Today I want to share my finance story with you. From the humble beginnings to my stupid mistakes to now. These mistakes of mine have shaped me into who I am today.
For as long as I can remember my family always lived paycheck to paycheck. Credit cards were only to be used in case of emergencies and the credit score was a delicate baby that always needed to be taken care off. Mom always did her best to save what little money we had left (if any) at the end of the month. She always put any leftover money in a savings account. Investing was a foreign concept in our household. The only trips we took consisted of 8 hour long drives to visit family members or shorter drives to the local lake.
In 1993 my parents decided to take the plunge into home-ownership. Dad leaned towards the more expensive homes while mom wanted something conservative. She wanted a house where the monthly mortgage payments could be paid with one persons salary. Dad was counting on both salaries for these payments. My parents ultimately decided to go the conservative way.
It was during my childhood when I realized that I never wanted to live paycheck to paycheck. There were times where we had to make a choice between groceries and utilities. Kids around my neighborhood always spoke about allowances but we never got any. The only recurring debt payments my parents ever made was for the mortgage.
My parents always worked hard and did the best they could with what little they had. Carrying consumer debt was not the norm, so how did I ended up with $36,895 worth of consumer debt?
My Finance History
I got my first credit card at 17. My mom co-signed and explained that this would help build my credit. In true form she reminded me to only use this for emergencies. I actually did pretty good for awhile until college started, I decided I needed clothes and thus began the never ending cycle of consumerism. Credit card offers soon poured in and I ended up with 7 credit cards.
During my internship my boss made a comment on how he would put all his expenses on a credit card then pay it all off at the end of the month. That sounded like a great idea so I followed his lead and did the same thing. The only difference was I never paid off my card at the end of the month. I would collect my small paycheck stick it in my bank account and then make the minimum payments. This is how I wound up with $7,000 in credit card debt. I eventually paid this off before graduation but only because my sister confiscated all my cards and put me on a cash budget (that was embarrassing).
In 2007 I graduated college (with $10,000 in student loans), exactly 1 year and 4 months later I purchased a brand new car. This was my reward for working hard and being the first to graduate college. A brand new $19,895 car note meant I was successful.
In 2010 while earning a modest income of $36,000, I took the plunge into home ownership and thus ended up with a $77,330 mortgage. The crazy part was that I actually qualified for a loan upwards of 100k. What?!?!? Thank goodness I was kinda sorta smart while house shopping and purchased something on the lower end of the scale. I was also really stupid and cashed out my Simple IRA. Being a first time home buyer I was able to cash it all out ($3,986.65) without paying the 10% tax penalty for early withdrawal. At the time I thought I was being smart but in reality this was one of my biggest financial mistakes to date.
Today my story is different. I earn a modest income and have zero dollars in consumer debt. I still drive the same brand new car I purchased in 2008 and live in the house I purchased in 2010. My income has increased substantially but my standard of living has pretty much stayed the same. The only additional expenses I have incurred are my training fees for martial arts plus any traveling throughout the year.
I still charge all my expenses to my credit card (for travel hacking) but I ALWAYS pay it off at the end of the month. I never pay interest on my purchases.
In 2014 I started investing into a retirement fund at the ripe age of 29. My emergency fund will be fully funded by March and finally 7 years after I purchased my home, I will start to pay down my mortgage. There’s a lot of discussion out there about paying off your home early versus investing. For me, being able to live in my home debt free comes with great peace of mind and is worth more to me than any of the future potential gains I could ever make by investing that money.
I will continue to invest the minimum 15% of my pay and the remainder will go straight to the mortgage. It is true that if I stop traveling and training then my mortgage could be paid off a lot faster. My travel plus training for a full year cost about 5k. When I input this into my amortization schedule as a one time lump sum principal payment, I shave off 16 months from my mortgage. It may well be worth putting off my hobbies to get to a debt free life sooner, however, these hobbies of mine help me stay sane throughout the year.
I want financial independence but I also want to be able to enjoy life. I need the happy medium.
And so there you have it, my finance story. Comment below, I would love to hear your story.