Updated on 11.10.06

The Road To Financial Armageddon #1: The Earliest Mistakes

Trent Hamm

A wise man once said “The man who makes no mistakes does not usually make anything.” It took me a long time to summon the courage to admit that it was my own mistakes that led me to financial armageddon. It required me to admit that not only had I been making mistakes since my earliest days, but also to admit that many of the ideas I had learned in my life and built through my own experiences were completely wrong.

In order to understand these mistakes, I am initiating a ten part series of posts, a part to be posted each weekday for the next two weeks, in which I outline those various mistakes and what they did to pave the road to financial armageddon. More importantly, I hope to learn (and perhaps you will learn, too) how these mistakes can be corrected, not only for myself, but for others around me, such as my children. Hopefully, my mistakes laid bare will bring some insight into your own financial mistakes and perhaps lead you to your own epiphanies.

The best place to start is the beginning. I was born into poverty, a family in which both my mother and father had been raised in poverty, too. Both of my parents were used to the concept of living from payday to payday, never having enough saved for themselves to survive more than a week or two. To some degree, this was out of necessity; there was often not enough money to put food on the table.

At first, you might think that this was a great background to learn hard lessons about personal finance, but instead I watched my parents make mistake after mistake. Perhaps the biggest mistake was that whenever a windfall would occur, they would celebrate by buying things that they didn’t need or buying gifts for us kids; it was because of a windfall that I was able to have a Nintendo and, later, a television in my bedroom.

As a child, I believed that this was a normal situation. I believed that when you had money, you were supposed to spend it on something that brought you happiness immediately. Money was the key to happiness, I thought, because it could get you stuff that you want. I didn’t understand that putting money in the bank might not buy you that immediate burst of joy, but it could provide a steady level of peace in the security that it could provide for you.

Another problem with our level of poverty is that I never really had an opportunity to manage any money of my own until rather late in my teen years. I didn’t receive any sort of allowance and any gift money I received was turned over to my parents for “saving,” which actually turned out to be merely an emergency fund for keeping food on the table.

On the rare occasion that I did have any money, it was usually slipped to me by my grandmother or a wealthy aunt that I had, who would whisper in my ear not to tell my mother and to spend it quickly on something fun. The intention was good; they wanted to bring joy to the life of an impoverished boy. The problem was that it didn’t teach me any sort of financial skill whatsoever. I would go to the store as soon as possible and buy a video game or some baseball cards or something frivolous which brought immediate joy, but afterward I would go back to having no budget.

Another problem is that I believed that accepting help from anyone was bad. My parents were strict libertarians and in many ways I respect their philosophy, but their personal beliefs kept them from ever accepting any handouts or assistance. Even though we would often scrape by on a single part-time income, we were never on welfare or food stamps and we didn’t go to soup kitchens or other such free offerings. The pastor at the local Presbyterian church practically begged us to eat at the church on Wednesdays and Sundays regardless of whether we attended, but my parents refused all handouts. I was led to believe that accepting a helping hand, even in time of dire need, was a sign of weakness.

To summarize my earliest lessons, I believed that money was the method to buying instant happiness and that accepting free things was wrong. I also missed out on any opportunity to learn about personal budgeting or finance simply because there was no opportunity for it.

It wasn’t long before I found myself maturing into my teenage years, where I began to apply some of the lessons learned during my childhood, only to find that I was to continue an already-proud tradition of financial mistakes. What did my transition into adulthood teach me? Read on to find out!

Want to jump quickly to the other Road to Financial Armageddon posts? Here’s an index to help you out.

#1: The Earliest Mistakes
#2: Early Profits … Lost
#3: Cash & College
#4: The First Taste of Real Money
#5: Love & Marriage
#6: The Yuppie Years
#7: Here Comes Baby
#8: Meltdown
#9: The Road to Recovery
#10: What I Learned

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  1. Golbguru says:

    People who are born and brought up in poverty generally manage their finances well (just an observation)….because deep down they don’t want to return to those days. I will not be surprised to see these people doing better in managing finances when they get the opportunity. In all probability you will not continue with the mistakes tradition.

