Key Points:
Using most of the principals in this article, the author has managed to pay down $45,000 in debt in just under three years.
Tracking your debt and finances is a good place to start
Making changes to your spending can have a positive effect on your finances
Its never too early to start thinking about retirement and goal setting may be an important tool to achieving retirement
Personal finance takes time and can be improved through study, evaluation and reading
I had some real reservations about writing this article. (In fact I went from real specific during my first draft to real general on this current draft) I thought "Was it too personal?" "Does it reveal too much information about myself?" "What will people think about the financial shape I am in?" In the end I decided to go ahead and write this article BECAUSE it deals with something near and dear to my heart...where I am at with my finances currently, where have I been and am I on track to meet my financial goals. Hopefully, my honesty in where I am at financially can help you be honest with yourself and start examining or re-examining your financial situation.
I consider myself a lucky guy, I have good health, a GREAT family, and I earn a decent living. But eight years ago I was going through a divorce and the girl I was dating at the time told me something I will never forget "You check all the boxes off for husband material except for your finances." Fast forward three years later, I was getting remarried to a different woman (my current wife and love of my life) and was sick of working 50 hours a week. I wanted to retire at that moment.
I knew I wasn't eligible in my job to retire, I had a 401K plan, but was far off the personal goal I had set. But "Would I be able to retire when I became eligible?" was a question I had to ask myself. I therefore needed to start looking at my finances. In doing so I started an excel spread sheet listing all my debt (house, credit cards, medical bills) and updating it monthly versus what I was saving and placing in my 401K savings. I also started a second spreadsheet for my monthly finances. In doing this simple exercise I realized something very quickly, I was way behind the ball.
I started this spreadsheet in August of 2015, this included 4 credit cards, and a home loan. (I was fortunate at the time my car was paid off.) This financial situation only would get worse, I was scheduled to take a guys trip to Las Vegas. When all the bills came in from the trip, Christmas came and went then a Wedding and honeymoon with my now wife in January of 2016. When all of the debt of these expenses was added up, my overall debt increased over $9,000 more in debt in just three months!!! This boggled my mind. I needed to take some action.
Unfortunately, I had to take a loan out on my 401K. Something I hated to do, but the interest rate of a then 1.5% was much better then the 17-22% I was currently paying on my credit cards. I then began scouring the internet for any advice on how to begin digging out of this mess. It was at that time I found numerous articles on personal finance, retirement and a book which would change my life.
"The Total Money Makeover" by Dave Ramsey
I bought the Total Money Makeover book pre-read on Amazon for .01. The book itself is broken down into very simple sections:
- Save $1000 for an emergency fund
- Payoff all debt using a snowball method
- Save 3 to 6 months of expenses for emergencies
- Invest 15% of your income into Roth IRA or pre-tax retirement funds
- Save for your children's college education
- Pay off your home early
- Build wealth and give
The most important piece of information I took from "The Total Money Makeover" which was not listed above was to sell everything and cut back on all unnecessary items. Get an extra job, do whatever it takes to get out of debt. For example, in doing this I had to sell all the stock I had purchased when the economy was still recovering from the recession. This included selling stock in Alibaba (BABA), Disney (DIS) and Bank of America (BAC) to name a few.
I sold Alibaba at $77 a share, today it is $178
I sold Disney at $70 a share, today it is $112
I sold Bank of America at $14 a share, today it is $31
I sold this all this stock and others also and was able to payoff my first credit card. (While I needed to accomplish this at the time it does hurt looking back that I missed out on an almost 120% increase in the price of these stocks). At the time, paying off the credit card freed up about $120 a month which, I could now apply to other debt (Snowball method).I was then able to increase what I was paying per month towards paying down my other credit cards with the extra $120. As one credit card was finished being paid-off, I then re-allocated those savings to my other credit cards.
I also cut out unnecessary purchases. I became "Cheap". I went from eating out everyday at work to brown bagging it. Previously, I was spending $10.00 a day for lunch and WAWA in the morning four times a week ($40.00 a week) or ($160.00 a week) or ($1920 a year). This debt is now gone! My wife who is very supportive began coupon clipping. Between couponing and discounts at Shoprite our food bill is currently cut anywhere from 30% to 50% a week. It may not sound like much, but if you spend $150.00 a week on groceries that can add up to ($45 to $75 a week) or ($2340 to $3900 a year).
