What Was Your Financial Fork in the Road?
Most of us have that pivotal moment or experience that shakes us from our stupor and resets our financial course. Maybe it’s a life change like bankruptcy or divorce. Maybe it’s something as simple as getting burned once by high credit card rates or finally ditching a car loan that had your budget on cinder blocks. What was your financial fork in the road, and what fate did it save you from? (See also: What's the Best Way to Get Out of Debt?)
Though I was raised by fairly conservative parents who made saving Priority One, I had my own money lesson to learn. Thankfully, it was quick and relatively painless.
As I was finishing my senior year of high school and preparing to start college, I decided that I needed a stereo system with a CD player. At the risk of divulging my age, let me just say that CD players were the pinnacle technology back then. To my 17-year-old mind, there simply wasn’t a higher form of musical entertainment.
I picked out my stereo and — drum-roll, please — financed the whole thing. Because I was 17, my credit score roughly matched the outdoor temperature in early spring, and the interest rate was astronomical. Money, especially during those lean college years, was hard to come by. Going to school full-time and working 20 hours a week for $4.85 an hour didn’t leave much room for fiscal error. That $400 stereo cost me roughly $700 in the end. When I finally — mercifully — grasped just how much labor and money I had forfeited in interest alone, something clicked. I was never quite the same again. That single event reset my entire financial course.
The interest, the worry, the sinking realization that I had been ripped off by a lender who saw me coming a mile away — all this imprinted on my mind permanently. The experience crystallized the simple lessons my parents had been teaching implicitly and explicitly my whole life. Though I didn’t shun credit completely, I would never again carry a balance or pay interest and fees on consumer debt. Decades later and still debt-free, I’ve never forgotten my “deluxe stereo” lesson.
But many people never have these watershed moments. They reach their fork in the road and continue along on the well-traveled path of easy credit and high interest. It’s easy to do. If you can pay the interest and never have a hiccup in income, consumer debt becomes a way of life. But if you’ve read this far, my guess is you’ve had your moment. What brought you to that financial fork in the road? Did you arrive early in life, or later? If you’re at that crossroads right now, how is it changing the decisions you make every day and how is it altering your relationship with money?