Filed under: Personal Finance, Financial Education
I want to talk about the five biggest moments in my personal finance journey. I was never destitute, but growing up with a single mom, we didn't have anything resembling financial security. When it was time for me to go off on my own, I promptly did a financial faceplant and amassed a bunch of debts that are frankly embarrassing to think about today. It has been more than a decade since I started turning things around, and half that time since I really started to gain ground. Lots of people can replicate in these milestones in their own lives.
- I hit rock bottom. When I look at pictures of myself at 21 and 22, I want to slap my stupid face. That kid spent and partied his way to five figures of debt with very little money coming in. I hope you enjoy that sports car, because you certainly can't afford it! I didn't really know better yet, but I quickly learned when I couldn't afford to make payments and I found out that I would be paying off my debts for more than a decade at the rate I was going. It took awhile for the reality of this to sink in. I will be poor -- this poor -- for many years to come. So I changed things up. I sold my car. I worked 70-80 hours a week at two jobs for almost two full years. I stopped wasting money and time, and I threw every extra dollar at my debts until ...
- I paid off my debt. In less than two years, no less! This was a huge eye opener for me. Not only had I killed off debt that was set to haunt me for a big chunk of the rest of my life, I had done it quickly. I've got to credit my mom for inspiration on this one. I had seen her turn her life around by buying a business a couple of years before. Seeing that another life was possible gave me the energy to work stupid long hours until my head was above water. It was a great feeling, but it didn't stop there.
- I started saving. For over a year, I was putting upwards of $1,000 into debt balances, every single month. Now I had no more debt. I kept working at the same rate for about half a year, still saving that much every month. But I started saving it in several key areas: 1) a six-month emergency fund, 2) a fund for the down payment of a house, 3) monthly contributions into my fresh new individual retirement account, 4) a fund for travel and 5) a fund to help start my business. Once the emergency fund was filled up, I could contribute even more to these other areas. At some point, I burned out laboring like a workaholic (not my natural mode of existence), so I quit my other job and took a breather. I can't tell you how much my mindset at this time differed from that of two years before. I felt like I could breathe. I didn't feel anxious. I felt good.
- I started my business. This takes us to about 2010, when I started getting the Modest Money blog off the ground. MM didn't become my full time gig for a couple more years, but I had learned the basics of web marketing through one of my jobs, and I knew I could do this thing myself. I spent thousands of hours learning how to really do this thing. I went to conferences, learned coding and talked to anybody who knew something I didn't about blogging. I also started a couple of side web ventures, a couple of which are still going strong today. Today, my work life is pretty fluid. Some days I work for other people, many days just for myself. I have a lot of residual income streaming in from many sources. If one business goes belly up, I know there are different revenue streams that will survive. The same goes for my investments.
- I bought my house. I don't know if I just missed the memo on home ownership when I was growing up, but it has turned out to be an awesome way to build wealth. My home has appreciated about 7 percent every year I've owned it. Because my taxes and interest payments are written off on my taxes, that's a 28 percent return on my investment since I bought my house. Add to this the steadily building wealth I've gained through equity, and my home might be the single best investment I have made in life thus far. It makes me want to buy more real estate.
The Hero in Your Future
I don't know if you saw Matthew McConaughey's crazy-eyed Oscar acceptance speech from last year, but he said something I'll always remember. He said that his hero in life was himself 10 years from now. That might sound a little conceited if you don't frame it right. Basically, he said he wanted to always be pushing himself to be better, to become someone that his past self could respect and admire. I want to do the same. I think my little debt-ridden self from a decade-plus ago would like the guy I've become. I want the same to go for the guy I am 10 years from now. Here are a couple bonus milestones I'd like to see in my future.
- More houses. I'd like to own a few houses. I've seen the way my current place has appreciated, and I'd like to rent to others. Growing up in a string of rental places, I know how vulnerable being a renter can be. I remember good landlords and bad ones. If I'm going to invest in properties, I want to provide quality housing to people without pushing for the highest dollar tenants. Just a personal project, but it's something close to my heart. The way I look at it, it's a way I can grow my money while providing a service that people actually need.
- Investments for my children. I don't have kids, and my girlfriend and I have no specific plans. But I want them someday. Before I start reproducing, I want to have investments in place for them to at least be able to go to college, to get a level of education somewhat better than the one I had.
These future investments will only be possible because I made the changes I mentioned in the first milestone. Without changing my life and paying off my debt, I never would have been able to achieve any level of wealth. Many people never get past that first step. I want to encourage you to make the change. Those two years or so were the hardest step on this journey. I guess that's why more people don't get past that stage. If I can do it, you can. Feel free to reach out to me or check out my writing for tips on how. But it's not rocket science. You can get there just like I did.