Many readers often wonder, "What do you know about being young and having too many bills and not enough money?" I'm not particularly old, but I am old enough to be married for 19 years and to have lived through a few life experiences. If you read my posts, you'll know that we're doing OK financially. We are debt free except for the mortgages on our two rental houses. We have two paid-for cars, a decent emergency fund, and we contribute about 20% of our income to retirement accounts. From my perspective, we are doing pretty well with the money.
It hasn't always been that way.
I pretty clearly remember our first few weeks of marriage. I quit my job to move with my new husband and my day had two highlights: when my husband got home from work, and when the mail arrived. I got the mail every day. As I opened that mail, I gradually started to realized that we had a lot of bills. I knew that I had a lot of bills, and I figured that my husband had a lot of bills, but with a fistful of mail, we really had a big lot of bills. When my spiffy new husband got paid, and it wasn't much, then I realized that it was going to be quite a challenge to pay all those bills with that paycheck.
In response to our predicament, I did two things. First, I got a job. I was working nights, and it meant that I didn't get to see the new husband quite as much, but it was necessary. Second, did what all the experts say: I got out a piece of paper and I wrote down every single bill that we had, how much we owed, the monthly payment amount, the interest rate, etc. I spent hours poring over that paper, figuring out how we could pay the minimum on everything and then pay a little more so that we could those debts paid off fast! The list was long: two car payments, my student loans, various credit cards, my husband's personal loan, even the loan I didn't know he had taken out to buy my engagement ring.
Then we started taking action. We refinanced my car loan and we made a budget. It was pretty tight; I think we each got $20 or $40 every paycheck to pay for gas, hair cuts, fast food, and anything else that wasn't essential. Honestly, I don't know how my husband felt about having his sweet new bride get all uptight about every single penny, but he never complained. Slowly, but surely, we began to pay off the smaller debts. Paying those off was good, but that meant that the remaining debts were relatively huge: the car loans and the student loans, plus the big credit cards. I tried to find our net worth statements from when we first got married, but either they are carefully filed somewhere safe or I threw them out. I would estimate that on our one year anniversary, we still owed more money in consumer debt than we made in a year.
My husband went on his first deployment (we're Navy, and this was a long time ago, so this meant six months out on the ship) and I worked two jobs while he was gone. Those balances started coming down with some serious speed then. I set aside enough money so that we could pay cash for our overdue honeymoon when he got back from his deployment, and kept paying bills. Coming up on our second anniversary, we still had very little savings, but we owed a lot less. We started saving a little bit in TSP (I can't remember where we started, but it was definitely less than 5%), and we also opened IRA accounts.
It wasn't until shortly before we reached five years of marriage that we paid off all credit cards, car loans and finally, my student loans. It was much easier for us than some: our bills were big but not huge, we didn't have kids, and I was able to work one or two jobs nearly the whole five years. There have been some ups and downs in the 14 years since we first paid off all our bills. We've made mistakes and racked up new credit card bills, even though we don't spend extravagantly. We've paid off debt and acquired new debt. We've bought houses, and we've moved. Which brings us to now.
Right now, we are doing pretty well. The Navy isn't a bad paycheck when you've been in for 20 years, and with all the kids in school, I've been able to return to the paying work world. We do own two houses, and they are both rented at the moment as we don't live near either of them. We save 12% of my husband's pay into TSP every month, and I max out my IRA every year.
There were many years of pinching pennies that brought us to this point. The penny pinching was a lot easier because we were working together towards long-term goals: being debt free, buying a house, and being able to afford to retire someday. Also, I am still amazed at how easy saving can be when you have the money taken out of your check before it hits your bank account. Yes, we save a lot, but we worked our way up to this rate and I can honestly say that I have never missed that money.
There are many points to this post. One is is possible to build a healthy financial life, even if it looks impossible now. Two, working together is really important. Setting goals together was the key to making this all work. Three, it is less painful to save when it comes out automatically. And four, I've been there. Really. And I'd like to help you!
This post was originally published as part of a Happy New Year post in 2011. It sort of got lost, what with the unexciting title and the madness of the holidays. I think it is important that people who see me now know that I've got some experience with being young, not having enough money, and somehow making it all work.