Many of us have a complicated relationship with money. Complicated might not be the best way to describe it. Maybe it’s more like a casual relationship. Many folks tend to spend very little time thinking about money other than imagining new ways to spend it. That was certainly me up until about 5 years ago. Sarah on the other hand had always been a bit more responsible with her money, but still hadn’t tapped into the full potential of how best to manage it.
My and Sarah’s views on money have changed drastically in the last five or so years. In the Finance section of this website we will be sharing our views and strategies for how we better manage our money.
Given this is our first post about money, or finance, I’m going to give a little history and then touch a bit on how we manage our money now. Subsequent posts will take a deeper dive.
History
How we think about money is directly derived from our experience, or lack of, with money early in our lives. In fact, one of my earliest memories involves money because it was such a powerful emotional experience, i.e. one of embarrassment and shame. That experience and subsequent ones went on to color my views of money and how it fit into my life. In short, I had a kind of odd distaste for it, even though I knew I needed it.
“I don’t need to be rich, but I absolutely don’t want to be poor”.
Throughout my childhood my family fit into two income brackets, low and lower middle class. Being in those two income brackets comes with the inevitable stress associated with regularly being short on cash. Because of that experience I distinctly remember saying to myself “I don’t need to be rich, but I absolutely don’t want to be poor”. My goal after high school was to somehow figure out how to avoid being poor. An admirable goal but not necessarily a lofty one. But I had no idea how to do that.
Fast forward several years to after I finished college and landed my first job. I left school with nearly $70,000 dollars in school loan debt, about $5000 in credit card debt and no savings. Reading that now sounds daunting, but at the time I told myself that it was the cost of entry to have a career and that I wouldn’t let it consume me as I entered a very exciting chapter in my life.
Despite the debt and lack of savings it was the first time that I didn’t feel poor. I was easily supporting myself and at times able to help others financially. It felt good but I still knew nothing about how to manage money, or better yet, how to have my money work for me. I spent the next five years slowly paying down my school loans, stashing away a tiny bit of savings and investing a modest amount into my 401(k).
Then in early 2011 something happened that forced me for the first time to become more aware of and deliberate about how I used money. Sarah and I had reached a kind of quarter-life crisis and grown discontent with our jobs and our personal lives. We sought adventure and freedom. So we set the lofty goal of quitting our jobs and traveling around the world for a year. This forced both of us to reign in our spending and focus on saving.
After running the numbers, we determined that we’d need at least $15,000 each to sustain us throughout the year. That number seemed unobtainable for me. Sarah had more confidence about reaching the goal given her longer track record of being a saver. Much to my surprise, after about a year and a half I was able to put aside that amount and more by prioritizing what I spent my money on. Being able to take control and manage my money in that way was empowering. More importantly, it opened the door to an amazing and life altering experience.
That’s when I came to the realization that deliberately managing my money gave me more control over my destiny.
That trip ranks as one my life’s greatest experiences and one that enabled a giant leap in personal and relationship growth for both Sarah and me. It forever altered our path as a couple and how money would fit into our lives.
We both returned to home and work reinvigorated and with the goal of setting up our lives to be able to take such a leap again, and if possible, set ourselves up for more freedom and flexibility for the rest of our lives. Enter my discovery of and obsession with the financial independence movement.
Shortly after returning from our year long trip we decided to get smarter about money, whatever that meant. I started scouring the web for knowledge and quickly stumbled upon the financial independence movement. The philosophy of this movement resonated with me. It spoke of using money as a tool to make more money to get to retirement, or more accurately, financial independence far sooner than previously imagined. Forget waiting until you’re 70, and instead reach financial independence by 40 or 50. Wow! For a couple of people who had just tasted the joy of freedom and exploration, this was a powerful idea.
That was the beginning of the journey we’re still on now. We have altered our spending habits to focus on the things that we most value. And we’ve educated ourselves about how to use our money to make us money. We don’t know exactly when we’ll reach the point of being financially independent or even if we need to get there as soon as we previously thought, but the path to getting there is pretty darn clear.
In future posts we will delve deeper into the details of our financial journey and the strategies we’re implementing. For now, here’s a short list of the things we do or have done to better manage our money to help us achieve our financial goals.
- Live below our means.
- Invest simply in low cost index funds using tax advantaged accounts.
- Take advantage of free money through employee sponsored 401(k) accounts.
- Track our income and expenses.
- Protect our assets.
- Have an emergency fund in a high yield account.
- Pay off high interest rate debt.
- Use credit cards to earn us money instead of costing us money.
- Buy only what we need.
We look forward to sharing our financial journey with you in hopes that it will help you on yours.