    Btw, 10 part series !…you must have quite a bit of stuff to write there :)

  2. Pingback: FIRE Finance
  3. BigBuddha says:

    This is a story which I believe is very common amongst lower income area’s/families … the cycle of debt in a majority of cases really starts at home where children learn bad habits from their parents … especially where the parents for whatever reason seem to be against their kids reaching for a higher goal or instill a belief that what they are now will be what they will be forever and that is POOR .. which is rubbish …

    I look forward to reading the rest of your journey.

  4. Joyrenee says:

    Wow – thanks for sharing your story. I also came from a very poor background, and am the only family member to get a college degree.

    I can see a lot of parallels between your family’s behavior and mine. My parents also never talked with us about money in any way – how to save, budgets, traps to avoid, credit reports, etc. Maybe that’s why its so hard to break the cycle of poverty.

  5. I’m coming late to this series, but want to give kudos to you for the series title!

  6. tambo says:

    Wow. your childhood sounds a lot like mine. And my husband’s. Especially the ‘accepting help is a sign of weakness’ part. Amazing how such things imbed into your thinking.

    Like the commentor above, I am the only member of my family to attend college – much less graduate – and my husband and I were the first from either of our families to own our home. FWIW, I think my mother tried to budget and save, but my father was an ‘if it’s there, spend it’ kind of guy. The poverty trap is a darn hard vise to break.

  7. Caeli says:

    This is my life right now. It’s crazy how we just fall into these cycles. My parents and my husband’s parents were both very poor when we were young. My parents are still having difficulties and I think always will, but managed to keep me and my siblings in good schools (which really only means all of my friends were rich). His parents are doing quite well now, but they never taught him the first thing about managing money once you have it. And now this is exactly how we live. We haven’t made it to the next payday in at least 6 months. The only difference is I am happy to accept help, but my husband gets upset if people even know about our situation.

  8. Tamar says:

    I grew up poor but, learned from that experience what NOT to do. What I don’t understand is how my son fell into this same trap–he was not raised that way. I learned very early on in my adult life to maximize my efforts with what I had. For example, this year I have to have a rather expensive series of dental surgeries. Even though I have the cash to cover it, I am putting it all on a credit card, paying it off right away and getting a gift card out of it. $0 cost out-of-pocket.

  9. I was pretty fortunate to be brought up with parents that maybe lived paycheck to paycheck, but they did save and had me listed to stock market report everyday at 5pm. I wasn’t brought up with parents that bought everything. We always kept to the basics and if I wanted something I had to make the money to buy it. Now, still young, I still find it hard to master money! You’d think being a nice guy and throwing money out at every good idea to earn money back would be a great idea and something would turn into a success but not much has yet for me. I’m still trying. Like you said you have to do things to make things happen. I’ve lost a lot of money, maybe from being foolish or just being a moron try to make my profits make more money. Recently to prevent me from losing money I put it into real estate.

    I liked your story. Sounds like most of my friends, which will go into financial armagenon soon too. Hopefully I’ll reach financial heaven with my own personal goals by the time I’m 30.

    To all your readers I’d be careful on the index funds right now in the market. like the wise man said “don’t try to catch the knife when its falling, pick it up off the ground”.

    great blog. maybe someday i can get readers like yours, like myself.

  10. 1stopmom says:

    I visit your site every day. So of course I had to see where it all started. I honestly think this post is great. It spoke to me, in my heart. Your site is so successful with all your great posts, i wonder how many fans have seen it. This post really talked to me and I am sure it will speak to others too. I was just writing to see if maybe 1 day you would repost it? You know for your old fans as well as your new ones too. It may help someone like it helped me.

  11. Laptop says:

    I am the only member of my family to attend college – much less graduate – and my husband and I were the first from either of our families to own our home. FWIW, I think my mother tried to budget and save, but my father was an ‘if it’s there, spend it’ kind of guy. The poverty trap is a darn hard vise to break.

