This past semester has been tough. And I apologize lately if my blog posts have appeared a bit on the whiny side. I sometimes get lost in the moment of the situation and don’t look at the forest and only see the trees. I was rummaging around some old papers today and I found something from February 2013 that provided me a little perspective on where we have gone financially over the past 4 1/2 years or so.
Before I started this blog in September 2014 our financial situation was not good. I mentioned part of this in Part III of my story of How I Got Here. I called that post “The Awakening” because it truly was. Before that let me back up a bit.
How This Financial Journey Started
Mrs. ROB and I have known each other for 17 years. We met at a conference long ago and I fully admit I was flirting with her and trying to pick her up. It didn’t work, but we became friends and that friendship eventually blossomed into a long-distance relationship in 2010. During our 2 year courtship Mrs. ROB and I traveled to multiple countries, we went out to fancy restaurants, I flew home to see her once a month, we got married in a foreign country, and she moved out to be with me where I lived. All of which cost money. Additionally, Mrs. ROB was laid off from her job due to the recession. Since she didn’t really have a lot of money I paid for our excursions.
I fully admit during this time that I was worried about money. I knew debt was piling up, but I figured I could just out earn my stupidity and I would dig my way out like I had done in the past. The truth was we didn’t need to have done all of those things. Mrs. ROB would’ve loved me for my effervescent charm (or the fact that I had a steady job….Ha, ha). But I kept doing things that probably weren’t the smartest financially.
Anyways, we got married in August of 2012, Mrs. ROB moves out to my neck of the woods, but unfortunately only finds some retail work initially. So we weren’t bringing in a lot of money. Couple that fact that she was traveling to Northern Ireland for some classroom stuff and I was going to Copenhagen for a conference, the start of our marriage, financially at least, was not progressing well. This was in January of 2013.
When we got back from Copenhagen I began to really take a hard look at our finances. We didn’t own a home at the time, but we had a lot of debt. This is what I wrote down in February 2013 concerning my debt.
Student Loan Debt: $71,518
Lending Club (Private Loan) $9883
Credit Card #1 $4917
Cred Card #2 $19,080
Credit Card #3 $330
Car Loan $8750
Bill Me Later $880
University Tuition $1780
Besides my student loan debt I had $45,620 in consumer debt.
Additionally, I had fixed expenses of $1288 in rent and another $400 in utilities. That didn’t include food. And I only brought home about $4600 a month. Our fixed monthly expenses were $3145.14. That left only about $1400 for Gas, Food, Medications, Entertainment, Savings, etc. Now that might sound like a lot of money, but those other items can add up fast.
When I put those numbers down on paper my eyes popped out of my head. I had never been in that much debt in my life and the shovel I had to combat it was smaller than I thought. And it scared me.
So I decided then and there to try to get my financial act together.
Additionally, those debts were very close to how much I had saved in my retirement accounts. Because of my job I am required to contribute 10% of my income to retirement no matter what, but I also had a small Roth IRA in there, along with another 403b retirement account. But I wasn’t putting much money in either one and for whatever reason had never supercharged my savings.
So when I read those numbers on the debt and assets I had I immediately started reading personal finance blogs, listening to financial shows on the radio, subscribing to Money and Kiplinger’s Personal Finance. All in the vain attempt to figure out the fastest way to get out of debt and start saving.
Mrs. ROB and I were trying to do the normal stuff that newly married couples do. We wanted to save for a house, start having a family, etc, but here was the spectre of that debt that hung over me like a black cloud.
Devising A Plan, Well Sort Of
At this time I also started listening to Dave Ramsey’s financial radio program again, began reading different threads on Mr. Money Mustache’s forums (he is a personal finance blogger who is AWESOME), and tracking my spending.
The next couple of months were tough. Since I started tracking our spending and wanted to clamp down on the budget I am sure that Mrs. ROB thought I was a jerk (and I can be). Once I get my mind on something I sometimes have tunnel vision. My biggest problem with money, at least between the two of us, is learning to communicate where it is actually a reciprocal conversation. I hope things have gotten better, but it is one of the things I need to work on the most as a person, which is one of the reasons I wrote a blog post about it a couple months ago.
