When I left school I had £400 to my name which was money I’d saved from birthday’s Christmas and pocket money. I remember drawing the cash from the bank and going to a car auction with my dad spending the lot on a Ford Cortina car.
That car was my pride and joy, my ticket to freedom, a babe magnet (ok maybe not a babe magnet) but it was pretty decent for the money.
I liked the car a lot but it wasn’t exactly what I wanted as I had purchased what I could afford, not what I desired. What I really wanted was a Ford Capri but they were too expensive and a lot to insure. So I stuck with my Cortina, telling myself I’ll save up for something better.
Then I noticed something that was quite important to me at the time. The guys with the better cars got the nicer looking girls. My Cortina on the Romford circuit didn’t quite catch the eye.
I needed something faster, more sporty looking and sexier. To my surprise I was offered a Peugeot 1.9 GTI for a bargain price of £1500. I couldn’t say no.
This was a sporty looking car, it was fast and at a great price. Only problem, I didn’t have £1500.
So I asked my parents if I could get a bank loan. At first they said No but I was 18 now and could do it anyway and they agreed to help me complete the forms. And soon enough I had £1500 sitting in my bank account.
The problem was the car never materialized and the money burned a hole in my pocket. I was out most nights at 18 with friends. Now I was out most nights with £1500 I could spend and spend, I did.
I spent the whole lot in the Thatched House Barking. To be fair I had a great time but I found myself on the wrong side of a debt for the first time in my life and had nothing to show for it.
Looking back I can see what an idiot I was, I wanted something and didn’t have the willpower to delay my gratification and save up for it. I took the easy option and got into debt. I bought something I couldn’t afford to impress others.
Then I had to pay the money back with interest. So I didn’t really spend £1500 on booze, after interest it was probably over 2K.
How crazy is that, we want something, agree on a price but actually pay way over what we agree because we can’t afford what we want so pay interest. And to top it all we end up working harder to earn more money to pay the debt off.
Looking back, what I should have done was be grateful for what I had then made a plan to earn the money to buy what I wanted. If I knew back then what I know now I would have done this.
Opened sub accounts with my bank. Then divided the money up as it came to me like this -
Account for investing
Account for purchasing something I want in the future
Account for fun - Spending every month
Account for education
Account for bills / food etc
I could have then put my money to work through my sub accounts -
Every month I could invest a little to make my money make money
Save a little to get what I decided I wanted in the future (in this case a new car)
Had some fun with my friends to a certain limit
Educated myself quicker to earn more money
Maintained a lifestyle where I always spent less than I earned.
If I had done that at 18 I know my finances would have grown a lot quicker than they did. I would be a lot more educated and my earning potential would have increased a lot quicker than it did.
So if you are still reading this and thinking of getting into debt to buy something to impress someone, think again. Getting into debt is easy, getting out of it is hard. Make your money work for you instead. Delay the gratification and save up. Allocate your money as I do above and watch it grow,
Your future self will definitely thank you for it.
