In a post I wrote about a year ago I chronicled the worst financial decisions that I have made. Since it has been about a year later I thought I would focus on some of the smartest and best financial decisions I have made. I think there are several decisions that have paid off and will pay off in the future.
- Taking control of my financial life and paying off my debt. I was/am like a lot of people. I would get my paycheck, maybe save for retirement, and spend the rest. I always paid my bills on time and although I hated debt I never did a lot or make a pledge to get out of it. After Mrs. ROB and I got married a couple of years ago that changed. I realized I needed to get my financial house in order. It didn’t help that I had a total of about $120,000 in debt (including student loans….which made up about $75000 of that debt). I have since shaved about $45000 off of that debt. I still have a ways to go, but I am better off than I was a couple of years ago.
- Investing beyond my 401k plan. At my current employer I had a choice of taking a pension plan or investing in basically a 401k. I chose the 401k plan because I didn’t know how long I was going to be at my current position. Ten years later I am still here. However, in January 2008 I also opened up a Roth IRA and a 403(b). Since that time I have contributed to both accounts fairly consistently. This year will be the first year that I have contributed the max contributions to 401k and 403(b) ($18,000 combined between the two is the max) and my full ROTH IRA contribution. It has been 9 years since I started investing and while I wish I would’ve started sooner and invested more I do have a nice little chunk of change in my investments. I am not going to be part of the two comma club anytime soon, but I will get there (hopefully by 50).
- Buying a house. The truth is I am not a huge fan of home ownership. What I mean by that is I don’t have much of a green thumb, I don’t like lawn work, etc. However, I love the fact that I don’t feel like I am throwing money down the drain by renting. Yes, I know sometimes renting makes more sense. And yes it can. However, if I am going to be in a particular environment/situation for awhile then home ownership makes sense for me. The value of the house increases, I feel like my net worth grows, and eventually this little piece of America will be all ours. Yes, there are a variety of negatives and at some level it is more expensive then renting. But a rental place doesn’t increase your net worth (unless you are living in a super cheap area/apartment or house). Mentally, I feel like I am making more progress as an adult.
- Taking the long road for my career. Perhaps the best decision I have made financially is that it took 10 years for me to get into my career. Over the first ten years I was out of my undergraduate program I was in graduate school 8 out of 10 years. During the other two years I worked in a professional position, taught part-time, and worked as a college speech coach, but those 8 years taught me to be a teacher. And every year I learn something more. A few posts ago I mentioned how I felt like I was a decade behind. That is true. When most people were getting their first jobs out of college I was a graduate assistant making $5000 a year and getting free tuition. I worked during the summer, but nothing like I would make at a “real” job. I was 33 when I got my “career” job. And for me it was worth it (even though I complain about it). So many of the people I read in the personal finance world are ready to leave the rat race, be financially independent, and retire early. I will be 50 before I am probably financially independent. However, I have a job I love. Even if I was financially independent I don’t think I would stop working. I love being an academic. I drank the kool aid and I am ok with that. I get to travel, interact with smart students and colleagues, have my name in print, and feel like I am actually making a difference in the world. Not a bad way to spend your life if you ask me. I don’t know if I will do this forever. I have visions of quitting my current job, moving somewhere else and maybe teaching on the side or just being lazy. But I don’t think that would work. My brain doesn’t work that way. I need to express opinions, do research, feel like I am making a contribution. It keeps me young, makes me feel good, and helps me in other ways. I maybe a decade behind, but in some respects I already have financial freedom.
What are your BEST and SMARTEST financial decisions?