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December 01, 2009

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That was a long story, that wasn't too short! :)

Lifestyle inflation ironically gets easier to control the more things you get, b/c you reach an upper limit.

Try our "going broke to win big method". It's helped me save a ton over my years, and excites me everytime I see almost NOTHING in my checking account, but hundreds of thousands in my savings in a different bank.

Thank you for that story.

I wonder if this is "average" for paycheck to paycheck stories... relationships and lifestyle inflation. I imagine the latter definitely is, but the reader above has convinced me that relationships play a huge role.

In light of what you've been through, I'm impressed by your present financial state and direction. I'm happy that you sought out a counselor when you realized that you were susceptible to bad boys. Unfortunately, I have a friend who is much closer to retirement age and still can’t prevent her husband from dragging her/them down financially. He seldom has steady employment, spends far more than they bring in and has very large CC balances which he’s very secretive about. All this after her highly-compensated first husband left her with very little net worth after many years of marriage.

(At the risk of sounding overly critical, my recommendation for the next step in your career would be to work on your writing skills. I found your story somewhat difficult to follow, and it had a fair number of typos and misspellings.)

You have learned a lot from your experiences and I am impressed by where you are currently based on all you have been through.

I hope you give yourself credit for how well you have managed to get yourself financially healthy even after the parasitic relationships you have had to come through. I know people in perfectly healthy relationships as old or older than you who are doing worse.

My advice to you is to keep doing what you are doing financially. It sounds like you are doing things just right. Saving, living below your means but still spending enough to enjoy life ..... Perfect! For your next relationship, please consult the advice of friends and family to help you see through what appears to have been a previous blind spot for you. You are clearly a person who has her life together and you deserve someone of equal maturity. If you can avoid getting saddled with loser #4 you are going to do great!

I couldn't agree more that your choice of partner has a huge impact on your financial well-being. I am just glad to have found this out BEFORE I got married to my perpetually debt-ridden ex. I'm single now, in my early 20s, and paying off the rest of my debt. I lived with my ex for a year, and before that we dated for 4 years - his bad habits helped shape my introduction to finances, not to mention the fact that I racked up consumer debt while we lived together. Luckily I'm on the right track now and know what things to watch out for. Very scary!

Financial Samurai:
You stated: "I see almost NOTHING in my checking account, but hundreds of thousands in my savings in a different bank."

I go along totally with keeping very little in a checking account because they pay a pitiful amount of interest.
My checking account seldom goes over $1,000.
However, keeping hundreds of thousands in savings at single bank detracts from your credibility.

My wife and I have several million in Banks, in high yielding CDs purchased in 2008, but it is spread around at many different institutions so that we stay underneath the limit of FDIC insurance for IRAs which is $250,000/customer. Since most CDs pay interest every six months, and the interest on a 5.5%, $250,000 CD is $6,875 every 6 months, the most either one of us keep at any institution is kept below ($250,000 - $6,875), or $243,000 rounded to the nearest $1,000 below $243,125.

I had one bank closed by the FDIC last month and I didn't lose a cent because they gave me back my principal plus all accrued interest.

I can relate to this story. I too fell for the wrong guy, and it was paycheck to paycheck (my paycheck of course) the whole time I was with him. Anytime there was extra money, something would come up to spend it on. And the things we "needed" to have. . . went on MY credit. I was naive, but he was also very manipulative. I left him when our daughter was 3, and had nothing except bills to show for the 5 years we spent together. I spent several years after that living paycheck to paycheck as I worked my way up through my job and tried to pay the bills. He never paid child support so it was really tough, especially paying for full time daycare. Now my daughter is 10 and I feel I'm are finally on track. The ex still doesn't pay child support but my income is up significantly and I have made some better money and relationship choices since those days. Thanks for the story.

I think this is very common for women!

