Making More Money and Fixing Our Lives

Mike: I’m not exactly sure when we decided that Friday was going to be chat day, but here we are. After doing them for a while, Logan and I got to this point where we were like, “Hmm! What should we talk about? We’ve talked about everything! Let’s try to dig deeper!” And it was kind of hard—we kind of dreaded it? Not knowing what we were going to talk about anymore. We were feeling stuck for a bit. But! We can revitalize the conversation by talking to other people. I can ask you the same things I talked about with Logan.

Meaghan: Ha! I am happy to serve you with a brand new gestalt. Okay so what are you going to ask me today?

Mike: Okay, so the first time I ever met you a few years ago, we met at a Starbucks and you didn’t really know me, but you told me all about your money. And there was a time in your life where you would, say, leave your credit card at a bar and decide not to go back for it, and then decide not to acknowledge it existed and ignore the bills that would come. You mentioned before that you had more “Logan” tendencies than “Mike” tendencies, and maybe that is a good example of that?

Meaghan: Oh definitely. And I think I am still that person, who is going to be more ruled by emotions, I guess, and to have all sorts of voodoo rationalizations and feelings about money. I still never picked up that credit card from the bar! And also, it is falling off of my credit history this year, which means it was about seven years ago. Ah, to be 23 again!

But I guess if anything when that ‘avoidance’ way of not-dealing with things shifted was when I, well around when I met you, when I was working at Tumblr and making a good salary for the first time. I started opening up all those envelopes and paying back bills, and I realized, “Oh shit, now I have to pay back WAY more and I have basically screwed myself.” For instance, I recently paid off my student loans in full, and I had ignored a Perkins loan which went to collection (DON’T DO THIS) and had to pay something like $22,000 instead of the $11,000 they originally lent me. So if I can avoid doing that again, I certainly will!

Mike: So what was the thing that sort of turned things around for you? It was the fact that you were making more money, right? Enough money to pay your bills and to live an existence that wasn’t paycheck-to-paycheck?

Meaghan: I mean yes, I was growing up a little bit, but at the end up of the day, it was actually having the money to be able to face this stuff. I went from working as a part-time nanny and personal assistant, making often about $1K/month, to getting hired at Tumblr and I think my starting salary was $60,000/year. My rent was about $750/month, I was still on my family’s phone plan, no big expenses, so I knew it was time to start paying back Sallie Mae and so on. In retrospect I should have been proactive about my bills and paid some kind of minimum, set up income-based repayment on my student loans — I should have faced it a little more. But it’s obviously much easier to face when you can afford to!

Mike: I do think that’s the key to a lot of our money problems. Data shows that the middle class is getting squeezed—stagnant incomes in the face of skyrocketing costs (Elizabeth Warren explains it in this video better than I can sum up). Many of our money problems are simply solved by earning more money. (Note: Readers wonder why Logan has been writing less—well it’s because she’s focused right now on looking for jobs that will pay her more money. She and I will be definitely chatting about this soon, stay tuned.)

Meaghan: I mean, yeah! And of course after I started making more money I did the lifestyle creep thing and suddenly I was overdrafting my checking account again. I moved to my own apartment, which was $1,300/month, started taking cabs, and then I took a paycut to go work somewhere else and was like, “Okay now I’m broke again.” I think since then I have been much more careful about keeping a low overhead and having savings — which for me translates to having more flexibility about the kind of work I do. Which sounds nice but is you know, easy for me to say?

Mike: Right, if you’re someone who hasn’t been vigilant with money, the lifestyle creep thing is likely to happen, but at least you started opening up your bills and paying them? As I always like to point out, very few people decide to turn their lives around financially and then snap their fingers and do so. It’s a gradual process. Which I think is a good reminder for people who look at stories about people who seemingly change their lives and suddenly pay off all their debt. You can decide to want to be better with your money, and you can trip along the way, and that is totally fine.

Meaghan: Right, I try to remember that a LOT of luck went into me getting the past few jobs I did, and I could just as easily be broke again. I don’t want to look back at 30-year-old me when I am say, 50, and be like, “You really screwed things up for us.” Ha. “Why didn’t you open an IRA?” etc. My strategy is basically minimizing future regret as much as I can.

