It’s remarkable the kind of financial turnaround people can achieve with SmartDollar!
Once they start taking the Baby Steps seriously, users drop their bad money habits and replace them with smart ones. And a lot of things that used to seem perfectly normal suddenly seem crazy!
Here’s a list of some basic money issues nearly everyone deals with. In each case, SmartDollar teaches people about a key behavior change that’s radically different from the way most people handle the issue. Check out the “Then” and “Now” descriptions of money habits from a typical SmartDollar user to see what a difference these behavior changes can make. The before-and-after comparison might just inspire you to make some changes of your own.
Then: “I had multiple credit cards and used them to pay for everything from movie tickets to groceries and even household bills. I tried to pay my card balances off every month, but I didn’t always pull that off, and the interest made it even harder. And when I needed a new vehicle, I always financed it to keep my payments low and get the nicest ride possible.”
Now: “I got tired of living paycheck to paycheck and barely keeping everything up in the air. When I realized I was spending a big chunk of my monthly pay on debt payments, I started paying them off systematically. With a bit of discipline, I was able to get out of debt in just six months. Now I cash flow everything, budget for every purchase no matter the size, and wouldn’t be caught dead with a credit card or a car note.”
Then: “In my credit card days, I treated the power of charging like a magic wand. Broken HVAC? Visa to the rescue. Slipping transmission? MasterCard took care of me. But even though I was keeping emergencies at bay, I never really felt secure because the bills to take care of my problems stuck around for months or years.”
Now: “My change of heart about handling financial emergencies was connected with my new understanding of debt. I finally connected two facts: I never had cash to cover emergencies, and I was spending way too much to cover minimum debt payments. So I got rid of my “magical” credit cards and set aside $1,000 cash for rainy days. As I was getting out of debt, I stayed motivated by thinking how great I’d feel if I had a big enough emergency fund to write a check to pay for any kind of crisis. About a year after becoming debt-free, I had enough saved to survive for up to six months!”
Then: “I used to think planning was only for nerds, worry warts and grandparents. When people asked me if I had investments set up for the future or talked about their 401(k), I didn’t give it any thought. I figured I’d think about the future when I got there, and if anything went really wrong I could always rely on good ol’ Social Security!”
Now: “Man has my thinking changed. Especially about the future and the importance of planning. Once I had no debt and a nice safety net in place, I found myself with plenty of extra income after paying my monthly bills. Suddenly investing was a real possibility for me! First I took advantage of my employer’s 401(k) match, then I opened a Roth IRA to take maximum advantage of compound interest. These days I’m devoting 15% of every paycheck to my retirement, and I love watching it grow.”
Paying for College
Then: “Remember everything I told you about my old thinking on debt? Yeah well, I brought that exact same thinking into my college years. Everyone I knew had taken out loans to pay for school, from my parents to my guidance counselors. And of course most of my friends were using them, too. Scholarships? They seemed like more trouble to apply for than they were worth. My parents assured me I’d be making more than enough after graduating to pay off any school debt.”
Now: “Going into debt to pay for my education taught me a really hard lesson. Contrary to what I’d always assumed, finding a job with great pay took a few years. Eventually I began to make more, but the minimum monthly payments on the loans were still costing me hundreds of dollars a month. Along with all the other valuable insights I gained while learning to budget, get out of debt and save, I also saw that no goal—not even a college degree—is worth going into debt for. That’s why I tell my children never to borrow for school. And I’m putting my money where my mouth is. I’ve started putting any extra cash toward a college fund for them.”
Buying a House
Then: “I rented for a few years after I graduated college. But when I got married, my spouse and I never even considered living anywhere but a house. What newlywed wants to be crammed into an apartment? Since we were young and just starting our careers, of course we took out a mortgage. And of course we made it a 30-year deal! That kept our monthly payments much lower, and gave us a lot more room. All our parents agreed it was a great plan.”
Now: “After I started learning how interest works and how much it delays people from paying debt off, I got thinking how that applied to my mortgage. The math turned out to be very simple. On our 30-year payment plan, we were paying $1,349 a month, which put us on track to wind up paying a total of $485,636. But by switching to a 15-year plan and sending $550 more a month, I saw that we could save over $100,000 over the life of the mortgage. For me those numbers were too big to ignore. We got busy throwing everything we could into extra principal payments and were able to pay our house off 15 years ahead of schedule!”
Those are some big changes, and some gigantic results. And for those who get intense about the Baby Steps, it’s possible to turn their entire financial world around in just a few years’ time.
Read more about bringing SmartDollar to your organization here.