Can we change our financial habits if our backs aren't against the wall?

Editor's note: This article originally ran on Get Rich Slowly. It has been reprinted here with permission.

I recently had a discussion with a friend who made an argument why it’s better to eat out in Manhattan than to save money by cooking because of the convenience and the joy of eating with friends. I’m all for breaking bread with good people, just not so much if you’re concerned about income. My friend just went through a divorce and eventually needs to find a job since she gave up her career in the arts to raise her son for a decade.

The reality is my friend does have income in the form of alimony. And I’m sure the alimony is a healthy amount because her now ex-husband is a wealthy businessman worth millions. I’ve been to their fabulous, 2,000-plus-square-foot apartment downtown. But alimony doesn’t usually last forever and when she was challenged by her brother to reduce her spending by eliminating eating out for one month, she failed after one week.

Let’s assume, for the sake of argument, that you are in her shoes and your alimony will last five years. Would you really drastically cut back on your lifestyle and master personal finance? Probably not. The more likely scenario for people is to keep on living like they always have until the last year of alimony and then realize, “Oh, man, I’d better change my ways!” It’s the same idea as waiting until the last minute to study for a final exam.

Maybe the alimony is indefinite since, in many instances, spousal support can be ordered for as long as necessary to help the recipient spouse receive training and become self-supporting. Who knows?

Starting a project

I was thinking about starting Financial Samurai in 2003 but did nothing to pursue it for six years until the financial crisis finally pushed my lazy self to launch in 2009. If there hadn’t been a financial crisis, I’d probably still be working my Wall Street job now. It wouldn’t be the end of the world, but after 14 consecutive years of doing the exact same job, I started to get bored with life. I was already beginning to tire after Year 10. I’d probably tell myself “just one more year of work,” which would ultimately turn out to be 10 more years. Golden handcuffs are hard to slip.

I’ve always encouraged readers to really focus on their X Factor. The X Factor is a project one is passionate about that may not seem like much in the beginning but that, with time and enough consistent effort, could turn out to be substantial in the future. You never know what will hit, so it’s also important to keep on trying new things. If you’re in any game long enough, good things happen.

Financial Samurai led me to escape Corporate America after 13 years in 2012 because it helped me create a financial plan that I methodically executed over the next three years. Financial Samurai also gave me something to do, one of the biggest questions people have when they no longer want to work a day job. If you can find a purpose after retirement, it makes retiring that much easier.

Getting out of debt

I speak to folks in debt all the time through my financial consultancy practice. Some have credit card debt amounts equivalent to their salaries! How on Earth does this happen? The most credit I can get on my main personal credit card is $30,000 compared with my average monthly credit card spend of $1,500.

Not paying off in full and letting your debt compound at 15 percent plus the annual rate is a scary thing to do. Not even Warren Buffett has averaged those returns in his glorious career, which should jolt you into never accepting revolving credit card debt again.

What usually made these debtors start handling money responsibly was that their credit card companies finally cut them off. Except for the credit card companies saying, “Denied!” they would have continued to make minimum monthly payments, eventually costing more than their monthly take-home salary. It takes that kind of action to force such debtors to stop.

Another client finally woke up to his credit addiction when he realized that he couldn’t pay the minimums of his seven credit cards with his current monthly income.

It makes absolute sense why people get into debt. It’s fun to buy and experience things you can’t afford. After all, if you take out a $1 billion loan to live it up and die from too much fun, you win! It’s also equally satisfying to successfully pay off the debt and tell all your friends about your achievement. Here are some tips on how to get out of debt and become happier in the process.

Saving money

If I wasn’t whipped so hard every single day for two years working at Goldman Sachs in Manhattan, I never would have gotten the urge to save at least 50 percent of my after-tax income on Day One. New York City is a wonderland if you have money to burn, thanks to all the incredible shows, restaurants, and bars. Instead of blowing my salary at Peter Luger’s Steakhouse followed by $13 cocktails at the Soho Grand, followed by another $200 for bottle service at the clubs, I just hung out with family and friends at low-key establishments. Petting strangers’ dogs at Union Square Park was always a favorite pastime.

I knew I couldn’t last going into work at 5:30 a.m. and leaving after 8 p.m. for longer than five years, so I saved like a maniac just in case I ended up unemployed for years after. My career lasted eight years longer than expected since I moved to San Francisco where life is more balanced. But even working in finance in San Francisco requires getting up before 5 a.m., so I didn’t stop saving.

If I landed a cushy 9-to-5 job where the bosses were nice and stress was at a minimum, there’s no way I would have saved even 25 percent of my income because there would be absolutely no sense of urgency to get out. When you’re young, you tend to think you could happily work forever. If you are in your first years of your job, come back to me after you’ve worked for 10 consecutive years and let me know if you still love it or not. If you don’t save money during this time, you will have an “uh-oh” moment.

Please try and save as much as you can before your energy for work fades.

Making more money

Life is relatively easy if you are born and raised in America, or any modern country for that matter. We’ve got infrastructure, a sound legal system, peace, subsidized health care, subsidized living, subsidized income, and plenty of free public facilities such as libraries and parks. If you are complaining about living in America, clearly you’ve never spent more than a month in a developing nation where they cherish the things we take for granted.

Two things motivated me to make money. The first was seeing my mother work into her 60s at a job she hated. She wasn’t happy working past midnight on a frequent basis. She mentioned how some of her managers were mean to her, and that really pissed me off. All I wanted to do was make enough money as quickly as possible so she didn’t have to work any longer.

The second motivation came from living in countries such as Zambia, Malaysia, and Taiwan in the ’70s and ’80s. I saw tremendous wealth and tremendous poverty mixed together. The impoverished frightened and saddened me while the wealthy emboldened me to pursue what I might become. There was no way I wasn’t going to study and work my absolute hardest if I was given a chance.


The reason you may hear so many recent immigrant success stories is because they have a basis for comparison that makes them unwilling to return to their former existence. I don’t think we can fault a person who was born and raised in America who only speaks one language and has never left the country for complaining about how life isn’t fair. Our lives are all we know.

2 comments on this story

If you grew up with parents on welfare, wouldn’t it be understandable to expect that’s the way life is as an adult? Only until I came to America for high school did I realize everybody doesn’t travel around every two to four years attending international schools. It was hard for me to adjust in the beginning because my classmates grew up with the same friends since elementary school.

You can’t blame people for making sub-optimal financial choices in general because everything is rational. We do things that make us happy and stop doing things that inflict pain. There is a self-correcting mechanism in personal finance, therefore, we shouldn’t worry about other people. Pushing our way onto others is a sure path to ruining a relationship.

- Sam the Financial Samurai