And yeah it’s very gradual. Learning about my credit score, then IRAs, index funds, 529 stuff, taxes… it has been at times totally overwhelming to me (not a bad problem to have, obviously but), so I’ve just gone really slow with it and tried to totally wrap my head around each thing before I make a move. I hate not fully understanding things, which is I think why I avoided it for so long: “I don’t get this, so obviously it is not for me” — AVOID — so now I am just slowly tackling it all.

Mike: Hah, I just spent some time digging through my email. I think I recall you — maybe right after we launched the site — emailing me and asking about IRAs. Do you remember that?

Meaghan: Yes! I think I probably read about IRAs on the Billfold, and you specifically had just said, “Look if you’re overwhelmed, just open an account with Vanguard, do the STAR fund.” So I was like okay, I’m just going to do that, rather than keep putting this off. So I did, then I emailed you to let you know. Ha. So Vanguard should be paying you. Maybe I should be paying you.

Mike: Hah—god I would not take money for that. Another reader who lives in New York emailed me once and was like, “Can you come over to my apartment and look at my finances? And then maybe tell me what I should do? I will pay you.” And I was like, “Um, you should go see a proper CPA and not someone from the internet!”

Meaghan: OMG. I wonder if she or he ever got her financial life in order!

Mike: I hope so!

Meaghan: If not, it’s your fault.

Mike: Reader, I am sorry!

Okay, it is spring, and we should be out and about on a Friday, so we’re going to wrap up and call it a day. Go out and enjoy the sunshine! We’ll have more next time!

 

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8 Comments / Post A Comment

HelloTheFuture (#5,275)

“Many of our money problems are simply solved by earning more money.” QUOTE OF THE DAY, YO.

(Also, I love this series.)

DebtOrAlive (#5,233)

It’s freeing to realize that no, you cannot in fact cut your way out of insolvency and the reason you’ve been making no/little headway on your personal finances even though you have the dumb phone and have roommates and cook all the time and never use taxis and live in the “hood” (Sidebar: Love my hood. LOVE. People say hi here.) and use Mint and Netflix instead of movies and and and… Is because you Just. Don’t. Make. Enough.

It allows you to pivot away from the Ramsey-an obsession with self-denial and towards actually solving your problems. Most people don’t have a Debt Problem, they have an Income Problem. So just have the latte.

Meaghano (#529)

@DebtOrAlive PREEEACH

Eric18 (#4,486)

@DebtOrAlive Partly agree. There are ALOT of people who have a debt problem. Earning more money would be good for some. But if you don’t know how to spend/invest/save it wisely, then earning more does not solve your problem. It just leads to more debt.

bgprincipessa (#699)

@DebtOrAlive Yes yes yes. I have been thinking about this a lot lately. I do most of the things you mention, I know I do everything I should. I put some money away every month. I splurge on little things here and there. I eat out sometimes on weekends, but cook all week for every meal. And then my bf and I start thinking about saving up for a downpayment on a house and we’re like, how do other people do this? Why don’t I have that much saved up? Oh. I just don’t make enough. I don’t! Not yet at least.

So instead of fretting over that, I’ll just keep doing what I’m doing and save what I can until I hopefully start making more – then I can reconsider things.

Lily Rowan (#70)

@Eric18 Yep — my friend with the worst debt problem makes a shitload of money. She still spends it faster than she makes it.

The income problem is definitely true of young creative-class people, though. (Related: I always thought I owned way too much stuff until I moved into a way bigger apartment.)

WSgirl (#6,217)

I completely agree that it’s easier to confront debt problems when you have money to resolve it. Great article! Happy Friday!

j a y (#3,935)

You can’t frugal yourself out of poverty. So when earnings are too low to cover expenses, the only possible (?) solution is to earn more.

By the same token, however, if you’re not impoverished, it’s generally easier to spend less money than it is to make more.

There are probably a lot of people who think they don’t make enough money when really it’s the spending that’s more of an issue. And people who are trying to frugal their way out of poverty…

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