Tuesday, May 19, 2009

My personal finances

Back in the late 90's I was falling into the trap. You know the trap. The need to have everything right now. The best clothes and the fancy restaurants. Part of this was compensating for a deep seated unhappiness of where I was in life. Trying to be someone I was not because I thought that was what defined success.

In 2000, I graduated from Grad School with an MBA in Finance and Financial Derivatives (<-- I know its a bad word). I was lucky in that, my company paid for most of my MBA so I didn't have any student loans but in my desire to "live the life" I had racked up what was for me, a lot of credit card debt, close to $7,000. Add on to this, my student loans in the range of $12,000 and I was heading into the debt trapt.

I just had gotten a raise and I was now making $40,000 a year. Yes, accountants coming out of school were making more then me just on base salary. Add on top of this I was miserable. I worked for one of the biggest jerks I have ever worked for (hint: never work for someone that went through the salomon brothers training program), I was over weight to the point I had what I describe as a Charlie Brown face (round), and my friends were starting to hate being around me.

The only consolation, was when bonus time came, and after taking the time to detail why I deserved a big bonus, I was told I would receive a bonus of $22,500. Holy cow I was rich! Think of all that I could buy!!! Luckily I had a father that talked some sense into me and to this day I think of fondly (sadly he passed away last year) how his advice has stayed with me.

"Chris, I will make you a deal, since your sister only had $6,000 in student loans, I will cover the the difference between what you owe past $6,000." I had been paying for 5 years so I had a good amount paid off. So I took my bonus, paid down my student loans, paid down my fathers student loans and paid off my credit card. I was now debt free. God it was a great feeling! My bonus was gone, but god it was a great feeling!

In fear of running up credit card debt again, I did what many consider to not be a great idea but I am glad I did. I got an American Express charge card. Unlike a credit card, you are required to pay your bill off every month. I still have it to this day, and I finally got a normal Visa card since many places still don't take Amex and that has all of $400 dollor balance on it.

Come 2001, being miserable still at my job was noticed by my ever pleasant managers and they managed to cut my bonus to $17,000. Still quite good in this day and age but it just made me even more bitter. Finally a month after I received my bonus I cracked and quit the job. It was the best thing I ever did. A giant weight lifted off my back. If it wasn't for paying off all my debt, I never would have been able to do it.

To this day I have grown as a person. I have lived in the DC Metro area, Southern California, Silicon Valley and currently in the midwest as I continue to clean things up in my fathers estate for my mother. I still have no debt, I own a 2005 car with 45k miles on it and no loan. I am ready to buy a house and take debt on for the first time.

On top of that, I am considered a leader in my field, which is not the same field I quit from. I make more base salary (6 figures) then I did in my other endevours. I am happy, and am myself which endears me to my managers even when I mess up. You don't have to be an @sshole to be successful, you just need to be yourself.

It is fear of losing money and going into debt that has held me back in starting this business. I know it is irrational, but when one becomes risk adverse, you can become overly risk adverse. Usually after a while I just spend the money and after its done I say, well jeez that wasn't to hard.

When I look back at this I would not be able to write this if I hadn't made the fateful decision (egged on by my father) to pay off my debts and live debt free. Don't get me wrong, while I am frugal, I am not cheap and live quite nice. I never skimp on food, I never want for a new computer or wear threadbare clothes. In fact, I probably spend more on clothes now then I ever did, but instead of looking at name brands, I look at fit, style and quality.

Someone once told me you should have $10,000 at all times just in case that great opportunity comes along. I believe this whole heartedly. Leverage is great for some but not for me. I encourage you to get your financial house in order to give you those opportunities.

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