Early on, Cynthia signed up for multiple credit cards and practiced no limit on spending. At 25, she’d already racked up more than $200,000 in credit card debt trying to live a lifestyle far beyond her means, while still managing mounting student loans. Her younger self had a bit of an addiction to financial risk-taking and an unhealthy relationship with money. Growing up, she also had little to no discussion about money in her family, watching her dad pay for things with cash, but never had any sense of how they budgeted, saved or invested.
When she got married, this thinking became reinforced. She viewed her husband as a type of fail-switch. “Since he was steadier with his finances, I felt I could be riskier. We now had two pools of money to play with,” she shared. It wasn’t until she had kids that this mindset started to shift. With the added expenses of raising two kids, Cynthia and her husband found themselves borrowing money to cover daily living expenses, and their debt ballooned. The stress of this took a toll on their emotional well-being and began preventing them from reaching financial goals they set for the entire family, like paying for college.
The Lesson: You need a budget. Depending on income and family needs, the first 10 percent of your paycheck needs to go toward eliminating debt. And make sure you get the reward for it. Debt reduction can be incredibly motivating—and for someone like Cynthia it may be the key to if you continue the practice or not. (Cynthia favored the snowball approach.)