Mogul In Training

We have heard it said a million and one times since the start of the recession: "This is the greatest recession since the Great Depression." This recession period has also been called the "Great Recession." Despite the 24 hour news coverage of every aspect of the recession, from the housing bust to the loss of jobs to the Oil Spill, the question that remains in my mind is, has the Great Recession had a permanent impact on how Americans spent their money, save and invest their income and view debt? In other words, will the recession have a positive impact on Americans' spending habits once the recession is over (technically, it's already over, according to the experts).

In my opinion, the recession will have the same effect as a yo-yo dieter; and, of course, everyone knows the symptoms and the consequent effects. There is an event that snaps the dieter into action--for example seeing a picture of oneself at an event and being jolted into the reality of just how much weight has been gained. Next, the dieter researches a variety of diet plans and decides which one fits. Then for months the dieter diligently follows the diet, sees results and vows to continue the healthy lifestyle, eating habits and exercise---and for a while is very successful at maintainance. But, slowly and unbeknownst to the dieter, the healthy habits are practiced less and less as day-to-day life takes precedent and the dieter isn't "dieting" anymore. Before you know it, the dieter has gained the weight back, is depressed again and doesn't even realize how he got back to square one. This is how I view most people who have changed their financial habits as a result of the recession.

Being financially responsible has to be a permanent mindset. It's not something you can just turn on and off or else you will find yourself right back where you started from. Just like I've known people who have lost weight only to gain it back again, I've also known people who have used their income tax return to pay off all of their debt and even go so far as to cut up their credit cards. But, somehow, they always end up right back in debt.

I never had a lot of debt and it was never really "bad debit". Although I would sometimes carry a small balance on credit cards, it was never more than I could pay off with one lump payment if I chose. Any other debt was mortgage and student loans, so, naturally, I thought I was doing just fine. Despite being fine, by most people's standards, in regards to debt, something clicked with me and I felt I needed to change. Instead of wanting to be just 'fine' in regards to debt, I decided to become completely debt-free FOR LIFE.

I still have not identified what my 'Ah Ha' moment was, but somehow, someway I got 'IT'. Whatever 'IT' is, it's what I feel the majority of the temporary, "only financially responsible because of the recession people are lacking. It is that lack of 'IT' that will, more than likely, place them right back into debt when this recession and effects have passed.

Can you identify your 'Ah Ha' moment?

I often ask myself why, without any concrete financial role models in my life, I became the financially repsonsible person in my family. Admittedly, I was raised by a grandmother who was not frugal, but cheap. And when I mean cheap, I mean cheap; the cheapest of everything from soap to toilets. Quality was not even an issue for her. For her, it was all about the lowest price. Her motto was, 'If you have a dollar, save a quarter.' And while I never strived to be that extreme and am definitely not cheap (because 'cheapest' comes with its own set of problems that my grandmother learned the hard way), I somehow got "it"; don't ask me how or why because I don't know. My sister, who was also raised by my grandmother, didn't get "it", in my very humble opinion. Don't get me wrong, my sister is financially responsible in her own way. But, she is the type that likes the latest and greatest of most things. She is not in debt (that I know of). But, she is one of those "I work hard, so I deserve it" people.

My sister and I couldn't be more different financially--although, I would say we are the two most financially responsible in the family. I attribute our financial independence on the fact that we didn't exactly have quality parents, hence living with the grandmother. My sister and I both are single, no kids and are both homeowners. My home, although, could have been smaller, is reasonable in size and cost. My sister, on the other hand, has a HUGE house. Based on my expenses I can live comfortably from only one paycheck and save and invest the other. My sister on the other hand, has taken on a second job because she wants to "build up her savings". Here's the catch: Her home is in Hammond, LA, which is a suburb of New Orleans and a 45 minute drive. Her full-time job is from 8 to 5, from which she goes to my grandmother's home and sleeps from 5:30pm to 10:30pm, then goes to a second job from 11pm to 7am. Then, she returns to my grandmother's to change for her full-time job. She does this Monday-Thursday. She never needed to build up her savings until she bought the big house. So, basically she is currently spending her entire life working in order to pay for the big house that she is NOT even living in. When I question her choices, she says the work situation is only temporary.

Every financial decision I've made, I've told my sister about it in hopes that she would get on board. But, needless to say, she has a different mentality than me; which is fine--no judgement. Everyone is entitled to be who they are and make their own choices. For me, money is not about material possessions. Instead, in my mind, money is about security and freedom. I never want to be stuck in a job I hate, stuck in a bad relationship, forced to borrow money, etc because of my financial choices. This is just my own personal logic. But, I often ask myself why do I think this way, but no one else in my family?

I know part of the answer is I've always been inquisitive--about EVERYTHING. As a result, I became a ferocious reader. At some point, I found personal finance books and my journey started. I've always studied successful people, both in real life and from TV and biographies. But, don't most people do this in some fashion, no matter how small?

So, what do you think the difference is between people who see money as a tool/asset and those who view it as a means to material possessions? If you are a PFer, what do you think is the difference for you? I ask because I still haven't figured it out...

First of all, I NEVER talk about my finances or my financial goals publicly. I just find that it's easier this way. But, for whatever reason, I have a reputation for being a financially responsible person--especially amongst my family members. Therein, lies the problem. I constantly have a slew of (mostly) family members always asking for loans.

A little background...I come from a family who is content with "just getting by" financially. Witnessing the misery that is "just getting by" is the reason I decided, as a child, to never "just get by". As a result, I never desired the latest and greatest as a teen. So, when I got monetary gifts I always saved most of it. As I got older, the loan request started..... Initially, I would ablige because the request would always be accompanied by a sob story. But, as I get older, I realize that there is a huge difference between a person who is financially responsible, but is going through some financial difficulties versus a financially irresponsible person who feels it is a responsible person's duty to bail him out of every financial crisis he creates for himself.

Therefore, I have adopted the policy that I do not loan money. There are always exceptions to any rule and there may come a time when I know, for sure, that a person has hit a tough patch and sincerely needs my help, but so far, that has not been the case. So, my policy for the last year and a half has been to simply say, "I don't have the money to loan". This is different from saying, "I don't have the money", because I do HAVE the money--just not to loan. The reason for this decision is twofold....

As a child, my grandmother was always the financially responsible person in the family. She worked hard and saved her money--which is not the easiest feat for a black woman born in 1919. But, somehow she managed NOT to pass these financial values down to her children. Therefore, she has six adult children still using her money to rectify every one of THEIR financial "crisis". My grandmother, by the way, will be 91 years old in October. After witnessing this, I vowed to never have to beg anyone for financial help and to pass down my financial values to my future kids. Additionally, for me, money is not about material things, but about freedom and security. I am single, never married (yet) and unlike many of my friends who would be able to turn to their parents in a true financial crisis, I only have myself to sustain me if something were to happen to me.

Therefore, my money IS my security blanket. Why should I loan money to someone else at the risk of my own security? Besides, I have also learned that in any relationship--be it romantic, family, friendship--if the relationship is not equal; if one person is always giving, then that person is being USED--it's that plan and that simple. If I am the one always doing the lending, wouldn't that mean that I am being used? Why continue to loan money to people who CHOOSE to be financially irresponsible and in the case of any financial rough patches in my life, I can't turn to them for the same type of assistance?