  12. Jana says:

    I was not brought up in poverty. It seemed like we always had anything we needed and extras. My mother and dad both worked at good jobs. This is the only difference in our upbringing. My mother constantly took everything we had. Even after I was old enough to get a job…she “borrowed” everythign I made. She kept a long list of “what I owe you so I can pay you back one day” and forty years later I still have not seen a cent of it. She always warned us to “don’t you dare tell your dad I borrowed money from you!” I have had to hack my way through learning to manage for myself and I have learned that the best way is to not immitate what she did. It has worked for me…instead of borrowing from my kids…they now borrow from me!

  13. Hey there,
    I think you bring up an important part do with personal beliefs. The only reason why poor people are more disadvantaged is because they have this lack mentality. The good thing about coming from absolute poverty is that these people are hungry.

    They are hungry for money, for meaning and for happiness. They have nothing to lose and everything to gain.

    I believe that the ones that are most disadvantaged are the ones that are in the middle class. Because they are comfortable. And comfort is a killer of an emotion. Because it kills drive. Not only do they have minimal motivation but they have extremly limited thinking. One set thinking of go to school, get a degree and get a job that you are ok with.

    That is not what life is about.That is why i have always admired people who are strong enough to follow their passion, to do something they absolutely love.

    I really do believe that you can become extremly wealthy by doing something that you love ….. sorry a bit off topic, but i guess what i wanted to say is that .. your right, money doesn’t buy happiness … its having a drive, a passion and a purpose that brings that

    Young Investor


  14. Trent I also started managing my own money in my teens and as such i think that i made lots of mistakes along the way. I now value the importance of ensuring that children know the value of money from a very early age so that they learn to manage it most effectively. This is a really well written personal post.

  15. beter wealth says:

    Hi Trent, you might be interested in watching this show that just aired on the main national channel, ABC1, here in Australia, titled Debtland: The Rising Sludge of Debt that threatens thousands of Australian families.


  16. sherry says:

    Thank you for sharing your story…Sounds like we grew up in the same home:) I was also a child of poverty and lost my father at a young age to suicide. I am trying so hard to break this cycle for my family but the biggest problem i have is managing what money we have and finding money to save for emergencies and to prepare for the future is very difficult. I am so greatful to have found your website and am egar to read more.

  17. all i’ve got to say is the poorer you are the easier it is TO want to spend money and try to fit in with american society of “consumers”.

    thanks for checkin out my site simple dollar.

  18. reader says:

    I guess you are not going to publish my comments. The thing is, you make it sound like your family had the right idea and you had everything you needed in one post, and then you are talking about the mistakes they made and how rough your life was in another post. You can’t have it both ways.

  19. Lauren says:

    First…what a great site..people need to talk about money. it’s the unspoken essential.

    Money is something we mostly all put effort into acquiring so I believe that we should all be able to prioritise and treat ourselves to what is special to us but you really don’t need to spend alot to be happy. My parents always worked, they enjoyed their direction and success but they always instilled to us kids the difference between needs and wants, to respect money and what it can buy you but at the same time that the most important things in life cannot be bought. With this in mind my partner and I like quality so we go without until we can have the one that we like…and it usually lasts longer..we have also been able to buy 4 properties at 27yrs and also to enjoy life to its fullest.

    I think the lack mentality is scary, people have to ask themselves what void they may be wanting to fill. I feel that if we envisage the life we want and work towards it…anything is possible.

    My Dad used to say…it takes time and effort.

  20. Make Money says:

    Nice article, Trent. I could see some of the things that happened in my life in the story. I know the importance of money as I have learnt it the hard way and would teach my children also to better manage money.

    Good work Trent.

  21. FIRE Finance says:

    We loved the opening lines of your article. It’s a great article and reflects many of the mistakes we did at the start of our journey in investing.
    Thanks for being so honest and admitting your mistakes in public. It takes courage to do so. We found it the hard way :).
    Keep up the good work.
    FIRE Finance

  22. It’s nice to see someone spell out the common mistakes that our society in general makes with money. It is especially visible today with bankruptcies and foreclosures going around like a bad cold. I think this article stands as a good warning for people.