I have a similar story, but fortunately the financial damage was limited by my ex and I keeping separate bank accounts & credit cards all during our marriage (because even way back then, I could see he was a financial disaster). So while he still "lost" approx 300K somewhere, my credit rating at least was fine when we split and I was ruled not liable for his credit card debt.

If I ever marry again, I'm getting a pre-nup. Or maybe I'll just "live in sin"! Marriage is far from a great financial deal for many women.

@MC
I know too many men who were saddled with the all the debt during the divorce to think this is mainly a female issue.

One of my male coworkers was left with $20,000 of credit card debt from his ex-wife. She actually bought a $3,000 tanning bed and gave it away as a gift when she knew that he was leaving her for cheating. It took him 3 years of living WAY below his means to get back on track.

Another male coworker was left with $15,000 of credit card debt and a credit score between 500-550...it took him 10 years to get everything back in order. It took him longer since he has a more entitled personality. He didn't hit it as hard as my friend above.

According to anyone I've ever talked to about it (including his own parents), my biological father spent money that my parents did not have and never put my mother before himself. I also know for a fact that he paid less than $3000 total in child support even though he should have been paying $350 a month for 17 years. He would be a perfect example of a crappy partner.

With my step-father, I get to see first hand that an awesome partner makes you a happier and healthier person. He and my mother have been married for 19 years and they are both better for it...not to mention that he and my mother managed their money well enough that she hasn't been employed in 18 years and he just retired in his mid-fifties even though my youngest sister is a freshman in highschool.

My husband and I are both financially frugal...even if (totally knocking on wood) our marriage ever ended, we'd be better off than if we built our wealth separately.

Financially inept people of both sexes drag down their counterparts just as financially adept significant others add to a marriage's wealth.

This is a really inspiring story. It takes a strong woman to survive not one but two parasitic partners. I also have to add a plug for Suze Orman who is by no means perfect, but her focus on the role that money plays in relationships and how women often put themselves last financially is really important I think to understanding how people (women and yes, men too) end up in financially destructive patterns/relationships.

Good post Crystal. Losers come in all shapes and sizes.

Thank you for sharing this story. It's certainly a lesson I will not forget.

My wife sits at home all day and I work, but I don't think she's a loser. Kind of sexist to say that a man staying at home is a loser.

Old Limey, you should try CDARs. that way you have one account and you're still FDIC insured up to 20 million.

Laura:
I maintain our total investment portfolio at just one institution, the oldest and most respected Mutual Fund company in the USA and they don't offer CDARs, at least to retail customers like myself. Even so, for our IRAs, I prefer the flexibility I have of laddering out the maturities of our CDs as desired. When I bought them over one year ago it was no big deal selecting the ones that suited my needs from a very large number that my institution offered. At the current time they offer 105 CDs with interest rates between 3.80% and 0.10%, far too low for my liking, so I am reinvesting the income they generate and the proceeds from any that mature in mortgage securities backed by the U.S. government with a much higher yield.

Like the poster here, I also grew up in a frugal family and was a person who enjoyed saving....until I met a guy who wasn't like that. I thought everyone grew up like I did...with parents saved money, paid cash for cars, & generally lived below their means. Boy, was I wrong!!!!

I think that this long post illustrates that there's more to money than appears on the surface. People who are not confident and/or are emotionally insecure are likely to have money problems, either because they can't control themselves, or because they end up with partners they can't say no to.

I think to a very large extent, money problems are really just a symptom of deeper emotional problems.

WorkingHusband - If you need your wife's income to pay the bills and she really just "sits at home all day", I think you need to reconsider her loser status or you're the sexist one.

The husband in this story may not be a loser but a risk taker that will not settle for a low paycheck and an unhappy job. There is of course another side to this story, but the info given does make him look like his lazy and not in touch with reality.