Good things, however, did start to happen financially in the ROB household over the next couple of months, particularly after May of 2013. Mrs. ROB was able to land a new position, in fact 2 new positions. She started teaching for my university part-time, as well as doing another part-time job that paid her fairly well.
I started working like a crazy person over the summer to bring in more money. I did any and every extra duty I could. I taught extra courses, took extra advising for money, applied for different grants, did different workshops. I would review books or do focus groups from publishers for a extra money here and there. Anything that was offered by my university or within my community of scholars for extra money I did it.
As we were going through this Mrs. ROB and I were talking about buying a house. I initially thought we couldn’t do it, but our rent was going up every year and I knew that Mrs. ROB was not happy living where we were. So while I tried to pay off debt, I also thought about scraping together a down payment.
Oh and did I mention that I also wanted to increase my retirement savings.
That is why I called this section “Devising a Plan, Well Sort Of.” Well sort of was I had all these ideas in my head, but I didn’t go in a specific order. I didn’t focus on one thing, which was a mistake and I do not recommend you go that route.
So basically my plan was just to earn a lot of money and see what I could pay off as fast as I could.
Before I started writing the blog in September of 2014 I remember that I was able to pay off my car in March of 2014, credit cards #1 & 3, and make a dent in credit card #2. I also paid off the college tuition and Bill Me Later.
By May of 2014, I had paid off about $17,000 in consumer debt and was also able to save about $10k for a down payment on a house. I also consolidated credit card #2 and my personal loan, into a lower interest rate loan of about $28000. Moreover, I increased my retirement holdings at work from about 15% of my income to about 20%. I think I was probably saving about $13k a year toward retirement.
The Blog as a Motivating Force
So things were looking better financially in our household when I started this blog in September 2014. By this time I was hooked on personal finance blogs. I loved it and wanted to write about it. Mrs. ROB was tired of hearing about it so she encouraged me to start the blog.
So I did.
However, that doesn’t mean we were disciplined.
We had just bought a house (here is where my wife saved us $50k).
My wife bought a newer used car.
And we bought new furniture for our house.
So we were still spending thousands of dollars.
At the same time, we were making the best money we had ever had as a married couple.
That semester Mrs. ROB taught 9 classes at 3 different campuses. She was nuts. But she did it so we could pay down some of these expenses. I was also teaching overloads (and still do) at my school so we wouldn’t go deeper into debt. Therefore, we were able to manage some of these newer expenses on the house.
In October of 2014 I reported that I had about $95000 in debt. At the time I didn’t include my mortgage as debt. So in 18 months I had paid off only about $15k in debt, while cash flowing a whole bunch of other stuff. I think we cash flowed another $25k with the down payment on the house, a down payment on the car, and newer furniture.
When I began writing the blog, however, something about writing a couple of times a week was very cathartic for me.
I gave my first debt update in early 2015. At that time I had $90k in student loan debt and a private loan, plus $168k in mortgage debt.
Within 14 months of that date I had paid off that personal loan, but I also refinanced Mrs. ROB’s car loan to a better interest rate. So technically, we still had about $24k in consumer debt. So I was sort of right back where I started from debt-wise.
That said, I was able to cash flow a new dishwasher and installation ($1400), a HEAT loan (it was for new insulation–$2850), a new dryer ($300), new pipes for the bathroom ($1900), a new microwave because ours crapped out on us ($300), a new refrigerator (same thing–$1000), and an upgraded electrical panel so our house doesn’t burn down ($2500).
Plus, for the past 2 years I have been able to rebuild our emergency fund for 3 months of expenses, max out my 403b for the past 2 years, and double our retirement savings in general.
Before I go any further I hope I am not coming off as a some braggadocious jackhole. The whole point of this post is for me to gain a little bit of perspective of where we have come these past few years.
