I’ve been trying to remember where I learned how to spend money.
I started by telling you where I didn’t learn about money. Then I talked about how the only money lesson I got was from my youth pastor. But even that wasn’t very good. He taught a good way to break up a paycheck between savings, giving, emergency funding, and spending but it had no way of teaching me how to use each of those categories.
- What’s an emergency?
- Who should I give to?
- What are reasonable monthly expenses?
- How much should I save?
None of the big questions were answered.
Cultural Guess Work
As I thought about it, I realized most of my money knowledge came from cultural guess work.
What is cultural guess work? It is using television, credit card offers, and car salesman to learn how to use money. You take all the bits of information the media dolls out and use it to make a some-what educated guess on how money should be used.
Here are a few cultural guesses I made:
- Everyone I knew had car payments so I decided car payments are a necessity (they’re not).
- At the store, I would hear couples say, “Should we use cash or our card for this?” and I assumed cash and credit are equally good ways to pay for things (they’re not).
- I noticed that even cheaper things like computers could be purchased on payments and decided that payments were a way of life (not true).
- I saw the world always had enough money to pay for the things they needed so I assumed I needed to out earn my payments (always a bad idea).
As I think more and more on my bad guesses, I realize it’s a miracle I didn’t go massively into debt.
Wait a second…I did go massively into debt!
My Biggest Money Mistake
In 2008 I purchased an (almost) new Toyota Corolla.
I ended up paying about $4,000 dollars more than it was worth. But I got a “really good deal” on the payments and interest rate. (editor’s note: it was a bad deal).
In 2008 I was a full-time student and part-time employee of a law firm. I barely made $16,000 bucks a year. And the car salesman decided I qualified for a loan for $16,000 dollars! That is 100% of my yearly income in debt!
I assumed the dealership wouldn’t give me something I couldn’t afford. I was very very wrong.
Yes, I was stupid and it would be several years before I could get the thing paid off (I almost sold it, but that’s a story for another day).
I’m not angry. It was the best decision I could make with the information I had at the time.
What you need to know
I needed a lot of help, and maybe you do too.
Some of the lessons cultural guess work taught me were good. I was better with money than my friends, but the really important things like investing, saving for emergencies, and paying down debts were completely outside my understanding.
I was without a clue until one faithful day in December when everything I thought I new about money was challenged.
But more on that next week.
What stupid thing did you learn through cultural guess work? How did you figure out you were doing it wrong?