Graduating from college can be a great feeling, especially when you’re heading into the job market with all kinds of opportunities to become gainfully employed and do what you love.
Things were looking great – and then they weren’t
If you have found yourself a “cutting-edge” job that’s exciting, it’s a great feeling. But, sadly, too often there’s a slump in sales, and suddenly a company finds it has to lay off workers. James Gordon tried to be optimistic and take this as an opportunity to focus on where he wanted to take his career.
James thought it would be a breeze to lock down a job in no time. He had excellent experience, great references, and a solid network. He wasn’t stressing over finding a new job. But a month went by, and his severance was no longer coming in. He had signed up for his unemployment benefits. He was just staying alive, but he sure wasn’t living. He barely scraped by. Then he made the “big mistake” of spending money he didn’t have by using his credit card.
Meet Mr. Big Spender
James was confident it wouldn’t be long before he was working. He made the mistake of believing that a manageable amount of debt was okay, and he would pay it off after he got his first check from this job that was eluding him.
He told himself everything was “okay”, and that going out to dinner three nights a week, attending a concert now and then or splurging on a mini vacation was okay. He was making more than the minimum payment on his credit card, but he wasn’t paying it off. That means there were interest charges.
His inner voice urging to be that “big spender” got louder. He found himself with more than $8,000 of credit card debt, and he had two delinquent payments, and his credit score declined more than 100 points within a 6-month period. Suddenly it hit him like a brick wall – he was mismanaging his money and ignoring his financial situation.
James never maxed out his card, and he didn’t worry about the credit he was using. His one card had a $10,000 limit. When his balance was $1,000, he paid only a part of it. Once that part had been paid, James gave himself permission to put that on his account again. For example, he paid $500 and then felt okay putting $500 back on his credit card – and then some. Slowly, the extra spending piled up, and interest charges started to grow.
Focusing more on spending less
James finally realized he had to discipline himself and get in control of the “big spender” in him, or else he was going to quickly find himself heading into a downward spiral. He learned three simple lessons and then changed the course:
1. Picking up some freelance or part-time work
While he was busy looking for full-time work, James realized he could put his skills to work as a freelancer, so he picked up some writing assignments every now and then. It wasn’t a full-time job, but it did keep him sharp and allowed him to still do his daily job searches. He still has those clients, and that extra money is quite handy.
2. A few dollars now and then can add up to a lot of spending
We blur what we need and what we want – it’s human nature. James began making the honest distinction between the two. He started rethinking his visits to the coffee shop, buying the cheaper name brand over the store brand, dropping monthly prescriptions, and the list goes on. It may be no fun to get rid of these conveniences, but there is no question that it is necessary.
After he constructed a safety net for himself, James could then sprinkle a few luxuries into his life every once in a while, because he was doing a better job of controlling how he spent his money. It showed just how important it was for him to let some conveniences go so that he could get his spending back on track and have control over his life.
3. Saving for those unexpected and/or emergency events
Money isn’t going to show up in your bank account unless you put it there. James have began to take a percentage of his paycheck and putting it in his savings account where it can build and grow. And, should he have an emergency or unexpected event in his life, he will have these emergency funds.
He also uses an app that rounds up his debit card purchases to the nearest dollar and deposits that money into his investment portfolio. This is very convenient because it requires very little action from him.
Now that his debt is paid off, he has far more disposable income, but he has not reverted to his old ways. James’s approach now is to be more secure financially in the future through smart budgeting and investing, and not getting on the “big spender” bus.