Our Financial 180

In 2007, I graduated college with a degree in computer engineering, took a job with a fortune 500 company, and bought a brand new house. For the first time in my entire life, I felt like an adult. With this new paycheck coming in every two weeks, I could have anything I wanted. And as luck would have it – I had expensive taste!

I decided my first purchase would be a $3500.00 HDTV. I added a PlayStation 3 and assorted accessories to the shopping cart, and raced back to my new house to get everything set up.

That night, as I sat on the floor in that empty house, watching the Simpsons on my new TV, my girlfriend (now wife) convinced me that something was fundamentally wrong.

“Joel.”
I glanced over to her. She looked beautiful in the glow of the giant TV.
“Yes my darling?”
“We have no furniture.”

She was right. In all of the excitement of my spending spree, I somehow forgot furniture! No problem. I reached for the credit card, and a quick $10K later, our entire house was filled with high-end furniture. Fancy leather sofas, king size beds, the works. It felt great- for the past five years I'd been a broke college kid, but now, I was a respectable grown-up.

Over the years, my spending habit got worse. By 2012, we were spending six figures a year on… stuff. Two brand new cars at $25K a piece? That seemed normal. A $40K wedding and a fancy Bahamian honeymoon? Sure that was expensive but we could afford it. $13K in restaurant spending in a single year? We liked to think of ourselves as food connoisseurs. Besides, why shouldn’t I treat myself? I was putting a full 6% into my 401(K) every year to get my employer match. So I continued my adventures in spending.

WARNING: Eating out thrice a day is hazardous to your wallet

Before I knew it, my life had become quite full. Food and water delivery services, monthly massages at the spa, fancy dry cleaning bills, season tickets to various entertainment venues, expensive martial arts hobbies. You name it, I had it. But as my life, and subsequently my bank statements filled up, I wasn’t getting any happier. It was actually the opposite- I was more stressed than ever before! But I just couldn’t put my finger on the problem.

In 2013, I decided changing employers would shake things up and give me a much-needed morale boost, so I jumped to another big firm in the area. The pay bump and new faces helped a bit, but within a few months, I was unhappy once again. What was wrong? I spent thousands of dollars on toys the previous year. Why weren't Amazon purchases fixing my problem?

What I needed was a way out. You'd think a high tech job would be interesting, but over the years I realized it’s all the same: write yet another version of an already existing widget for a program that's behind schedule and over budget. Changing jobs didn't help: new code, new cubicle, same prison sentence. The fluorescent lights taunted me as I stared at the blue skies outside. I couldn't go out and enjoy it: I was always too far behind on my tasks. I tried coming to work earlier, staying later, working through lunch. Nothing helped. I was trapped.

It was around this time that a friend pointed me to a blog called Mr. Money Mustache. He thought it might help give me some perspective on money, so I glanced over a few posts. “What an interesting website” I remember thinking at the time, unaware that my life was about to change very, very quickly.

A Crash Course in FI

A few weeks later, the wife was in a terrible car accident. She was visiting her mom down in south Florida when a sheriff's officer ran a red light with no sirens and T-boned her in an intersection. The Honda was totaled, but thankfully she walked away with only minor injuries. Soon after, the insurance company sent us a check for $10K- the depreciated value of the $25K car she purchased new just a few years earlier.

That night, as we sat on the fancy leather sofa in our filled-to-the-brim-with-stuff house, my wife once again convinced me that something was fundamentally wrong.

“Joel.”
“Yes my darling?”
“We need to stop spending our money.”

Once again, she was right. We binged through a dozen MMM articles together that night. The strange concept of financial independence – the idea that someone could save up enough money to retire in less than ten years – it consumed me. I worked out the math for myself. I checked the numbers twice, looking for a mistake. It was real – FI was a way to escape the daily grind. A way to add control and meaning back into our lives. We took the $10K insurance check and put it into Vanguard instead of buying a second car. It was a new financial beginning for us.

As we began slashing our expenses, we quickly realized that most of the luxuries we purchased to make ourselves happy were superficial. The new house and cars, the fancy furniture, it’s all a sham. None of it actually brought us any long-term happiness. After a few months, the shininess fades, and you're back to square one. It’s called hedonic adaptation.

