Introduction

Bad Decisions Part 2: Easy credit, hard payments

credit card disaster

So, when I left off in “Bad decisions: It’s raining student loans” recall, I had been succeeding spectacularly at living above my means utilizing cash infusions through student loans. After school with the bills coming out of my ears, I consolidated those loans, but I had added another $300/month expense to my paycheck off the top. I’m my own worst enemy in a lot of ways, and like student loans, I am almost as bad with credit cards. Fortunately, I don’t have $60k limits on my cards.

My first credit card… oh how I love that memory. I had just spent $700 on frigging books for my first semester and was leaving the used bookstore- yeah these were all used and still added up to $700!! What a racket! Anyway, I passed this little folding table with a cute brunette and some papers on it and she said (in a valley-girl voice, even though we’re in KY) “Hi, Are you interested in applying for a credit card?” I said, “Sure, what’s the catch”? Hahaha, I was and I just didn’t realize it. She said, “None, you just fill out this application, and you’ll get your card in a couple of weeks! Do you have good credit?” I said, “I don’t know, I don’t think I have any credit.” She said, “That sounds great, here’s the application!” It was an application for a Discover card, and while I still have the same account almost 20 yrs later, back then I could only use it at a few places and had to always ask “Do you take Discover?”.

I was good with my Discover card for a long time, mostly because I could only use it at certain places, since they weren’t accepted everywhere back in the 90s. Eventually, I fell off the “good credit card use” wagon and used it like it was tied to actual money I owned (it wasn’t). My downfall started when I was on a crazy New Year’s road trip adventure. I had spent the millennium New Year’s in the Keys because, hey if everything crashed with Y2K, I’m in a good spot right? Except I ran out of money, and somewhere between there and Arkansas to visit family (remember it was a crazy road trip adventure — KY to FL Keys, to AR, back to KY to pack, followed by a move to CO almost 3,800 miles in ~2.5 weeks). I called up to get a cash advancement from my credit card because my bank account was empty and I still had this big trip going on… NEVER do that, it’s like 21% interest and it never gets paid off until you pay off every other dollar first. Big, big mistake. Plus, taking a vacation right before moving across the country and maxing out funds before the move wasn’t the brightest idea either.  So, that was my first run-in with a big bill and having to make an effort to pay it down. I literally put it in a drawer and paid extra toward it and it took almost a year to pay off my huge $1800 card bill. But the point is that I did it, and I paid it off even in those trying financial times as a student.

But I didn’t learn my lesson. As soon as the Discover card was paid off,  my brain was yelling at me ” Guess what, my card’s back in my wallet baby!! yeah!!! Let’s celebrate!!!”   Looking back on that now, it is amazing how much family and friends influence our views of money.   A co-worker once told me about her dad being super broke and unexpectedly coming into a chunk of change ~20k, almost enough to cover his debts, and I said, “Oh, is he throwing a party to celebrate?” and she replied, “How do you know my dad?” I said, “I don’t, but I know my dad, and that’s what he would’ve done with ANY extra money.” I treated my finances similarly, I mean monkey see, monkey do, right?

I would go on to repeat this cycle often. Rack up the card, get it maxed out, I’d even get to pay them extra $$ for maxing out my credit line. It seems counter intuitive, but those bastards have it all figured out with loopholes and technicalities for financial idiots like myself. I loved seeing the statements with the “you’re maxed out, let’s charge you XX% interest for that too!”  posted there.

I used credit for exactly what the name insinuates, a line of credit I could rack up and then pay down and then rack up again in an endless cycle. I didn’t see that I could do the same thing with just saving money… I needed the immediate gratification of “I need this now, I want this meal, I want these margaritas, I deserve this!” That’s how I felt, and I also felt that saying to someone, “I can’t afford that” was admitting failure at life. This led to the majority of my credit card spending. Well that and impulse buys after 11pm on Amazon (damn you one click ordering!!)

A perfect example is my “Richard Pryor night” as Mrs. SSC puts it. My favorite comedian of all is Richard Pryor, I just get all his humor and can connect to it, and it literally makes me laugh, and feel sad, and back to happy every time I hear it, the guy is just so real and out there with his soul. Anyway, one night I was thinking, I have a few mp3 comedy skits, but what could I get on Amazon? A few clicks later, I have almost all of his recorded shows ordered, a couple of cd’s, and some autobiographies, and a book by his daughter. Well, it ended up being ~$120 of Richard Pryor, and as Mrs. SSC puts it, “Richard Pryor stuff was showing up for days on end.” That was from my allowance (see the allowances post) but still, this is a perfect example of my mentality with spending. This is great, I want this, buy. Oh shiny! I want, buy, buy! Oh shiny! repeat…..

The big point is that when I started out with credit cards I used them for  fairly mundane reasons and maybe how they’re intended? Emergencies, car break downs, unplanned contingencies, and not as often to cover a vacation, night out, etc… As you’ll read in my next installment of Bad Decisions 3: Easier credit, harder payments; I cross the line from recreational user to hard core credit card addict. Damn credit cards, damn my impulse buying*, damn my lack of discipline with the 1 week rule because I KNOW I’ll still want some Pryor after 1 week, so why delay it? Impulse buying ruled my life for a long time, and it still takes over occasionally.  Mostly, it’s in check now, and luckily, I have an allowance to reign the wild spending in, whether I like that system or not.