Let’s Break This Down and Sum Up
Mortgage Debt–$173,000 (September 2014); $137,564 (Current)–$35,436–Debt Paid Off
Student Loan Debt $71,518 (February 2013); $59,226 (Current)–$12,295–Debt Paid Off
Private Loan–Lending Club $9883 (February 2013); $0 (paid in March 2016)
Credit Card #1–$4917 (February 2013); $0 (paid in March 2014)
Credit Card #2–$19,080 (February 2013); $0 (Consolidated with Lending Club Loan–Paid Off March 2016)
Bill Me Later–$880 (February 2013); $0 (paid in March 2014)
Car Loan–$8750 (February 2013); $0 (paid in March 2014)
Credit Card #3–$330 (February 2013) $0 (paid inMarch 2014)
University Tuition–$1780 (February 2013);$0 paid in March 2014)
Heat Loan–$2850 (February 2016; $0 paid in December 2016)
Car Loan–$24,000 (June 2016); $15,182 (Current)–$8,818–Debt Paid Off
Cash Flowed Items
Electrical Panel Update–$2500
House Down payment–$9500
I know I am forgetting small things we have added for the house or bought over that time period as well.
One more thing, we have doubled our retirement contributions and our overall investment portfolio has almost tripled since February 2013.
As I lay out the above numbers I think to myself: 1) Wow, that is great you have been able to pay off this debt and cash flow these items; 2) I think to myself what a moron I am for all of this extra spending. Just think about what I could have done with all of that money ahead of time; just think if we actually focused on a specific plan.
Paying off $141,219 in debt and/or cash flowing specific items, while also doubling our retirement contributions isn’t bad over this five year period.
That is $28,243.80 per year. That is about 10% of my debt per year that I want to pay off and we have been doing it for the past five years, really the past 3 years or so when our income got kicked into higher gear once we bought our house. In the past 3 1/2 years we have paid or cash flowed about $115,000. That is almost $38,500 a year.
Considering we haven’t been on a tight budgeting system for the past few years I am kind of amazed we accomplished as much as we did.
Where Do We Go From Here?
Thank you for staying with me thus far. I am sure I could’ve made this post a little shorter and I apologize for that. But after looking at those numbers here are some things I am thinking about.
First, this post has given me a little perspective. Things could be worse. And they have been. While I still feel like we have too much debt (I would like to get rid of the car note and mortgage ASAP) things are becoming more manageable.
Second, I want to continue to maximize our retirement savings. While paying off debt is still a goal, I should have been focusing a lot more on super charging our savings. I should’ve gotten started on Mrs. ROB’s retirement contributions sooner. Over the next year, if I could max out our IRAs that would be great, in addition to me maxing out retirement savings at work.
Third, I want to be a little more systematic in my money planning. I don’t think we will ever have a zero-based budget. That is a bit too restrictive for us. It doesn’t give us any room for things. That said, I do want to try to tackle things in a bit of an order. I want to take extra money and throw it at a particular debt or put it into savings. In other words, a bit more focus. I still think I am a little herky jerky in planning things out.
Fourth, I want to become a month ahead budget wise. There are months when we are caught off guard with different expenses. Although we have an emergency fund I don’t want to be dipping into it for specific expenses. And we shouldn’t it. The emergency fund should be for EMERGENCIES only. If I can get one month ahead with expenses then that kind of eases the financial pressure when we come to 2018, particularly in the summer, which are not the best financial months for the ROB household.
Finally, I would like to start contributing to some sinking fund accounts. In other words, if I could I would like to put a couple hundred dollars a month to a fund for household repairs or a fund for travel or whatever. We don’t currently do that and it would be nice to have that extra money.
Now this is more of a wish list than anything else. Based upon our income I don’t think we can do everything, but if we reduce our expenses enough (e.g. pay off the car, pay down the house) then some of these items are more manageable.
The Bottom Line: I know that I have seemed a little whiny in my posts lately and I am sorry for that. But when I think about where we have come from and where we are today we are in such a better financial position than ever before. I need to remember that. I need to see the forest and not just the trees. But I also know that if I can develop a bit more of a plan I can fine tune this even more.
Time to think about what the most important principles are and execute them.