Rule 3: Realistically Examine Your Habits (#31WriteNow)

Realistically examine your habits.

Rule three is perhaps the second hardest rule in the “Building Blocks for Building Wealth”™ series. This rule requires that you take a fine tooth comb and go through your financial history. While doing this exercise, you’ll want to ask yourself:

  1. Over the past year, how much money did I make? Look at sources of income such as paychecks from your job, cash gifts, money from consulting work, etc.
  2. Over the past year, how much money did I invest into myself? This can be answered by looking at your savings accounts and other investment accounts (Retirement Accounts, CDs, Stocks, Mutual Funds, etc.).
  3. Over the past year, how much money did I spend? If you have a bank account, this is very easy to do (just look at the numbers in your debit column).

Special Note: Of the money you spent, you’ll want to break them down into major categories. The categories that I had were:

  • A. Housing (Rent/Mortgage)
  • B. Utilities
  • C. Student Loans
  • D. Medical Bills
  • E. Self-Care
  • F: Groceries
  • G. Fast Food
  • H. Shopping
  • I. Bank & ATM Fees
  • J. Other Loans
  • K. Miscellaneous

If you are anything like me, what you see will be absolutely scary. After going through my bank account, student loan statements and credit card statements, I quickly saw a pattern emerge. I had a hunch that I spent money in a reactionary way. By the time I was midway through examining my “fiscal year,” I KNEW that I was right.

I’m not a bad spender and on its face, I don’t even have bad spending habits. Like many people in my position, an enormous amount of student loan debt ($91k to be exact) and mounting medical bills (roughly $20k), I would say that I was doing pretty good on my sole income (after take home pay for the year, $23,600 — my tax return made me cry). Like much of the working poor, I was able to stay ahead of my bills and I paid them on time. I even had everything automated so that it would come directly out of my account and I wouldn’t have to worry about late fees.

Then something crazy happened – I had surgery.

I knew before I went in for my surgery that I didn’t have enough money saved up to carry me through the time off of work and I made the decision to cancel my auto-pay. If you want to know what happened, check out my Miss Celie Moment post. This was also around the time I began to shut down mentally. I’d been running in circles about leaving a job that reminded me of an abusive relationship; and when I looked at my finances, there were key moments that stuck out to me. In November 2012, I spent roughly $200 on a whim after a bad review from my Executive Director. In December 2012, I went to the movies and dinner and shopping as a way to cheer myself up. It was at this time that I found out I had a fibroid the size of a softball and needed surgery. In February 2013, after a clash with Senior Management, I spent roughly $300 on food, books and clothes (I should also mention that in February I was sleeping on an air mattress in my Cousin’s apartment).

But what also stuck out to me is that I would juggle between paying the bare minimum of a bill and paying a much larger sum on a bill based on my fear of adverse reactions. That same November, I paid almost $400 extra dollars on a student loan because I was afraid I was going to lose my job (my thinking – “better to pay a large amount at once in case I fall behind” – which is foolish). In December, I paid up and over on all of the utilities (don’t do this ever). In February, I transferred all of the money I had in my savings into my checking and again paid up and over on some student loans.

In each scenario, I was scared — terrified — that I wouldn’t have a job. Or that my health prognosis wasn’t favorable. Or that…

Well, it doesn’t matter what I was afraid of (looking back I can say that). What matters is that I now understand that realistically, I made decisions based on fear; and fear and finances are not good bedfellows. Now that I realistically know what my habits are, I can move into developing new ones.

Stay tuned for Rule 4: Build New Habits.

Have you examined your habits lately? What have you learned about yourself? 

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