What are the habits you find yourself repeating? What do you do to break them? I’d love to hear about it, because as you can see, I’m still having trouble breaking mine… I’ll go into some of my methods to protect me from myself in my next post, but until then, let me know about yours.

 

 

*Damn! I just found another few albums of his comedy material and have those on their way to my house in 2 days. Yeah allowance! Looking forward to the commute getting to listen to some  “new material”!

Bad Decisions Part 1: It’s raining student loans!

SSC student loans

When I was in college and  grad school, I took out much more in student loans than I needed, to try to live above my means, and I have only recently started to understand the financial ramifications and lament the decisions that the younger Mr. SSC made. Let’s start at the best place to understand these decisions: The Beginning!

The problem started a long time ago when I was working on my Bachelor’s degree.  At first, I was undeclared and attending college simply because that is what I was supposed to do.  Initially, I was attending Western Kentucky University (WKU) on a Pell Grant while also working long hours at a restaurant to foot the other bills. I got the shaft when my mom married a judge and they claimed me on income tax and it derailed my Pell Grant status. After a couple of semesters paying for school myself, I took some time off to figure out what I wanted to do, and if it even involved college. My time-off resulted in a long hiking trip, and the decision to go back to school to pursue an environmental science degree. I declared my major, registered for classes, and was introduced to the wonderful world of student loans and it was amazing! They’ll “give” you money to go to school! This was brilliant! I could get a student loan, pay for school, and have some cash left over for living expenses. After all, it was ‘deferred’ – not that I really understood at the time what that truly meant. This was like getting the free money of an income tax refund two more times a year. Awesome!

Obviously, I started taking out student loans. Fortunately, the school was in-state tuition, so not very expensive. Nonetheless, I still managed to rack up about $12k in loans over my 1.5 yrs there. In August 1999, I went to Colorado to visit family and fell in love with the area.  By January 2000, I was enrolled at the University of Colorado at Denver and studying full time in the geology program.

Upon transferring to CU Denver, I did myself several disservices. First, at WKU I had completed all my required elective courses, and only needed 3 semesters to complete my new major. However, CU Denver classified things differently and I needed another 30 hrs of electives (ten more classes), almost 2 whole years because I could only manage 12 hrs a semester while working. Even worse I had to take math! Two frigging yrs of math! Gah! A whole semester of trigonometry only, and a yr of algebra, and a yr of calculus and I’m sure there was a semester of regular geometry, shit, that’s 3 yrs of math, see how bad at it I am? That just added more time and $$. Second, I was now an out-of-state student subject to out-of-state tuition. This was three times the in-state tuition price. “This was fine”, I told myself, “it will only be for 2 semesters, so it won’t be that bad”. Subsequently, my school loans jumped from about $5k/semester to ~$16k/semester* for tuition alone with almost no left over funds for subsidizing living.

My plan was to live in Denver, work and go to school downtown, and be able to play in the mountains in my free time- now that’s the life! Except I now had to study a lot just to pass stupid math classes and work full time and be broke, so I didn’t get to the mountains much except to hike some 14’ers on the occasional weekend day I may have had off. Sigh….   I was maxing out loans and still working full-time at a good restaurant job, so I had that income, but no savings or contingency in case of an accident. I felt this was fine though. I was investing in me, and my future, and with this degree, surely I’d get a good job to cover these loans.

However, with my poor finance skills, I wasn’t keeping an accurate tally of how much I’d actually borrowed. Take that back, every year I got a statement that said “you owe $XX amount in student loans”, but, I’d glance at it and throw it in the trash. What I wasn’t considering was the payback. Yeah, they eventually want their money back! Gah!!! Meanwhile, I kept borrowing and taking as much as they’d give me, and it was like a breath of fresh air each semester when I’d get that check for $3-5k extra. I was so excited that I could catch up on bills, and restock my savings which was empty again (damn thing was always empty, how does that happen?).  I even had a little extra money to be able to go out with friends.**

Eventually, I was out of school and had a good job as a geotechnical engineer. Yeah, I’m not an engineer, but I played one at work. It was a decent gig, I loved the job and it paid about $45,000. I was starting to live the dream baby! Then I started getting bills, a LOT of bills for my student loans. Kentucky wanted money for the WKU loan, Colorado wanted money for the CU Denver loan,  and Sallie May wasn’t my friend anymore, but more like an angry ex-wife. My monthly bills were close to $500. I freaked out after covering them for 3 months when my savings died and I was still paying. I got a great rate and consolidated them all at ~2.25% interest. Hell yeah! That’s some personal financing! I cut my bill in half almost, and now just had one bill to pay, and I set it up to a separate bank account so when I overdrew my main account (yes this happened more often than not) it would still get paid. Good job Mr. SSC, let’s go out and celebrate!

