Spending money is easy, really easy. But so is saving money, it’s a similar process, really. Money leaves your current account and is used to purchase something or it flitters across the financial ether into a savings vehicle.
|My chosen savings vehicle|
The result of spending and saving completely different, but the mechanism for is essentially the same. Saving doesn’t require any additional mental or physical capacity, not really. You’re not required to answer but questions three to cross a bridge to gain access to make a savings deposit or battle with a giant 7 headed bee be allowed a share-dealing account.
But for whatever reason, people generally cannot seem to wait to rid themselves of spare money, as if the cash was a carrier of the rage virus. Yet after relieving themselves of money at a masterful pace, the desire for more surfaces. And so the cycle continues. If only there was a way to hold onto it.
I’m no different, at least I didn’t use to be.
While at University, learning the wonders of astronautical engineering, rocking a bleached Mohawk and being generally studious, I did what many did and took on as much of an overdraft as the banks would let me. Afterall, I was at University, one of the 50%, the chosen few, selected to further my education, I was pretty sure I would be handsomely remunerated for my efforts in the near future. 8 months working as a labourer building windows for minimum wage and then at a call centre was a bit of a shock. It shouldn’t have been, given the shear number of graduates flooding the workplace. The world wasn’t going to let me ‘make it rain’ money. At least not because I had a few new letters after my name.
I started work with a maxed out overdraft, no desire to clear it and so the overdraft followed me around for about 10 years. 10 years, it’s worth repeating.
I had a look through some old bank statements and the sheer pace at which I could spend following payday was truly staggering, impressive even. An independent observer would have thought I hated money arrogantly swanning around my current account.
Going back six years, looking at my historic overdraft balance just before getting paid each month;
You would be forgiven for saying;
“Overdrawn for nearly every month, that’s pretty fucking dire Mr Z.”
And I’d flare up like a house cat and hiss at you, temporarily, then my raised hackles would collapse and I’d concede defeat. It was dire.
In my defence the overdraft was ‘interest free’ throughout university and for a good number of years after. Just not in any of the six years above.
I was paying overdraft fees nearly every single month over these years;
The two lofty peaks are months where I actually went over my overdraft limit and got suplexed by the bank with charges. You know what the last expense was one month, whilst being over my overdraft limit, just before payday? Costa coffee. Haha, oh deary me. You live and you learn (5 years later) right?
The second line of my defence says that at least I was paying into a pension, a regular saver and sporadically into a share dealing account. Problem was, the regular saver and the shares tended to be used to either pay off my credit card or temporarily boost my current around into a positive position.
The question is why. Not why did I get myself overdrawn in the first place, I imagine plenty of students do. Why did I let it carry on for so long? For 10 years after starting work I continued to bounce about in my overdraft.
For one, personal finance never came across as particularly interesting or sexy. Who wants to budget when you could go surfing instead, I sure didn’t.
It never felt suffocating, I knew that a few months of restrained spending would sort it out, and frequently did. My spending wasn’t out of control, I had no debt, I lived in a small flat, so bills weren’t a problem. I was young, dumb and…well, a personal finance idiot. Looking back, I don’t remember ever feeling bothered or worried by my overdraft, not once.
A few quid a month in overdraft charges didn’t seem like much, so it didn’t bother me. And it’s not a lot on it’s own.
But it’s not the overdraft or the fees that are the issue really. It’s the fact that I was saving nothing, other than into my pension scheme. The grand total of my overdraft, credit card, savings account and share dealing account was around £nil up until some time last year. Nearly 10 years of work and my net worth was about £nil. My parents Labrador could claim the same thing, and she gets to pooh in the garden without being shouted at.
The problem was;
“Treating my wage like an allowance“
Something to be spent, not to be saved. Each month I was the proverbial 6 year old charging down to the shop for a bag of sweeties, pennies in hand (spell check made an extremely creepy suggestion for pennies).
It never occurred that I had become someone living from paycheck to paycheck, because I wasn’t paid by cheque. And because I wasn’t scraping by each month, I wasn’t paying back any loans and I wasn’t locking the door at night to keep the loan sharks out. There was no struggling involved. And that’s how I’d always imagined those suckers living from month to month, struggling.
The evidence is pretty damming though, I was quite clearly living paycheck to paycheck. You don’t have to be struggling to be living like this. There was no terrible terrible debt to speak of, or some other financial horror. The lack of any obvious mistake gave my cacophony of spending the perfect place to hide, in plain sight.
And this is the issue, there is no immediate issue, so why change our habits. We need that moment to realise that spending all of our wage every month is an issue. It just doesn’t seem to come that easy or soon enough.
Clearly, but at a frustratingly slow pace. It took me until I was in my thirties to realise I had a decade of work behind me and nothing tangible to show for it other than a crooked spine. Sure, there’s more to work than just money, but some savings would have been good.
It irks me to see my sister doing the exact same thing. Like I did, she is getting by just fine, there is no terrible soulless loan in the financial mists, no unpaid bills and no grumpy tooled up and stabby loan sharks looking for repayment. Seemingly just like me, she won’t listen either. Is it the inevitable circle of finance? 1/2/10/20 years, when will she have here epiphany moment? Hopefully earlier than I did.
Being told your first financial tasks are to set up a pension and save 3 to 6 months spending money in an emergency fund in case the boiler explodes is hardly financial cat-nip. It just doesn’t hold any narrative for someone young and agile. When I started working, the boiler breaking would have meant showering at the gym for two months, no big deal. Not a strong enough reason alone to sort out my personal finances.
Work becoming optional, which could follow getting your finances in check, does have a narrative that anyone can fit around their lives. Rather than starting with emergency funds and pensions, the end result of financial independence should be the opening point for financial education. Would have held my attention.
Anyway, my overdraft is done with. So long, and thanks for all the overdraft.
[As an aside, I don’t blame the banks. They offered me what I thought was free money and it did help at university. Perhaps it is unethical to increase a students overdraft each year, but it was I who said ‘yes please’. My mistake, I’ll learn from it and pay for it. And pay I did. The cost over the last 6 years was £280, apparently my overdraft is ‘only’ 19.9%. Expensive, yes, but it is unsecured debt.]