Financial Wellness is Self Care

My eldest came home after a nearly 6 month stint away, in another state, on his own. His reason? No money. He had run through his savings, was running up credit card debt, and his new business was not producing enough business to sustain three salaries – they underestimated how much capital they would need starting out. I have not properly advised him about financial wellness. I have not, until recently, modeled financial wellness in my own behavior.

I lived paycheck to paycheck for decades, often in a state of anxiety over how the bills would be paid or how we’d manage the grocery bill for a family of five. I even have had the benefit of family helping me defray costs, make large ticket purchases, and sending me significant financial gifts. To say that I did not properly steward their kindness would be an understatement. To be truthful, I am still dependent on a single paycheck, but my financial health is finally on the upswing.

How it started

I am by no means an expert in financial wellness, but I know an unhealthy relationship with debt and finances when I see one – because I lived it for most of my adult life. As a child, I understood that money was required to live in a home, have food on the table, and clothes on one’s back. I did understand the concept of earning more than you spent, and saving up for major expenses.

Sadly, my adult life was not quite so straightforward, and once I became a parent, things seemed a lot harder to keep a handle on. From the time my oldest child was born, he received everything he ever wanted, setting him up to make similar mistakes. I was earning a good living, as was his dad, and we were able to stay on top of our expenses, for the most part. The younger two arrived and grew up during the family’s lean years – these children are very frugal – when my earnings were erratic, money was tight, but we continued to spend as if that wasn’t the case. Job loss could be catastrophic. Cash flow was a huge issue. I had major dental health issues that insurance didn’t cover. My stress and anxiety was off the charts. I gained weight. I lost sleep.

Money stress, if not addressed, causes psychological harm. It kills relationships. It seeps into every corner of life.

At first, I made small changes: I started saving a small amount of my pay, and used that as my backup grocery fund. I paid into my work-sponsored retirement accounts, at least to the match. I took out a personal loan to pay off the credit card bill and get utilization back to normal. We refinanced the mortgage. Unfortunately, the early success was short-lived. The household savings account dwindled down to nothing. First, a car repair bill. Then, a flood in the basement and mold remediation. Then a plumbing bill or a sports fee was due. Or we needed a new car. The annual vacation airfare needed paying. And the credit card was once again the bridge. My credit score was a mess. Suggestions that we change how we lived were met with defensiveness. At some point, I gave up.

How it’s going

The only way to fix the problem is to change the behavior that got you there in the first place, right? I spent a couple of years doing debt to income analyses, running varying financial scenarios. I made several alternative budgets. Finally, I made a huge, life-changing decision that affected my financial (and mental) health and wellbeing, and forever changed how I manage my finances. My son has already benefitted from this new approach in the form of direct support, but he will also benefit when he puts these principles into play in his own life.

• First, I bit the bullet and refinanced the mortgage yet again. This time, though, I eliminated all the accumulated debt that wasn’t the mortgage – all the loans, lines of credit, credit card balances. I was able to do it when interest rates were ridiculously low, so even with a middling credit score, my rate is great and my monthly payment was reduced by over $1,000!
• I set aside about 6 months of bare-bones expenses in a separate account.
• When the tax bill arrived (that was a BIG surprise, and not a good one), I immediately moved that money into another account specifically for paying that monthly bill. I’m now down to 5 months of emergency funds, but that is more than I have had in over 30 years.
• I allocated 10% of my gross earnings to directly deposit into my savings account every pay period. The rest goes into the bill paying account. This allows me the freedom to help out the kids if they need it, pay for a surprise expense, or indulge myself periodically.
• I’ve automated all bill paying, and set up the credit card payment to pay the entire amount for the billing period. I carry less than 1% on that high-interest card and it is the only one I have. Obviously, I don’t use it for much and pay it off. My credit score is now excellent and I’ve sustained that for the last 6 months.
• I have eliminated expenses that are not additive. I don’t eat out often, and I don’t order take out more than twice a month. I buy only that which we need. I’ve taken steps to bring down the utility bills that had been astronomical.

What my son is doing

His situation is different. His major asset is also costing him a pretty penny: he drives a very nice (and I mean very high-end) vehicle. He is tied into a lease he cannot get out of easily – it would cost him nearly as much as if he just paid the rent until the lease is up. It’s capital he cannot use for his own betterment, which is a shame. These are the steps he is taking to get his finances, and his mental health, in order:

• He’s secured a full-time job with very generous compensation based on performance. It is built-in incentive to do well.
• Once he’s on the payroll, he will likely obtain a personal loan with a lower APR to consolidate the credit card debt he’s now only able to pay minimums on. Removing this albatross will free up his cash flow and improve his credit score almost immediately.
• He’ll reduce the number of credit cards he uses to the one with the lowest interest rate, and only spend what can be paid every month.
• Either sell the beautiful car for a less expensive one (which would make the most sense) or, once in the job for a long enough period and credit score rebounded, refinance the car loan to a lower monthly payment.
• Once rent payments are no longer a necessity, he’ll put that money toward beefing up the emergency fund. Follow the same rules with savings and bill paying: designate specific accounts for specific purposes. Deposit directly into those accounts and manage them with diligence.

Often, we don’t have a lot of choices in how we get back to financial wellness. Our society encourages people to get into debt early, and continually bombards them with messages that keeps them there. Credit cards are the enemy of a good financial wellness plan. Ever notice how credit card companies start sending you more pre-approved applications when you know you’re in over your head?

It’s by design. They make money off of your debt spiral. “Buy now, pay later” is the biggest scam ever invented and designed to keep people in debt. Sometimes, it is all too much to bear. For decades, I was resigned to being stuck in a place of debt that I felt I could never recover from. It is a terrible feeling. I felt like I had zero options despite a lot of evidence to the contrary. Sometimes, we have to take extreme measures to get back to a place of wellness. I had to first recognize that I deserved better.

Financial wellness is self-care.