I had a money wake-up call this week. Wednesday morning, I got a text from my bank, USAA, saying that I had a low balance. Actually, it said my checking account balance was “$0.00.” WTF? I logged in to check on this right away. It was true: I over-drafted my checking account, and my balance was zero.
Luckily, USAA offers free overdraft protection, so the money was transferred automatically from my savings to cover my deficit. Ironically, I over-drafted my account by paying off the last of my credit card bills after vowing not to use credit anymore. Turns out I also got a little too excited about paying off my loan debt and saving for my “quitting” fund, too.
Not Rich…Yet
This whole overdraft situation is almost comical because before I even got my first paycheck after getting my first real job, I was joking with my girlfriend about how I’m rich now. I didn’t made any stupid purchases, but I did notice a bit of a psychological change and feeling that I really did have much more money. I was making a lot less before my job when I was serving as a VISTA, but I obviously haven’t hit rock star status here, either.
But this over-draft (which had never happened before in my life) made me realize something: even though I’m earning a decent salary now, I’m far from being “rich” and comfortable. I’m glad this realization came now and only a couple months after getting my first job, and I imagine that everyone learns it at one point or another like I did.
We’re Not Entitled
This led to me think about what many people feel they’re “entitled” to once they have a job, and that’s mostly because everyone else spends on these things. But just because everyone else is doing it doesn’t make it okay, and this is a large reason why people are in such bad financial shape in this country, old and young. Here are some of the things I’m talking about (and have been guilty of myself from time to time):
- Expensive apartments in popular neighborhoods
- iPhones, HDTVs, and other gadgets
- A new car
- Eating out multiple times a week
- Expensive nights out with friends
I’m not saying you can’t have these things, but I am saying that there are still consequences to wanting to have it all.
For me, reality has already set in. I’m putting 30-40% of every paycheck towards either my debt or towards my savings goal. I even have my loan payments automated to pay $560 on each payday for the rest of the year so I can be debt free by December 31. My $400 rent plus utilities is only about 17% of my net pay every month, which I’m happy with. I don’t own a car, which makes me and my wallet happy. I’m not saying these things because I think I’m better or smarter than others out there that haven’t realized this yet. I’m saying this because I feel like I’m cutting back, but I still don’t feel “well-off” despite doing that.
It’s really easy to fall into spending traps when you’re a recent graduate with a new job and all of a sudden have extra income to play around with. But this is where there’s great opportunity for those that seize it. Perhaps never again will you have the opportunity to save so much money to spend on something great. This could be for a year of travel or to take on a new business venture or to just save for retirement and start taking advantage of compound interest. I find it sad to see so much opportunity squandered on new Honda Accords, Kindles, and gourmet restaurants.
Don’t Get Comfortable
I don’t feel financially comfortable with where I’m at, and I think that’s good thing. I’m not a cheap or extremely frugal person, but I don’t feel like it’s okay to just go on shopping sprees without having to consider what the consequences on my life may be. If I had extra money just lying around, I’d say that means I’m not managing my money and saving to meet my goals as I should be.
I’m by no means comfortable with my salary, either. It’s pretty hard to meet any ambitious savings goals now, even though my expenses are pretty low. I’m going to want to move to a larger apartment at some point (my bedroom is sorta like a closet now), and, if I end up with a kids and house someday, this kind of salary isn’t going to cut it.
Bottom line: we all need to strive to do better. I don’t want to feel resigned to the typically American life, and I know a lot of others aren’t happy with that either. Money is a part of that. If you’re one of those people, what are you doing to change that?
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photo by: f_shields
I budget with the aim of having close to a zero checking account balance before pay day. This tells me I have saved all I can save, and met all the other obligations. It’s a balancing act.
I feel your pain Jeff. Starting out is not easy but if you can keep that hunger you’ll be way ahead of the pack in a few years.
I do the same thing, Hunter, and for the exact same reasons. That works best for me, but I’m not always the best at keeping track of what checks and other auto-pay amounts are outstanding.
And don’t feel too badly for me, Hunter! I’m doing just fine, and I didn’t write this with the intention to make people feel bad for me.
I try to have a few thousand $ buffer in the checking so I don’t overdraft. I think you’re doing great. Most people gave in to temptation and inflate their lifestyle when the big paychecks start rolling in. If you can resist, you’ll be rich in no time. 😉
That makes sense, but, for me, it’s much harder to me to keep money in my checking account and just have it sit there without spending it.
Thanks, I feel like I’m doing okay, but the encouragement definitely helps!
Hats off on choosing a good bank! Just saved a potential $30 or so in OD fees right there!
Haha thanks! USAA is so good I almost wouldn’t have minded paying them the fee 🙂
Good for you for having such low living expenses!! It’s nice to be able to save so much. You won’t regret those choices. The overdraft is actually kinda funny, especially since it didn’t cost you anything.
The last overdraft I had was about 11 years ago. I was baby sitting for a friend and needed a gallon of non-tap water to make bottles. I think it cost me $1 for the gallon and it caused an overdraft. Sigh. I didn’t even have one dollar in my account! I paid $26 for a bottle of water!
Yikes! That’s the worst when that happens.
Seems like you’re doing well, putting away 30% to 40% toward debt and saving.
Totally agree with the idea of avoiding entitlement or feeling too comfortable. This is what gets people in trouble. To the part of being comfortable, best to feel that when present AND future needs are taken care of! The latter part is a ways off for me, hence the desire not to get too comfortable with the present 🙂