Salary Hostage

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My good friend and west coast alter ego, Shannon from The Heavy Purse, is a huge advocate of financial literacy, and when she asked me to share “My Biggest Money A-ha” story in honor of Financial Literacy Month this month, I could not say yes fast enough. Here is my story and cautionary tale.

For the Love of Money

From an early age, I was always good at making money, whether it was babysitting, or working at various jobs through high school and college, I always had money. In fact, even recently, my mom had my cards read (it’s a weird thing she’s into right now), and apparently I am a Two of Diamonds, which means I am good at making money. The pursuit of making money, led me to major in business and finance when I went to college, and despite the fact that I knew a career in this profession would lead to money down the road, I actually also really enjoyed the classes in my major.

In another stroke of luck in my early working life, I was actively looking for a full-time job after college in the fall of 1999 right before the big dot com bubble burst. This meant that I had five job offers before Thanksgiving of my senior year, and each job not only offered intellectual stimulation and growth, but a nice paycheck as well.

Money Makes You Do Crazy Things

I ended up taking the job that paid the highest salary and thus began my career of working on a trading floor as an investment-banking analyst. The hours were crazy, the traders were crazy, but thankfully the money was also crazy. When my boss sat me down for my first review and told me my bonus number, I literally almost fell out of my chair. I could not believe that at 23, I had “earned” a bonus almost equivalent to my salary.

So what did I do with that bonus? Did I save it? Did I invest it? Did I open a Roth IRA?  The answer is “no” to all of the above, instead of making smart choices like those, I used the money to buy new clothes, new furniture, and I upgraded my car even though I had a perfectly functioning, fully paid for car. This bonus splurge represented the beginning of my vicious cycle of lifestyle inflation that continued for the next ten years of my working life.  And the crazy thing with this behavior is that I did not think that anything was wrong with it. After all, other investment bankers who were living the same way and making similar choices surrounded me. We vacationed together at the Ritz, we upgraded cars every three years, we lived in nice houses, and we wore nice clothes.

There’s Gotta Be More

When I turned 30, I felt accomplished, and I was assured that I had achieved my every goal in life to date. I had a successful career, I was married to a great guy, I had a beautiful son, and I owned a nice home. It wasn’t too long after I turned 30, and I met a good friend/life coach that I realized I was in fact miserable. I had a difficult time finding meaning in my life, and what I was doing with it. I had spent so much time chasing after the next “thing” but those things never added up to much. One of my “exercises” to get in a better frame of mind was to read a book about Happiness, and the book literally changed my life. After reading it, I decided that I wanted to live a life that was dedicated to helping others in some fashion, and I was so excited about how I was going to take on this next stage in my life. So excited until….

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Ah-Ha!

I realized that I could not leave my current job because I had elevated my lifestyle to the point that I needed the paycheck to pay for my living expenses, and it was an awful feeling. I literally felt as though I was being held hostage by my salary, and the only reason why I was held hostage was my own doing. There was no one to blame but me because I was the one who made poor money decisions for the past ten years that led to this point. It was and still is a very painful experience to look back and realize all of the mistakes that you made. However, I also knew that it was all in the past, and I now had the choice to make a change for my present and my future, and so I got to work (with my hubby) on making some hard choices and readjusting many aspects of our lifestyle.

My Shackles to Financial Health and Well-Being

  1. Entitlement Issues – I always rationalized that I worked hard, so I should “play” hard. And I assumed that it if didn’t acquire the “stuff” or experiences that I would feel an underlying level of unhappiness.
  2. Lifestyle Inflation – Just because you earn more, does not mean you should spend more. Now I illustrate the lifestyle inflation curve to my clients and it’s amazing to see that if your earnings increase, but your spending remains the same, just how much you can grow your wealth.
  3. Jones Effect – In my situation, I was surrounded by the Joneses and it created an almost lemming effect where everyone was “doing it” and you were the crazy one if you weren’t. There are certain industries where this is a widespread issue and finance is one of those.

Happiness is Achievable

A few years have passed since my A-ha moment, and I don’t miss a single thing about my previous financially illiterate days. My hubby and I have managed our lifestyle down to the point that gives us flexibility on what we want to do with our lives. Because of these changes, I was able to start my company, NextGen Financial, last September, and I am committed to helping others gain financial literacy and make smarter choices so that they don’t feel the pangs of regret or the shackles of a poorly managed lifestyle. And as I help others, I have found my happiness. Every time I see a client make progress toward his or her financial dreams, I feel a joy that is beyond words, and I could have never found that happiness without finding financial health myself. Financial literacy is achievable no matter what stage you are on in your financial journey, and the only key to success is a commitment to discovering it.

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Salary Hostage

Did you make poor financial choices that led you to a state of regret in life? How did you make the change to move onto something better?

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Shannon is a financial planner who left a “traditional” financial services firm to start her own company, The Financial Gym, because she felt traditional financial services firms did not have the tools or resources to help people in their 20s and 30s who are starting out and trying to build assets while also managing debt. She realized that the key to long-term personal financial success is a commitment to financial fitness and making smart financial choices. Through her blog, Financially Blonde, her book, Train Your Way To Financial Fitness, her podcast, Martinis and Your Money and The Financial Gym, Shannon is committed to making financial fitness fun, easy and accessible for everyone.

1 COMMENT

  1. Similarly I made money very early in life. At 24, I had a six-figure job which I used to fund a mortgage on a 4-bedroom house, new SUV, and extravagant vacations. What was I thinking?? I’ve since tried to take steps back but it’s hard to unwind some of those poor choices/ cut the cord immediately. I have since paid off my student loans, working on my car now, and then will pay my fiance’s loans next. I’m also considering making a job change for more money but I also value my time more now.
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