[Welcome to a new post in our Financial Confession Series :) Up today, Christine Luken who went from financial mess to financial coach! Whip out your coffee and donuts this morning, and enjoy the story…]
Four years after I graduated from college, I hit financial rock bottom – hard.
I owed three different payday lenders money. I received regular collection calls on my credit cards and car loan. And I was on the black-list at all the local grocery stores because I’d bounced at least one check at each.
What’s worse – I was an accountant! First for an interior decorator, then for my father’s business – a multi-million-dollar machine repair company. Talk about feeling like a hypocrite!
How does a smart girl who made the National Honor Society make such stupid mistakes with money? Because I made emotional decisions with my personal finances, not logical ones. I let my heart hijack my wallet. From the time I was nineteen, I dated and then eventually became engaged to a guy; we’ll call him “Jeff,” who handled his money irresponsibly. Unfortunately, many of his bad money habits rubbed off on me.
Here are three of my most horrifying money mistakes and the lessons you can learn from them.
Horrifying Money Mistake #1 – “Theft by Deception”
Because Jeff rarely had his fair share of the bill money, we were constantly in the red. On more than one occasion our refrigerator was bare and payday still several days off. My brilliant solution: write a check for groceries despite the lack of funds to cover the amount! (This was back in the late 90’s when there wasn’t the instant communication between banks like there is today.)
At one point, a check was actually returned twice by my bank for insufficient funds. Rather than try to collect the money directly from me, this particular grocery chain turned it over to an attorney which led to me going before a judge and admitting that yes, I owed them money. I then had to arrange a payment system with the court, which included fees on top of all that I owed.
If that wasn’t horrifying enough, several months later when I applied for the accounting job at my father’s company, I received a call from HR. Something came up when running my pre-hire background check: “theft by deception.” That’s the scary legal term for writing bad checks. Imagine how mortified I felt trying to explain this to the HR manager and my father!
Horrifying Money Mistake #2 – “We’re Coming For Your Car”
There’s nothing quite like a collection call to stir up a cocktail of terror, shame, and embarrassment. I distinctly remember the call from my local bank informing me that my car payment was two months past due. The man on the phone pressed me to commit to a payment.
“If I had the money, I would have already sent it!” I wailed.
“Well, just imagine how embarrassing it will be when your neighbors see the tow truck coming to get your car if we don’t have a payment by Friday,” he threatened back.
For the whole next month I hid my car while I scrambled to come up with the past due amount. I would park my car in another part of the apartment complex, backing it in just right so the license plate couldn’t be seen from the street. I then walked half a mile back to my apartment in high heels, praying the whole time that my car would still be there when it was time to go to work in the morning.
Horrifying Money Mistake #3 – “Payday Lender Roulette”
It’s never fun when the alternator goes out on your car or truck. It’s even less fun when you have zero dollars in the bank to fix it. Not only do you have a transportation issue, but you also have a money crisis on top of that.
Thankfully (not), when my alternator went out, I remembered the commercial I’d recently seen from the nice folks at “Check N Go” who gladly lent me the money I needed until payday. What the payday lenders don’t tell you is that borrowing from them starts a vicious cycle. Once you receive your pay check and have to hand it over to them, you still have bills to pay and need to borrow even more.
At one point I tapped out the max amount Check N Go would lend me, so I came up with a bright idea: borrow from one of the other payday lenders in my town! When my financial house of cards finally fell, I owed three different payday lenders money. I ended up closing my checking account, letting their checks bounce, and arranged to send each of them a certain amount every month.
To say that this destroyed my credit would be a vast understatement.
[EDITOR’S NOTE: See our post on facts about Payday Lenders – they’re horrible!]
Lessons Learned Through All This:
#1. Even smart people do dumb things with money when they are financially desperate. The lesson here is to insulate yourself from financial desperation by having two things: an emergency fund, and a spending plan (budget).
#2. Guard your financial reputation! Those bounced checks that resulted in my “theft by deception” charge could have cost me an important job opportunity. Many employers check credit as part of the pre-hire process, even if the job doesn’t involve money. Why? Credit reports are an accurate indicator of general responsibility! Employers also know that financially stressed employees are less productive and have higher absenteeism than their financially healthy colleagues.
#3. Money is emotional. Personal finance isn’t just about the numbers. Our mindset, emotions, and relationships affect our money behaviors. I made countless financial mistakes despite majoring in accounting. I allowed my heart to hijack my wallet. Shame and embarrassment kept me from seeking the help I so desperately needed.
When our finances are a disaster, there are usually non-financial factors contributing to the situation. We must address and correct those issues if we are to get and stay financially healthy. My money only improved when I broke off the engagement with Jeff and removed myself from that toxic relationship.
#4. Bonus Lesson: The people in your inner circle impact your financial well-being, either positively or negatively.
The Recovery To Financial Health
It wasn’t a fast or easy journey back to financial health. When I decided to end the relationship with Jeff, I had no money, almost $10,000 in debt, and ruined credit. I moved in with my dad and step mom for several months so I could regroup and save up for first month’s rent and a deposit for a place of my own.
The first thing my dad said to me was, “You need a plan to straighten out this mess!” He helped me create a budget and a plan to pay off my debt. I was so stressed out and emotional about my financial situation that I needed an objective person to help me sort out the details.
I remember looking at the department store credit card bill and seeing a charge on there for a gift Jeff had “bought” me for Valentine’s Day. (Seriously people, I cannot even make this stuff up!) When I realized I was now going to have to pay for it, I was livid. However, to my dad, it was just one bill in the stack that needed to paid.
I followed the plan, and slowly but surely my debt began to shrink and my savings balance grew. Seeing the incremental progress month after month motivated me to stick with it.
About a year later, I was driving to work and an amazing thought struck me: “I can’t remember the last time I worried about money?” It was such a shock to me because I used to have almost constant money anxiety. That’s when I realized there had to be other people out there who were just like I was, living under a heavy burden of money stress and worry. I decided then and there I would find a way to help them get on the road to financial health, too.
I’m happy to report that now, 17 years later, I have an awesome relationship with my money. When I started dating my husband, Nick, we talked openly and freely about personal finances. He’s always been very responsible with his money and he positively influenced me with his good habits. I went from $10,000 in the hole and nothing in savings to having a years’ worth of income saved up and a net worth in the high six figures.
We’re on pace to hit the million-dollar mark in five years or less!
All my horrifying money mistakes have a silver lining, because now my full-time profession is to help others avoid the same shame, pain, and embarrassment of financial desperation. As the Financial Lifeguard, I now teach people how to swim in the choppy waters of personal finance. I’ve even published a book about it – check it out! Money is Emotional: Prevent Your Heart from Hijacking Your Wallet
Christine Luken is a Certified Financial Coach, speaker, and author. She helps individuals, families, and entrepreneurs design a financial road map to help them arrive at their Preferred Financial Destination. You can find Christine’s blogs, podcasts, webinars, and videos on her Financial Lifeguard website.
Like this series? Here are some other Financial Confessionals to peruse next:
- “I Used to Hire Escorts”
- “We Used to Blow Our Money on Motorcycles & Airplanes”
- “I Turned My Back on My Wealthy Parents to Live a Life of My Own.”
- “I’ve Spent over $40,000 on Amazon”
- “I Bought a Used Honda for $45,000”
- “I Became So Obsessed With Being Rich That I’m Now Sitting in Prison”