my story, I’ll save someone else from heartache. I’ll explain more of the lessons I learned about money NOT being my master in the following days.