I wanted you to hear more stories than my own. So, as part of the My Money Story series I am asking you to submit your story to me as a guest post. All of you have a money story. This is Tim’s story. Tim is a friend of mine and the person who introduced me to Dave Ramsey.
First of all, I would like to thank Alex for letting me make a guest post on his Website and allowing me to share my money story and thoughts on money and how to use it.
What is Money?
I’d like to start by more acutely defining money (as Alex already made a post about this). Money is power. Now, it is certainly not the be-all-end-all of human existence, but money is a tangible form of power; it allows you to achieve your goals and dreams in life. Call it purchasing power or the ability to marshal resources or what have you. Money is a tool that allows you to call on labor, be it a service or delivery of a good; and to earn money, you have to yourself offer a service or product to someone else. In this respect, money can be called a claim on future human labor.
As a young child, I didn’t understand this idea. Not a lot of us clearly understand things like that as children; certainly I didn’t. My understanding of money was limited to silvery coins or green pieces of paper that I could take to the store and trade for candy or toys. I thought money was that magical stuff that people wanted for some reason but didn’t really understand why.
As I grew older, I began to realize the value of work. My first foray into this came around the age of 8, loitering at a nearby gas station, offering to pump peoples’ gas for them and only asking donations. This lasted for about two hours before the clerk shooed me away, but when it was done, I had pocketed about $3 in change; quite a haul for a young kid in 1992. Previously, I had to rely on whatever coins I found on the ground, but here I finally understood, however rudimentarily, that work provided a greater windfall.
As I put the ideas together, I began to look to my parents. I saw that they worked hard but didn’t have a lot to show for it. Most of the year was spent with my mom who, through a Herculean effort, managed to raise 4 children on her own. Summers were spent with my father who, despite being a hard worker himself, also had little to show for his efforts. I didn’t understand the noose that held them back. What I didn’t see was debt.
The Specter of Debt
Now if money is a claim on future human labor, what is debt? Well when one borrows money, they are able to claim that labor; to consume right now. But debt has the burden of repayment attached to it. The debtor is choosing the consumption now and guaranteeing his or her own future to pay it back. In that regard, debt is truly a form of slavery. Part of the product of your labor is due to someone else and unavailable to you. And because very little debt is ever truly interest-free, one is almost always obliged to give up more of one’s labor in debt payment than they would be to save up the product of one’s labor and pay in cash.
Did I know this as I reached my teenage years? Not really. Fortunately, I did have a simple and naive idea that if I didn’t have the money, I couldn’t afford something. I rarely borrowed money from people and if I did, I was sure to pay them back quickly. Every day I didn’t pay back the few bucks in hock was another day I’d be nagged, bugged and ashamed that I didn’t repay. This one trope has served me well and, I’d like to believe, has prevented me from making any huge mistakes with money. But I would deign to say that I knew everything about money because I still had a long way to go.
I began to work. My first job was a sacker at a grocery store for minimum wage. Since I was still living at home, I would typically waste this money. It was nice to be able to afford fast food and concert tickets, but I quit my job after two months. It was difficult for me to work nearly full time while going to school. After another year of being broke, I decided to get another job, but it was sadly not something I did with pride. Like the typical teenager, I felt like the management was ripping me off and the employees were doing more for the owner than the other way around. Again, I frittered my paychecks away, but it was at least good to have spending money again.
Who’s more valuable: the employee or the employer? I used to think it was the employees since “they did all the work.” As I’ve wised up, I came to realize that in the free market, no one is “more valuable,” and that question is the wrong one to be asking. Employers provide service to their customers, but also to their employees by paying them for utilization of their labor. Employees too also serve by exchanging their labor to the employer for these wages. It’s a two-way street and in a robust, open economy, the back-and-forth of wages and prices determines pretty accurately the value of one’s service. Thus, the employer needs the employee as much as vice versa. In this regard, every single person that works is self-employed; most just happen to have one customer — the boss.
As I reached my early 20s, I certainly understood the value of money. I was starting to dabble into the stock market, I pretty much paid for all of my stuff with cash or credit — and that balance was paid off quickly. Despite making little money, I was living quite well. At that time, I was living quite well with my family in a large 5-bedroom house in a decent neighborhood. We split the rent but I only had to pay $300 a month and everything above that was gravy. Despite all of this, I was still basically living hand-to-mouth. My money comprehension was missing one last important piece.
At this time, I floated through temp jobs and called in sick often, not particularly caring if I was fired or not. I had these grand ideas in my mind that I would make it big playing stocks or playing cards or maybe if I could just find the right lottery ticket, I’d be set for life. I even tried to get an unsecured loan for $10,000 at one point for money just to play around with; thank goodness it was rejected. At the time, I figured I didn’t have much to lose.
But that changed. And a year later, I would finally know what I was missing in my understanding of money; responsibility.
My mom decided to buy a house. It was also unanimously decided the rest of us should move out and strike it on our own. I didn’t fully understand the ramifications of this beforehand; I’d have to find my own apartment and get everything set up on my own. I was able to do it, but there were certainly plenty of times I was broke and not for want of some useless junk either. Money was all gone to bills and rent. For the first time in my life, I was fully responsible for my own survival.
Responsibility: the Tie that Binds
To me, being responsible with money is not a muzzle. While it is restrictive in some respects, it is liberating in others. Responsibility means managing money with a purpose. We human beings all have unlimited wants and needs, but we live in a finite world with finite resources. To be responsible with money is to acknowledge our limits and work within them to make what we do have work for us effectively. We all have certain goals in life; to take care of our families, to go to school, to buy a house or even just to have some fun on the weekends. Responsibly managing money, staying clear of debt and sticking to a budget will allow you to make the most of your money.
One day in October 2007, putting away laundry in my small studio apartment on a rare rainy day in Arizona, I tuned through the AM dials to find something decent to listen to that wasn’t the latest crappy pop music. I came across a supposed financial guru who was claiming success for everyone that follows his plan. He was even selling books and CDs on how to do it. The cynic in me said to turn this garbage off since it was probably some Amway scheme; surely too good to be true. But I listened some more. It turns out the man was named Dave Ramsey and his plan was free to anyone who would simply open their minds.
And what did he have to say? Work hard, get and stay out of debt and have a plan for your money. Be wise, save, give and use your largest wealth-building tool (your income) to achieve your goals. This is the surest way for anyone to become wealthy. While I decidedly don’t claim to know everything about money (or anything else for that matter), I do feel I’ve come a long way in this regard. This is one legacy I hope to pass down to my daughter as she grows up.
To everyone reading this, your legacy can change, too. Your destiny is not set; you can turn the ship around and chart a new course. Are you up to it?