Living Below Your Means
Re: Young Fools

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April 22, 2004

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I was completely clueless about money when I was 21. I spent my years in college flipping out the credit cards at every opportunity, and when college was over, I had $12,000 of credit card debt with nothing to show for it. I tried to figure out where all that money went, and the truth hurt a lot. It was $12,000 worth of meals, gas, CDs, and beer. We would always have study group meetings at the local campus bar, where draft beers were only $.59 each, and at the end of the night, I would usually offer to put the tab on my credit card and everyone would give me cash. The problem is that I didn't put the cash back in the bank. I would use it to buy stuff and then I would still have the credit card bill to deal with. It didn't take too many of those $125 tabs to add up to $12,000.

So after college, I was ready to set the world on fire. I quit my part time job so I could devote my full effort to finding that dream job that was sitting there waiting for me (LMAO!). After about 2 months of job hunting with absolutely zero leads, my parents (who had covered 2 months worth of credit card and car payment bills) told me to go apply for a job at McDonald's. I was insulted. There was no way *I* was going to work there after 4 year of college. My parents said that was fine, but I would need to figure out how I was going to pay my bills next month, since they would not cover me anymore, and that McDonald's paid a lot more than I was making now (nothing).

So, I went to McDonalds and was hired as a shift manager and became an assistant manager 6 months later. I ended up working there 3 years, and I learned more about management there than I ever learned in college. I started back on the plan of paying the minimum monthly payments on the credit cards and saving the rest of my money (because I was working 80+ hours a week, I no longer had the time or energy to spend money). One day I realized I had enough cash in the bank to pay off my car, so I did, and was astounded to find out that instead of owing them (approximately) $10,000, I only owed $7800. How could that be??? Interest. I saved over 2 grand by paying it off early. A light went on in my head and I started reading up about interest and how it worked. I took a look at my credit card bills and finally realized I was not even making a dent in them by paying the minimums. So I changed my strategy. I starting putting all of my extra cash toward the credit cards and paid them off in about 2 years. When they were finally paid off, I found the extreme thrill of watching my bank account GROW each month...and it was a very addictive experience.

At this time, I was still not aware of any LBYM dogma. Because I lived at home, everything was below my means so I still wasted a lot of money on stupid stuff. But when the cards were finally paid off (at age 26) I vowed that I would never again have credit card debt. So far, I have not carried a balance for even 1 month in 6 years (knock on wood).

It's a lesson I am glad I learned before I got in so deep that I could never dig out.


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