Absolutely loved this post (b/c of the detail, esp. that actual numbers were often given, which makes it infinitely more interesting)

@original poster:

Seems like you are a proven, disciplined money manager, so you're ahead of the pack on that account. What you need to work on is assertiveness. It is very obvious you're letting other people dominate you. Abusive partners are the symptom, not the cause. The real cause: you're giving in too easily, you're not standing up for yourself, you're avoiding confrontation on every occasion. You didn't mention it, but I am sure this behavior pops up everywhere: while with co-workers, friends, and perhaps even parents. There's a saying that respect is earned, not given. This means that on every interaction we have with someone, there is an implicit negotiation/shift of the power balance. If you give very easily and very often, you are actively creating an abusive situation. So far the theory. What I suggest in practice:

1. play a very assertive person for the next 30 days with no compromises or excuses. I guarantee this will open your eyes in a way no therapist can.
2. next time you move in with someone, split finances (if only because it's a good ongoing exercise in assertiveness: you'll have to discuss who pays what every time)
3. change your circle of friends. It seems like you've surrounded yourself with friends who keep you down. I'm not talking about your former partners here, but the friends that should have opened your eyes while you were in trouble, and didn't. It's important to have friends that you admire because they will pull you up (people unconsciously take over the attitudes of their friends, so be picky).

P.S. you could print your post and feed it to your therapist. Compare analysis and proposed solutions to mine.

Wow, this story makes me happy my wife and I met in Highschool where we molded each other financially over the last 15 years.
Then again, I think I would realize within the first month or so, my girl's work ethic/financial goals and get out before she got me broke!

I'm so impressed by this story and I really love that you've posted it. Thank you for sharing this with all of us!

Beastlike:
I met my wife while I was in high school back in 1950, we got engaged in 1954 and married in 1956 and we couldn't be happier. Over those years we have also molded each other in a lot of ways. We didn't need to do anything about money because we were both savers and both frugal, but we have certainly moved into unison where politics and religion are concerned. In other areas we recognize each other's skills and are happy to let whoever is best at something take it over. In other words, and purposely mixing my metaphors, a great marriage needs to be a partnership that runs like a well oiled machine. For example my wife has never used a computer in her life, I have used computers from the very earliest days that they existed. My wife is a fabulous cook, consequently I don't even know how to make a nice sandwich, and that's the pattern for many other functions.

I think it's interesting to note that in this story, it is the fact that the OP got attached/married which brought her down financially. In most of my own and friends' experiences, getting attachmed is what helps a lot of people move UP out of financial difficulties. The old adage "Two can live as cheaply as one" comes into play.

I guess the real difference is in choosing a partner who has the same financial goals and work ethic as you have. What a great lesson.

Old Limey - You haven't read my "Going Broke To Win Big" post then, which encourages people to have multiple bank accounts to optimize their returns and minimize their costs.

Without going into too much detail, I have multiple bank accounts, exactly for the reason you stated... which is the $250,000 FDIC cap. I don't think we'll ever need the FDIC to bail us out, but my accounts have somewhere around that range +/- $100,000.

I don't mind having $350,000 in one bank b/c of my belief Citibank, for example will always get bailed out by the US gov't, and therefore, their depositors will be fie. Worst case, I lose $100,000, which ain't going to happen.

Strick,

Why would I need my wife's income since she doesn't work? That doesn't make sense. I make good money and I give my wife the freedom to work or not work. She chooses not to.

I don't know that this story is typical.
Living paycheck to paycheck just means that you need each paycheck in order to meet your financial commitments, that you have no cushion. I have been in this condition a few times. First, when I went out on my own after college, it took a while before I made enough money to pay for the basics like rent, car insurance, and groceries. My parents helped for a while, but even after I could pay the bills I never made enough to save, and endured several periods of unemployment. I acquired a lot of debt during my unemployment, so that when I was working more of my money went to debt and I still couldn't save. This went on for many years.
Now I have paid my debt and make enough money that I can save some every month. Finally I have a small cushion and could continue if something happened and I didn't get my next paycheck. However I could only miss one or two at this stage and then I'd be in trouble again. So while I am not living paycheck to paycheck at this time in my life, I have done for many years and could easily do so again. It can happen to anyone.