The next part was very embarrassing, I had to go into the Comic Book (Conquest Comics) store I frequent and tell them I had to cut back on the books I purchase to 3 a month. Prior to this I was spending anywhere from $25 a week to $60 a week there. (Savings of $1300 to $3120 a year estimated.) While I really enjoyed the Comic store, and while the people who work at Conquest Comics are extremely friendly. I could no longer afford to keep spending this amount of money on a daily basis. I would however encourage anyone interested in Comic books or collectibles to visit there.
The biggest item, I had to give up though was gambling. While I cannot put a number on how much I was playing either on-line or at the Casino, or how much I was losing or winning. I can say for sure that after the guys trip to Las Vegas, I had already stopped gambling. Since August of 2016, I can say I have only gambled 3 times. ( I am considering a future Steemit article on internet gambling and what my system was!)
Lastly, I deleted all the Apps on my phone which sell products or services. This included EBAY. I do use Groupon and when the family recently went to Sesame Street we were able to save over 40% on the purchase of our tickets. Some other things I do to nickel and dime my saving include going to movies on Tuesday nights, its only $5.00 at the local AMC. I call the cable company monthly (yes its a pain and frustrating) to try and see if there are plans to save me money. We have also raised our air conditioning this summer and we have it set at 73 degrees. It was previously set in the past years at about 70 degrees.
I have not had to do anything as drastic as move people into our house, or eat only macaroni and cheese. My one friend who I always try and learn from financially goes around his house and unscrews light bulbs (Who does this?!?) to save on his electric bill. When I told my wife I wanted to try this to save on our electric bill, I was promptly hit on the back of the head.
Joking aside, while I have not used every piece of advice "The Total Money Makeover" provided it was an excellent start. I then started adapting and applying other principals I learned about saving money from various sources. I was not only able to start saving money again, I paid off the 401K loan, I was also able to start buying stock again (what I can afford), have an established emergency fund, I have already started a college fund for my daughter and now pay for things in cash. I am not totally in the clear debt wise. I do have one outstanding loan at 3.5% which I am expecting to pay off a year early and my mortgage (hopefully ten to fifteen years early).
I still put in the extra hours at work, I am still "cheap", and still brown bag it with my lunch to work everyday. One other thing I want to add, which I learned the hard way. People are not always supportive of these changes. Those who you talk to about what you are doing to effect a positive change in your life financially will not always support you or cheer you on. Sometimes, its jealousy or a lack of care or understanding about their financial future. Debt in general is a very hard issue to talk about, it makes people emotional, cry, stress, loss sleep or fight.
As I write this I am reminded of the quote from the Jack Reacher movie with Tom Cruise "Look at the people. Now tell me which ones are free. Free from debt. Anxiety. Stress. Fear. Failure. Indignity. Betrayal. How many wish that they were born knowing what they know now? Ask yourself how many would do things the same way over again? And how many would live their lives like me." (If you have never read any of the Lee Child, Jack Reacher novels I highly encourage you to do so.) In the novels and movie Jack Reacher essentially lives as a vagrant traveling from place to place with only a passport, a toothbrush and an ATM card.
Final Thoughts
Personal Finance is not taught in a classroom, not in grade school, not in high school and not in college as a core requirement. It takes discipline and I continue to keep track on my spread sheet. There have been months where I have relapsed (Christmas this year was very tough) but the goal is to continue to achieve total debt relief and put myself in the best possible situation for when I do consider "retiring."
Author's note: This article is all my opinion and should not be relied upon for predictive behavior or outcome of any stock, advice on debt or financial advice. It is all my opinion. You can follow me on Twitter @TheMoonknight77 where I mainly follow NWBO, send prayers for cancer patients and post Steemit articles on topics which I enjoy. Yes I am NWBO Long and a share holder. I also anxiously await the next Jack Reacher novel.