Reflections on My Journey to Financial Freedom

 

For years, I financially operated under the philosophy of “spend now, earn more later.” I truly believed that my earning potential will definitely grow with time (why would it not) because in the foolish optimism of youth I imagined that in life the only way is up. But this has not been the case: my income has fluctuated as I took on different opportunities in my career, with some being valuable positions yet not the highest paying.

Despite being raised by a very frugal mother, I developed a habit in my young adult years of spending more than I earned. I made poor decisions with my money, living paycheck to paycheck, always risking utter brokenness should an emergency arise. My memories are still fresh from the times that I stayed up until 2 a.m. on my paydays, refreshing my online banking app just to make sure I saw it when I got paid. In my anxiety, I wanted to see the money was there before going to sleep, as my bills would be waiting for me.

It took things spinning out of control and the measured words of my financially savvy partner to jolt me awake from my slumber. In 2020, faced with a pandemic-related job cut, I did just that. I made the decision to turn around my finances. It began with first taking responsibility for my actions, followed by being humbled by my situation to accept guidance, and finally acting on this help.

Taking Responsibility

It is easier to claim to be a victim rather than take responsibility for the mess one creates. As simple as breathing, pointing fingers comes naturally when we are faced with a crisis. In many ways, claiming that I was forced to (mis)manage my money the way I did rather than asserting that I was in fact responsible for my actions helped me sleep better at night. However, I could only make a change in my financial health by doing the harder thing: owning up to my role in the issues I was facing.

While the symptom was low savings, the disease was actually “Keeping up with the Joneses.” I had been so engrossed in how I appeared to my peers that spending money on things like entertainment subscriptions so that I don’t miss out on the latest releases seemed rational to me. As an example, I once had Netflix, Amazon Prime, Hulu, Disney Plus, Spotify, and Apple Music subscriptions all at the same time. Let me not get started on the makeup or clothes I bought both online and in-person under the guise of “investing” in my appearance.
Morgan Housel describes the link between caring about what people think and financial stability in his book The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness. He puts it so well when he says: “People with enduring personal finance success—not necessarily those with high incomes—tend to have a propensity to not give a damn what others think about them.” What I was doing was the complete opposite.

Taking responsibility for my financial situation went beyond my spending habits. It also extended to my giving. It was also necessary for me to understand that the black tax I was subjected to was also my responsibility; I was not a victim here either. When relatives borrowed money, I had all the power to say “no” but instead made a conscious decision to still give them money. I gave even when its intended uses were unclear, when I was clearly being exploited, or when I could simply not afford to give. The ball was squarely in my court, so it dawned on me that I was equally responsible for the black tax as I was for my spending.

Accepting and Acting on GuidanceOnce I recognized my role in my financial distress, I had no choice but to eat the humble pie and accept the help offered towards making me better with money. As previously mentioned, my partner is gifted when it comes to handling finances and was more than happy to lead me along a better path.

His suggestion was to first know where every cent went, to better tackle my personal finances. He suggested that I begin the practice of tracking my monthly expenses to see how my expenses compared to my income. Drawing this out of his own experience, I learned that he had for a long time tracked his expenses before reaching a point where he knew from his averages what his yearly expenditure was. Thankfully, his handy dandy Excel document was available once customized for me.

The hope here was that I would understand my personal finances better and eventually learn to live within my means and also have savings. We did a trial run between September 2020 and December 2020 to get me into the habit before we started seriously tracking my spending from January 2021. Graciously, my partner joined me, doing his own tracking alongside me to provide moral support and accountability. By December 2021, I had a full year’s overview of my money and could start to recognize patterns such as what was my average expenditure for food, travel, or entertainment. This now helps me with financial discipline and saving practices.

This habit of tracking expenses is one that is often skipped by the many financial gurus that I have listened to on the internet. Many tout the benefits of budgeting and setting an amount for every expense every month, but it has proven useless for me for the times that I have tried using a budgeter. I think this is because it is generally easier to see where one’s money has gone than to decide beforehand, since life is full of the unexpected. In my case, the countless times I have had all the good intentions to spend a specific amount on a specific expense, I always ended up going overboard.

Tracking my finances has been a better solution to understand my money because since I see where my money has gone, I am better incentivized to spend less. I became diligent in completing my expenses sheet so rather than doing my numbers once a month, I made it a practice of sitting down and updating the Excel document once a week, usually on Sunday afternoons or evenings. When I paid cash for something and didn’t get a receipt for it, I updated my expenses sheet the same day so as not to forget that expenditure.

It has been more than a year since I have been tracking my expenses and I realize that more than anything, the first step towards financial freedom is this temperature check in the form of tracking expenses. It was not pretty entering all my figures for my partner to see where every cent that I earned went, but this humbling experience literally paid off. I am still new when it comes to good financial habits, but my hope is that my experience will help someone who is also fed up with unhealthy finances. The power of compounding eventually results in better outcomes, so starting early and consistency are key. As Housel says in The Psychology of Money: “Compounding works best when you can give a plan years or decades to grow…endurance is key.”