Today marks what I hope will be a turnaround in my financial fortunes. Today, I opened a savings account.
Yes, it's true that I'm 33, with no dependents, and an annual income greater than that of the average household in the United States. And yet I have no savings, no equity, no real assets, and a massive amount of credit card debt.
Some of it I can blame on grad school and related professional hazards. Consider, for example, that in the summer of 2006 I received my last paycheque from Big Urban in May and didn't receive my first from RU until October--during which time I had to move hundreds of miles, set up house, buy a car, and occasionally eat.
But although grad school is responsible for most of my student loans, some of my consumer debt, and my virtual inability to build equity for six or seven years, I can't blame it for habits I clearly developed on my own. As soon as I graduated from college I moved to the big city, decided I needed my own place (in a pricey neighborhood), and then had to furnish that place. I made enough money that this wasn't unreasonable, but not enough that I could have the apartment and the lifestyle I wanted without continually courting overdraft fees. And what did I do after getting into thousands of dollars of consumer debt? I took out loans to go to graduate school!
After a financially disastrous first year, I actually managed to pull it together for a while. For my first four years in grad school, I lived in a tiny, cheap apartment, I didn't have a car, and I had few nearby friends; in addition to my stipend I got a job working at the university press for 12 hours a week. I paid down a fairly impressive amount of debt and even saved up a couple of thousand dollars. . . but all with the goal of moving back to the city and being able to afford movers and a rental deposit. Need I say that the rent on this new apartment--though a great deal!--was more than twice what I'd paid in Grad School City?
You see the problem. The decisions I make are never independently unreasonable, and I'm a master of small economies: I reuse tinfoil, pack a lunch every day, and know which drugstore has the best prices; I've been known to buy a single gallon of gas at a time and when I have to I can survive 10 days on $20. But when I get my paycheque I'll immediately drop $90 at Amazon (for books important to my research!) and $60 at Banana Republic (but for $180 worth of clothes--and they're wardrobe staples!). If I'm sharing hotel rooms, carpooling, and using frequent flyer miles to stretch my departmental travel budget, I congratulate myself for being "able" to attend four conferences in twelve months rather than remarking that I'm still out of pocket $800.
In short, the expression "penny-wise, pound foolish" was invented for your Flavia.
I thought things would magically turn around when I got this job. But, well, there were those four months without an income to make up for. And then I was doing a lot of conference work--and getting reimbursed months later, if at all. And then I didn't get my scheduled cost-of-living raise last September, because our faculty contracts were still being negotiated.
That raise finally arrived today, in a lump sum. In six weeks, next year's will kick in. And it has at last occurred to me that I need to take active steps to improve my financial situation rather than thinking that at some point it will take care of itself--with the next raise, or when my car is paid off, or whatever.
So I put $500 in my new savings account and will be making modest regular deposits from every paycheque. I don't intend this as a major-emergency fund--just a cushion of $1,500-2,000 for when I need to buy a plane ticket or a new set of tires. I've figured out a significant but reasonable amount I should be able to put toward my credit cards every month. (And yes, yes: they both have very low APRs and I already make substantive contributions to my retirement plan.) Hopefully, since I have no dependents and do make a decent salary, I'll be able to turn things around largely by making smarter choices and being more mindful about where my money goes.
I write none of this as a defense of my improvident ways, but I'm not sure it's an apology, either--I've loved everything I've bought and owned and done over the years. I just need to ensure a future that's equally enjoyable, and more secure.