  23. Deanna says:

    I came from a family that were children of Great Depression parents (my parents grew up on the tail end of the Great Depression). They were very frugal, my mom was always a stay at home mom, they had no debt, purchased a farm for their retirement years, owned their home in the city, always had a good car (never new)….they just didn’t teach their children about money, and they were terrified of investing, they only knew about check book and savings accounts (my father started a retirement plan late in life at his work). I can say my mother and father were ignorant to a lot in the world, they didn’t press me to go to college (even when I received a scholarship and I didn’t know what it meant). Then, I married too young to a guy that as long as he could make the payment, he thought he could afford it. We divorced in 2006 after 18 years, and I may dig out of that hole for a long time, but I am determined to do it. I also finished my degree during the last 2 years. In those 2 years, I have studied a lot about money & finance, have all of my investments chugging and debts going down (I’m down to one remaining credit card). I’m saving 12% of my check, funding an emergency fund every pay check, opened a Roth IRA as a small side investment and created my CD Ladder for the emergency fund (from your website!) I took David Bach’s advice from Automatic Millionare and have made everything automatic (401, IRA, CC payment and House payment so I can pay it off in 22 years instead of 30), and I’m raising two children (one who was just diagnosed with cancer, a plethora of financial as well as emotional challenges). If I can get finances under control, anyone can, it just takes determination and in my case anger, I was fed up with being broke. My biggest money saver lately has been participating in Once a Month Cooking. My grocery bill went from about $500 to $250 a month. Dining out is a budget killer! That’s a lot of money to go into my emergency fund that I will no longer give to Subway, Taco Bell or WHOEVER.

  24. Greg says:

    Hi Trent

    I too have had minimal education when it comes to managing money, my parents also tended to buy things when they had additional money and did not have the education to make decsions about investing in property or shares. So my journey has been one of discovery, I have saved, I have spent, I have lost and I have gained. Now I am spending time on developing my idea’s about money and what it means to me and going back to the very basic need to be happy and to have a better life. This means releasing any conditions of how much i can earn as an individual (lifting my ceiling on earnings) and also how I should spend my money to suit my current and future life needs (balance). This way I am learning to strike a balance between money and spending. It also allows me to spend more than average because I allow my self to earn more than average. I think we should all go back as to what we need to be truly happy (partner, kids, family , friends, roof over our head) and use this to get passionate about what we do every day in work and start to earn more than we ever have, this way we can build better choices into our decision making processes about spending and budgeting. Food for thought! Keep up the good work.

  25. Denise says:

    Very interesting article. Personally, my husband and I fell into the spending to much category when we were first married, after bankruptcy we found a new way of living we had to scale back a lot of areas in which we were used to living but found that we were much happier without all of these items. We were on our way to financial freedom, we owed no one and had everything we needed, in the past year we have been helping out family members which has put us in a financial bind. I know logically I have to stand up and say enough is enough but it is so hard to watch someone struggle and not help (at least for me it is), after skimming through your site I found that most of your tactics are something that we personally have used, is it not odd how financial freedom can come from such simple practices?

  26. funky house says:

    Oh the good ol days of playing nintendo in your room. Ohh how i wish i were young again :D

    great site, i’m signing up to the newsletter

  27. Jennifer says:

    Im in need of a fast cash donation to get a photo copying machine to continue doing God’s work of distributing religious articles, booklets, pamplets to encourage God’s people to come back to Him. Also, Im an unpublished writer of children’s books, desperatley seeking publication… see website of brief synopsis of all my stories.

  28. Sofie says:

    Hello Trent… awesome website. Just stumbled upon it looking for online tips on coupon clipping for a simple post I’m writing and wow! I found a goldmine of info that goes way beyond coupon clipping. Your story will no doubt inspire my readers as much as it inspires me. The prudent lessons you pass along are lessons this nation must collectively learn, government as well as individuals, so please keep up the good work!

