JASON SCOTT STRUGGLED FINANCIALLY in the past because of what he calls his right now," attitude about money.
"I had just got a job as a medical claims specialist for Aetna and was excited about moving to Cali. My attitude was, 'Let's do it," says the 33-year-old who didn't think twice about how he spent his money.
With an annual salary of $32,000, Scott rented a one-bedroom apartment in La Mesa, California, for $1,050, including utilities. Other expenses such as eating out, traveling, and a $375 monthly car note for his 2006 Ford Malibu easily put him over budget.
"I was living a lifestyle I couldn't afford," Scott admits. "But I felt that if I worked overtime or picked up freelance work I could make up the difference." Unfortunately, he couldn't and turned to credit cards and payday loans with interest rates that skyrocketed as high as 335%.
"I got stuck in the cycle and when I would pay one payday loan back I would take out another, I wasn't thinking. I just felt that I needed the money," he says.
But Scott's frivolous spending caught up to him, resulting in what he calls his own "personal recession." After being laid off in 2009 with no personal savings or emergency fund and with maxed-out credit cards and defaulted loans, Scott was forced to move back home with his parents in Indiana.
He remained unemployed for two years and cashed out his 401(k) and pension, depleting both and incurring taxes and penalties as he went through some $10,000. He also relied on credit cards. When he reached the limit on one, he'd open another. He eventually accumulated $11,000 in debt across four cards. His credit score also took a hit, sinking from 680 to the low 500s.
"When I lost my job, I lost absolutely everything. I was young, and saving was something that I didn't think I had to worry about. But losing my job made me think more long term. I asked myself, 'What can I do to make sure this doesn't happen again?'"
Scott returned to the workforce in March of 2011. He found full-time employment as a proofreader and copy editor for a nonprofit and moved back to California. He has a salary of $40,000, and makes $5,000 to $10,000 a year freelancing. He is still recovering financially but is finally living within his means. One paycheck covers most of his bills, he says. His rent, including utilities, is $850, and he's learned that he doesn't need to travel as much or drive a new car. He's saved $1,000, but for the past two years he has...