I think one issue with the "paycheck-to-paycheck" thought process is that people think it means once the bare necessities are taken case of, there's nothing left over, therefore it must be bad. I lived on approximately $300 a month my senior year of college (thanks to Mom and Dad for paying rent!): ~$130 to car insurance, $20-$25 a week to my "I should get on this bus" online savings account, and most of the rest to utilities, gas for the car, and groceries (I didn't go out much). Now that I have a "real" job with benefits and a 401(k), I make quite a bit more than $300/month. I still strain on the budget front: I moved out in September and pay about $1200/month between rent and my student loan payments (overpaid to the nearest $100 because I read PF blogs like this one), and the rest of my paycheck goes into my savings account. My eventual goal is to live - comfortably - on a check-to-check basis. I mean, don't we all? Isn't that the purpose of a budget? To account for all (or most) dollars coming in? Rent/mortgage, food, savings, utilities, transportation, investments... I would think that it's not always a bad thing to have "nothing" left in the checking account at the end of the month because it's all gone where it was supposed to go. Each paycheck gets maximized to be as useful as possible.

I was a single mom with limited income, and lived on just over minimum wage for years. It was not even paycheck to paycheck-there were days I ate popcorn so I would be able to make the rent. the two reasons- Cost of daycare and medical bills. I made two dollars a month too much to qualify for food stamps, daycare help or state medicaid for my child. In cases like this, when your child is sick, you go to the emergency room and then of course you can't pay. My credit was basically trashed till my son was in his twenties and the old medical stuff dropped off. His wife has a tubal pregnancy 6 days before the health insurance kicked in. It took the 5,000 he had in savings and has trashed his credit as well. The total bill was over 150,000 for the ambulance, emergency surgery etc. he has not yet recovered financially from this.

I was shocked at the question posed behind the story and a little annoyed by the story as though it's representative of people who live month to month. I started working at 14 And lived on my own in high school because my mom was sick and my dad died when I was younger. I lived month to month not because of any choices I made but because I grew up in poverty. I think there are many people who grow up in poverty and that's why they live month to month. I do appreciate the story but feel it does a dis service to people in Poverty if that is how we relate to most people living month to
month as being middle class people who make Choices that put them there.

Thanks for the story. It provides a valuable lesson to those with questionable finances: to always keep a clear head financial-wise and be aware of your money and whoever you meet, what their financial habits are.

This is -one example- and everyone has their own story. I grew up in a family where saving money was the norm, and if I wanted to spend money (even if it was my own!) I had to get permission (usually by explaining logically why I wanted/needed the item). My fiance grew up in a very different environment that I can not even imagine. His parents lived paycheck to paycheck and this is how he was taught to do things. You cover your obligations and whatever is left is to have fun with! WOO! Savings was not even discussed or talked about. I have been slowly working with my fiance to get him to understand saving money and the stress it can relieve, but it is a long process. At least he knows he is "not good with money" and leaves a lot of the planning and budgeting to me, but it will be nice when we can both understand it some day.

@ Amanda....I agree with you to an extent....But the thing I see poor people doing that really kills them financially is having kids too young and/or having them out of wedlock. So even with a lot of poor people, there are many instances where better choices could have been made. This also goes back to the idea that peeople with emotional problems often have financial problems as I mentioned earlier on this thread.

old limey you are b/sing..there are no cd's in 2008 that pay close to 5%..you'll be lucky if you get 2%. Nice try.

I'm 41, married for 17 years and we are FINALLY 'getting it'. We have 2 teenagers that are savers and I really POUND this into them, savings, no credit - only buy what you can afford, etc...

I wish my husband and I had had good money rolemodels but all adults we were around spent every dime they made.

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