  29. MeekWoman says:

    Hi Trent,

    I’ve been visiting your blog on and off for about 5 months now, but regularly for 2 months. You are such an inspiration, and many of your articles hit home.

    Thank you, and keep blogging!

  30. I agree with one of the comments. People who did not experience poverty or any kind of hardship will tend to spend lavishly if they, say for example, won the lotto or received any cash windfall.

    In contrast, people who really work hard to earn their money will turn out to be better in managing their finances.

  31. Jane FairlyPrice says:

    I visit your site every day. So of course I had to see where it all started. I honestly think this post is great. let post more great topic!

  32. Hot Coupons says:

    I agree with you that I believed that accepting help from anyone was bad. I was also born in a poor famliy. When I was a little child and I alomost have no money. Before I graduated from college, all my money come from my parents. After I graduated and work, i have my own money. I am very careful about spending money. I don’t do any investment but put all savings in bank. I am happy when I spend my own money.

  33. Christine says:

    Trent- I’ve really enjoyed your articles; you not only discuss saving money, you touch on other interesting subjects, too. I know from reading your story that you started this blog because you wanted to write. May I make a suggestion? You’re a mite wordy. For example, cut out some of the “I tend to…” and just say “I…”. Also, on the above post, you wrote, “It wasn’t long before I found myself maturing into my teenage years…”, when “As a teenager…” would have sufficed. I feel your articles would be even more enjoyable to read than they already are if some of the wordiness was cut out.
    P.S. Congratulations on your Toyota purchase! I’m a loyal Toyota consumer myself.

  34. Angela says:

    Wow, you could have been writing about my childhood too. Even now my husband and I use WIC and my Mother still gets upset about it. It allows us to do other nice things for our children but she just sees it as a shameful. Oh well….

  35. JB says:

    I think introspection is a powerful tool to achieve change in one’s life. All too often, many people either do not take the time to reflect due to the fast-paced lifestyle they live or refuse to do so because of fear, anger or any other emotion that they might encounter if they started to peel back the layers to understand why they do the things that they do. I’ve followed The Simple Dollar for some time now. It is interesting to see how things started for you as a writer and financially. Thanks for the post and the encouragement to make changes in my own life.

  36. Too bad Christine doesn’t post her blog so we can grade her on her writing abilities. Her comments were too wordy for me.

  37. Sue says:

    This is a great recipe, and fun too. What I did to get rid of the big slim goop, the next moring I use my hand mixer. That left me with a nice thick liquid.

  38. Lucy Valderez says:

    I also grew up an impoverished child in rural Iowa. I’m glad that you have used your background as a forefront for a more frugal lifestyle. You bring a great sense of pride to your fellow Iowans. Unfortunately, things didn’t work out so nicely for me and mine. Even after packing lunches for road trips, consolidating my loans, and repairing my clothing instead of replacing them, a bout with cholera wiped out most of my nine brothers and sisters. Destitute and wracked with illness, my sister Lolita and I were sent to Des Moines for medical experiments so our parents could save enough money to send us to a special school where we could learn how to retread tires. Thanks for nothing.
    Sincerely yours,
    Lucy Valderez

  39. Trina says:

    Congratulations Trent on turning a bad situation into a positive and getting your financial situation in order.

    What I just read describes my husband to a T. He also grew up without money and learned to never ask or accept help.

    He’s now 40 and still walks around with an empty wallet between paychecks because it’s impossible for him to save even a dollar. He pays his share of our household bills but as far as saving the rest goes he’s a total victim of his childhood.
    I was raised middle class by parents who grew up poor and I was taught at an early age to save, save, save. For 10yrs I tried to get my husband to do the same to no avail. That and other issues have put us on the road to divorce.
    Although we’re separated I still hope that one day he’ll eventually learn to live for the future instead of waiting for that next big windfall to buy a little happiness.
    By the way, I haven’t always saved, I admit that I sometimes got caught up in his spending sprees and when I found myself $20,000 in credit card debt, I quickly woke up, paid off my debt with the help of a credit counseling program and never looked back.
    I’ve been reading your articles off and on for about two yrs and you have provided some great information and tips. Thank you and keep up the great work.