The things we sacrificed for those luxuries, though- the once-in-a-lifetime trips, the ability to control our own schedules, having free time to spend with friends and family- these things really did contribute to our happiness, if only we had time for them! Once we figured this out, we worked hard to increase our saving rate as much as possible.

Figure 1: Our Financial 180

We turned it into a game: every month, we'd look for one improvement we could make in our budget. Before long, we got pretty good at saving money! The results were dramatic. By 2015 we cut our expenses by two thirds, allowing us to max out our 401(K)s and pay down our mortgage. In the years that followed we saved over $300K, and are now on track to reach Financial Independence sometime in the next two years. (Update: Just after my 33rd birthday, less than five years after our financial awakening, I was able to quit my job – for good!)

I do want to make something clear, since this story sounds like sunshine and lollipops so far: turning things around was not easy. It didn't happen overnight, either. It was gradual, and we made a TON of mistakes along the way: Buying a new home worth less than half its mortgage; Six-figure annual expenses and lifestyle inflation; Sizable wedding, travel, and new car expenses; No investment knowledge whatsoever… the list goes on.

Although daunting, we were determined to work together as a team to turn our finances around and learn as much as possible. We devoured the FI blogs. We read every book we could find on the subject. We trimmed our spending month by month and tracked our net worth as it grew. This helped form a mission statement for my blog: to document our journey, and help as many people as possible save up their own FU money, replace fear with flexibility, and avoid all the mistakes we've made in the past!

If We Can Do This, You Can Too

Why did we pursue Financial Independence? To spend more time with family, and less time at unfulfilling jobs. To pursue creative endeavors, with no pressure to turn a profit. To live our lives the way we want, on our own schedules, without the need to worry about money ever again.

So that's our story! Well, the big picture, at least. There's still a ton of details I've glossed over… What was our spending breakdown before and after the 180? How were we able to lower our spending so significantly? What if you don't have an engineering salary? All this and more … on the next Financial 180.

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Joel

Blogging about our dramatic financial turnaround as we approach Financial Independence!



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16 thoughts on “Our Financial 180”

  1. That furniture story is classic.

    I have a very different furniture story. My parents bought me “cheap” furniture from Living Spaces when I first bought a condo in 2010. My mom’s logic was that if I get married, my future wife will want to pick out her own things. And I can’t say I’ve ever had a major opinion about my furniture.

    Seven years later I’m still using all of the same stuff. Actually, my bedroom dresser is a hand-me-down from my dad’s childhood. Stuff was built with higher quality back then. My computer desk is the same one I used since middle school. My kitchen utinsels, glasswear, and dishes are also all hand-me-down’s. I am very thankful.

    1. Totally agree – high quality furniture can last for generations… There’s really no need to buy brand new. Craigslist and local thrift shops are a great way to find good furniture at very low prices.

      As for the splurge we did on furniture, we will at least try to make it last decades!

  2. Ha! “Honey… Yes, Darling?” I wish my husband listened to me the way you listen to your wife! It’s frustrating to want to have your cake and eat it too. Being FI sounds so liberating… but BOY, OH, BOY does “living it up” sound good. It’s probably because I have never had the luxury of “living it up” financially that I secretly desire it even though I know it’s not good for me and won’t make me happy in the long run.

    1. I can honestly say ‘living it up’ is overrated! But you don’t want to feel deprived all the time either… everyone has their own balance. Maybe take a few luxurious trips, scratch the itch, then get back to hustling towards FI?

      Also remember that FI isn’t the goal… it’s simply a side effect of a healthy financial lifestyle. JD Roth gave an amazing presentation on this at Camp Mustache last weekend. He’ll have the audio of the presentation up soon, but until then check out a related post he did on the subject: http://moneyboss.com/finding-purpose/

  3. This is a serious 180 and to be able to save 300k in just a couple of years is incredibly impressive. Sounds like MMM really supercharged your life and helped set some new goals for you and your wife. That’s so awesome to hear. I look forward to reading more on your financial journey.

    1. Thanks! We did save very quickly, and within a few years it snowballed. I am thankful to have an engineering salary, which did speed up the 180. But the strategies we used to control our expenses, choose our investments, and turn things around are applicable to people in almost any income range. I have a few posts coming out this week detailing some of these strategies.

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