How not to start your own Personal Finance Journey

What I would like to do, is give a brief overview of how I would start my personal finance optimization journey, if I could do it all over again. We all take different paths in life, and sometimes it takes some of us longer to figure things out. Someone once told me, “a wise man learns from his mistakes, but a genius can learn from the mistakes of others”. Well, I was the former. It took me a while to appreciate that there was no get rich quick scheme and that over the long haul, it takes planning, sound decision making, and impulse control to get on the path to financial success.

When i started out, fresh out of college, i was not making much money. maybe 30 grand a year. but i had freedom, and i had very little responsibility. I spent money like it was burning a hole in my pocket. Savings was foreign to me. I was just living life in the fast lane, dealing with the consequences later. Got my self a credit card, with a 600 dollar limit. I thought I was on top of the world. Long story short, that card was quickly maxed, and I forgot to make minimum payments. Well that party ended pretty quick. Soon the collection calls started. I eventually scraped enough money together to pay the card off, but the damage was done. My Credit Rating was severely impacted. In hindsight, this is one of the best things that could have happend to me, and I will tell you why.

Access to Credit, and your personal credit rating is one of, if not the most important thing you have to your name. You must protect it at all costs. Without a good credit rating, you cannot, rent and apartment, buy or lease a car, get a mortgage, get a credit card. This becomes a negative feedback loop. Because when you don’t have good credit, that is when you need to build it the most. Borrowing money is an essential part of being an adult. For you Game of Thrones fans out there, “A Lannister always pays his debts” remember? You cant build credit, if you have no loans to your name. You cant build a positive credit record when no bank will give you a credit card! you become invisible to banks and lenders. you are infected with grayscale, so to speak (another Thrones reference).

So what do you do? What i did was apply for what was called a”Secured Credit Card” which was my only option at the time. what you do is write a check to a bank, and they issue you a credit card, that you can then use. the balance is then “secured” or backed by the money of yours that they are holding. This was how i slowly crawled out of my credit hole, and established a credit history.

Credit now is a bit easier to come by. It seams like any bank will lend, for pretty favorable rates. listen to the radio long enough, and you will hear Car dealer commercials where they promise that “NO ONE is turned down” for an auto loan. Trust me, you don’t want to be that person. Do yourself one of the biggest favors to your future self. This is right up there with saving for retirement. Lay the groundwork so that when the future you goes out there an applies for a mortgage, the lender can’t look back at a spotty payment history and turn you down. Learn from my mistake, and you will thank me later.

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