When I was in my late twenties, I found myself with roughly $32,000 of debt. The debt, mostly consumer, had been rolled into a second mortgage to ease the burden of the various monthly payments. As things happen, I ended up divorced and that debt became solely mine as part of the settlement. I’m not bitter nor blaming anyone. It’s the way life goes and how I ended up where I am today.
I later remarried bringing this debt into that marriage. Unfortunately, she also brought $14,000 worth of debt for a combined $48,000 worth of liability.
I made good money, but lived paycheck to paycheck. It was frustrating to live that way. I wanted more out of life, but couldn’t figure out how to get it.
It was then that I discovered Dave Ramsey’s Finance Peace. Ramsey laid out his own life, how he’d found himself deep in debt and then had to work himself out. Many of the things he wrote about were things I felt. Stress and humiliation are two that immediately come to mind.
It took effort, but I started a budget and created an envelope system, having various ones that were carried most days – groceries, gas, etc. There were others that remained at home and were touched only when necessary – car and clothing, for example. Many of the daily envelopes would get beat up so badly that I needed to replace them often.
I ran into a friend recently who I hadn’t seen in years. We talked for a bit and when I told him that I was investing in commercial real estate now, he said he remembered me carrying those envelopes. I smiled at that memory. It seemed so long ago.
The envelopes were a source of discipline, both self and imposed, on my finances as I worked to pay down that debt.
During that time, I drove an older GMC S-15 pick-up and she drove an older Chevy Cavalier. Neither car was flashy. New cars weren’t possible without going deeper into debt.
It took almost two years to get debt free. I remember when that burden finally released. The only debt remaining was the home loan. A big weight lifted from my shoulders.
For about six months, my financial situation couldn’t have been better. A little money was starting to get put away and I felt like something positive was right around the corner.
From Bad to Good to Worse
I decided to change jobs and went to work for a national mall developer. It was a great opportunity that I couldn’t pass up.
However, this is where I knocked myself out financially.
I was going to be an assistant general manager for Spokane’s largest mall. Part of my responsibilities was leasing. In my mind, that meant meeting prospects and, possibly, bringing them to the mall.
I can’t let them see my old pick-up truck, I reasoned. I need a new car.
I didn’t argue with myself long before giving in to my immature side. Suddenly, I wanted to look rich rather than be rich. I wanted to look cool rather than be secure.
I went to the local Ford dealership and test drove a 2004 Mustang. It was the 40th Anniversary edition and almost brand new. The car was previously owned for three months before it was traded back in so its owner could step up to a Shelby. It was beautiful. I never had a muscle car before and I wanted one so badly I couldn’t wait to sign the financing paperwork.
Soon, I was the proud owner of a new Mustang and roughly $25,000 worth of a car loan.
Take a moment and consider this: I might be able to drive a single client around, but what if there were two people? They would never sit comfortably in that car. It was a silly and immature choice.
Anyway, I drove that car around proudly not even caring what I’d just done to my finances. Two weeks later, I received a call while happily driving my new Mustang.
“I need you to come downtown,” she said.
“Because I’m buying a new car.”
And with that statement, I proceeded to the car lot and signed the financing paper work to get a new Mazda and put ourselves $24,000 deeper into debt.
For those of you keeping track, in two-weeks’ time, I went from zero debt to $49,000 worth of car debt.
To make matters worse, the monthly car insurance skyrocketed. The insurance for the previous two paid-off vehicles was $60/month. The new amount was almost $200/month.
The monthly car and insurance payments were over $900 / month. That’s a small house payment!
The new cars were also the implosion of the envelope system. Soon, I was eating out again and doing whatever I wanted with my money. Not a single penny was getting saved. The only saving grace was that I didn’t have a credit card so I couldn’t go further into debt.
Financial stress returned and I soon became embarrassed at my failure with Dave Ramsey’s Financial Peace.
How Do You Keep Moving Forward?
Rocky is my favorite movie. I love it. If you haven’t seen it, it’s the story of a fighter who’s given an opportunity of a lifetime, a long-shot, and makes good on it. There are many movies that follow, some good, some not-so-good. However, there was one, Rocky Balboa, about an aging fighter looking to prove something to himself one more time. He has a conversation with his son and he makes one of my favorite statements about success:
“It ain’t about how hard you hit, it’s about how hard you can get hit and keep moving forward, how much you can take and keep moving forward. That’s how winning is done.” – Rocky Balboa / Sylvester Stallone
It took a couple years, but the realization of how immature that Mustang purchase had been finally hit me and I knew I needed to make a decision. There was an upcoming promotion and relocation opportunity. It would be incredibly stressful with that level of debt on my back.
Sometimes the universe delivers when you’re open to it. I took my car to the dealership for an oil change (yes, I was that guy). When I returned to get it, a salesman approached me and asked, “Do you want to sell your car?”
He had a buyer who wanted to purchase my make and model.
I said I would be interested in an offer. He hurried off and came back a few minutes later. Their offer was $1,200 lower than what I owed on the car. I told him if they would pay off the car loan, it was theirs.
Ten minutes later we had a deal and I was out from under that obligation.
I quickly bought a used Honda for cash and started improving my overall financial and mental position.
A few years later, I would get divorced for a second time. Again, it’s how life goes and how I ended up where I’m at today.
From that period in my life though, I’ve learned that looking rich and being cool are fleeting feelings from immature responses.
Today, my car is a decade old. I don’t care. It’s clean and functional.
My girlfriend’s car is five years old and also clean and functional.
Both are paid off and neither are status symbols, unless you count a loan-free car as a status symbol (we do).
There are days where we want to dent the budget for the sake of some vacation or some experience for the family, but it’s never for a new car or a throwaway trinket.
Our version of being cool is dinner around the table every night and playing in the backyard. It’s about building something for tomorrow while protecting today.
Every day and dollar counts now.
What I didn’t understand before was that every day and every dollar has always counted. I was too immature to see that.
Now, my net worth is clicking up every month due to my real estate investments. I couldn’t have made those investments with the behaviors I exhibited in my previous life. I’ve had to make conscious choices to act in more mature, responsible ways with my money.
I want more from life. I can only get there by realizing it’s okay I’ve taken a hit, stumbled and fell. However, I still must get up, take responsibility for an immature choice and move forward.
That’s how winning is done
Have you ever fallen financially?
How did you pick yourself up and move forward?