‘œLife is the sum of all your choices.’ ‘“ Albert Camus

It was during the summer of 1997 when two lawyers, a financial advisor and a CPA all told me to file bankruptcy. I was horrified at the prospect, but after putting together a detailed financial spreadsheet, I realized there was no way out. Even though I’d found a decent-paying job, I was too far over my head. Between my mortgage and other debts, I owed more than I expected I’d be able to repay within a decade.

I was in such terrible financial shape because of a series of bad decisions.

  1. I made bad decisions about relationships.
  2. I made bad decisions about housing.
  3. I made bad decisions about jobs and self-employment.

As I looked back over the wreckage that was my life, I realized there wasn’t a single decision I could point to that could be blamed for my troubles. Rather, it was the cumulative effect of everything. If I didn’t have the burden of a mobile home I couldn’t sell or rent out, I might have been able to dig myself out of the credit card debt I’d incurred for the business. If I didn’t have the burden of the credit card debt, I might have been able to tough it out until the housing market improved and I could sell the house. If it weren’t for my sinking business that was requiring an increasingly large slice of my take-home pay, I might not have incurred so much debt in the first place.

Looking back, more than a decade later, I realize that my bad decisions came from three areas:

1. Lack of financial education – My family, although solidly upper-middle class, never discussed money. I think the extent of my financial education came from my mother, who taught me how to balance my first checkbook. Beyond that, I knew nothing about savings, retirement accounts, real estate, or the insidious nature of debt and credit cards.

2. Lack of realistic expectations – When I graduated from college, I had no idea just how difficult it would be to earn back the money I’d spent from my trust fund. I wrongly assumed that in a couple of years I’d be able to earn it all back, plus more. I failed to realize that jobs weren’t like ripe fruit, ready to be picked from a nearby tree.

3. Lack of self-esteem – My lack of self worth hurt me both personally and professionally. It made me willing to jump into unfulfilling relationships, thinking I could do no better, and it left me feeling forced to accept (and endure) marginal positions with difficult bosses. Had I had a better view of myself, I would have insisted on better relationships and better jobs. I left the world of W2 employment not only because I dreamt of having my own business; I honestly felt that there wasn’t a decent job out there that would have me. When I finally sought employment after it was clear I had no other choice, I was surprised to be offered a position. What didn’t surprise me, though, was the fact that I was the company’s second choice. They had wanted to hire someone else, but he had turned down their offer to accept a more lucrative position elsewhere.

I’ve often wondered, given my lack of financial skill, and unrealistic expectations, if anything could have saved me from falling into the financial abyss. Had personal financial management been a required class in high school or college, it certainly might have helped. A class in entrepreneurship might have been helpful, especially if it taught the lesson that it’s not possible to spend one’s business into profitability.

Although I think that my lack of financial acumen certainly hurt me, I think the most damaging problem was my lack of self-esteem. Had I felt better about myself, I wouldn’t have agreed to relationships that brought me more pain and expense than joy, and I wouldn’t have accepted positions that further robbed me of my self-confidence. I might not have clung to the sinking ship of my business, had I believed that a rewarding and fulfilling job was out there, waiting for me.

So what can others do to avoid the mess I found myself in? The answers are relatively simple, yet surprisingly difficult to implement:

  1. Always spend less than you earn.
  2. Save money for a rainy day.
  3. Pay cash for everything; avoid debt at all cost.
  4. Evaluate your relationships on logical as well as emotional grounds.
  5. Avoid jobs, bosses and co-workers who rob you of your self-esteem.

All of these answers are much easier said than done, and nearly all of them will require a certain amount of sacrifice. Paying cash for everything, saving and living within your means often requires one to endure a lower standard of living now, for a greater payoff later. Looking at relationships and jobs with a critical eye can be very difficult, especially if you find yourself in a position of being emotionally or financially needy.

Next in series: Filing Bankruptcy

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