  40. Tara Bartee says:

    My dad grew up in a household that struggled through the depression. My mom grew up in a household of feast and famine. My dad valued status, and behaved as if his credit limits were cash on hand. My mom had better sense, but did respond when Sears told her she could spend $xxx and still have the same payment. It took me until my late 50s to overcome the lessons learned at home.

    I am in pretty good shape now, and really appreciate this site for helping me keep my head on straight. Thanks

  41. Good stuff Trent. Thanks for sharing. If you come from poverty, you must be doing incredibly well with the income generated from this site. Poverty gives great perspective, and makes people appreciate money more in my opinion.

  42. Liz says:

    I’m just starting to read this site: I found it via zenhabits.net. So far this is probably the most interesting and frank thing I’ve seen on the web in a good while. Nice job. I appreciate the amount of thought that went into this, and how deeply you dug.

  43. Kevin says:

    Really interesting post! Thanks, Trent.

  44. David says:

    Very good comments here! I try to keep up with a lot of financial sites. One that i found that is really helpful as well with personal finance issues is http://www.myfinancedoctor.com.

  45. I was not brought up in poverty. I had what I wanted and needed. but we were not rich either. Working middle class. But no one taught me how to do the money thing. I learned the hard way like most boomers.

  46. Rick says:

    Trent…how do I send an email to you as opposed to doing a comment on the website. I’d rather not post my question to you for the world to read. Certainly, you’d be welcome to extract situational info to use for the benefit of your blog. But, I have a couple of questions to ask.

    Please advise at your earliest convenience.


  47. Carol says:

    I just wanted to comment regarding the first comment…people in depression era, with NO money at all, often live making few money mistakes, but those raised in poverty and by poverty I am talking about more than just lack of money..it is all encompassing, about culture and ideas,many people born in poverty will make the same mistakes as their parents and on and on until someone understands the issues and makes a change. This is so profoundly deep and why it is so hard to change. here is a quote.

    Poverty is not just a condition of not having enough money. It is a realm of particular rules, emotions, and knowledge that override all other ways of building relationships and making a life. This book was written as a guide and exercise book for middle-class teachers, who often don’t connect with their impoverished students–largely because they don’t understand the hidden rules of poverty In the same way, poor children misconnect with school because they don’t understand the hidden rules of middle-class life. Ruby Payne, a former teacher and principal who has been a member of all three of the economic cultures of our time (poor, middle-class, and wealthy) compassionately and dispassionately describes the hidden rules and knowledge of each. I think it’s useful not just for educators, but for anyone who has to deal with people of different backgrounds. Having read it, I feel a lot more confident about dealing with people as people, not as representatives of their social class. Especially noteworthy is the Could you survive? quiz on page 53. For example, can you keep your clothes from being stolen at the laundromat, or entertain friends with stories? (That’s essential knowledge for the world of the poor.) Can you get a library card or use a credit card? (Essential for middle-class life.) Can you ensure loyalty from a household staff, or build a wall of privacy and inaccessibility around you? (Essential knowledge for wealth.) Every class assumes that their knowledge is known by everyone, which is one reason they assume that people in other classes don’t & get it. I also appreciate the telling point about upward mobility in America: It’s possible for anyone to shift classes, but only at the price of leaving behind your existing personal relationships. One sign of A Framework’s value is the way that educators who grew up in poverty from a variety of ethnic backgrounds, embrace this book. –Whole Earth, Art Kleiner, [former editor]

  48. julia says:

    well,this is very good pionion,i will suggestion this good ideal to do .

  49. i appreciate your bravery & passion of doing this on your own..it’s very influencial too see it..keep it up..

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