I ended up going back to grad school, and got those loans in deferment as quickly as possible, whew! There’s an extra $300 a month! Now, for more student loans… Yep, I still took out student loans even though grad school tuition was paid for. I was even getting a stipend of ~$20k/yr just to go to school. But I had tasted the good life at $45k and couldn’t go back! Actually, I’m just a sucker for bad financial decisions, and I racked up another $12-15k maybe in grad school loans. See, I still don’t know… Ultimately, I was in for over $60,000 when it was all said and done.

I could have helped us get to FI and leave work to stay at home almost 2 full yeas sooner if I’d been more financially sober in my decision-making. I don’t regret the decisions I made, hell it’s what makes you the person you are – good decisions, bad decisions, ugly decisions. The main point is that by being so financially reckless in my younger days, I prolonged my work life by at least a few years.

I hope that you may be able to learn from my poor decision-making and realize that yes, you can save enough and retire early. Like early 40’s early, even with a late start in life. Hell, I made the worst of the worst decisions, and I cashed out a 401k at 28, it was up to $12000! Still, I’ve been able to recover in spite of myself. For me, it took changing my mindset of living as if there’s no tomorrow and instead looking toward a future with no work and more family time. You may want to have that time with family too, or just fishing, gardening, or doing whatever you want, but until you break that mindset of “I’ll pay it back later” it’s just not going to happen.

Let me know if you’ve made any stupid decisions you realize cost you a few more years getting to FI or early retirement. Check back for more installments of the series Bad Decisions, there have been a lot… Next up — Bad Decisions: Easy credit, hard payments.

 

 

*I tried to appeal the third semester of out-of-state tuition to have it switched to in-state, but I lost the appeal and paid the full 3 semesters out-of-state tuition, because administration loves technicalities in their favor.

** Working at a restaurant had its advantages. I got $2 pints at work (off clock, of course) and a free meal each shift (so, ~6 days a week). BUT, my friends were all servers and got $100 – $300 a night. They were always saying “let’s leave the cheap drinks here and go anywhere else to get more expensive drinks, or out to dinner, sushi anyone?”.  I was running with the wrong but fun crowd, and I didn’t want to be different. So I would go and just charge it to a credit card if I didn’t have the funds available (which was always).

The Beginning: Mr. SSC – Jay

Mt HoodEarly Retirement? Riiiiiight….

This “early retirement” stuff, all started in 2014 when Mrs. SSC started throwing around phrases like “lifestyle creep” and “FIRE”, and talking about how we could retire from the 9 to 5 in maybe 5-7 years, instead of the ~20 years that had always been the plan. I mean, first of all, who REALLY does that, and how do they do it so easily? After checking out all the personal finance articles and blogs that Mrs. SSC was constantly emailing me, I realized that most people do this by living on extremely low, almost unbelievable incomes. Especially, the ones supporting a family. It might work great for them, and I applaud them for being able to achieve FI and retire early, but I just saw it as unfeasible for the lifestyle I want to live.

If only there was a way that we could “pre-tire” and transition from dual income parents to dual stay at home parents and not decrease our current lifestyle. Wouldn’t that be great?! Yeah, I agree. BUT, how does that happen? Can it work for us, and if so how? I plan on showing you our approach and how we are getting there- maybe it will help you get there also.

Let me qualify my opinion and statements on this blog with the fact that I’m horrible with money, budgets, and savings, but especially savings, and budgets, and money. My family was bad at it, so I didn’t have any good financial role models, however, I still thought I was pretty good, since I was the best one with money in my family. But the truth is, I just suck at managing finances. I can manage them, but I manage them right back into the economy and out of my checking account…

Enter Mrs. SSC

Fortunately, I married someone who is great with money, saving, and planning. Actually, she’s great at planning anything and everything and so we go well together. When we finished school and started working she already had a nice rollover 401k, and a little nest egg already built up. I had cashed out my 401k (seriously, I did that, the entire 12k…) and I had a lot of debt. Mostly from school loans, but the rest were simply self-induced due to poor spending habits through ease of spending with credit cards. By paying down ALL those debts month after month, and saving for newer cars, we never got the lifestyle creep that comes with most Dual Income No Kid couples.

While I’d been busy wanting a boat (kayaks are fun, but aren’t boats even more fun?), luxury auto (why not me? can’t we afford a nice car?) and wanting to do things other people were doing, my wife had been working her magic in the background.

I realized that while I’d jokingly referred to budgeting and investing  as Mrs. SSC’s hobby, it really was. She  would show me her graphs and spreadsheets and I’d peruse them and think, “why the hell can’t I buy a boat? I see it right there. This amount would cover the boat I want,  come on, one little boat?”  The conversation usually went like this:

Me: “We can afford a boat.”

Mrs. SSC: “Yes, but do we want to afford it?”

Me: “Of course we do! Boats are great, I like fishing, we could have fun on the water every weekend.”

Mrs. SSC: “Where would we keep it? What about tax, title, registration, insurance, gas?”

Me: “Fine, but what about a kayak?”

Mrs. SSC: “You can get a kayak, as long as your allowance covers it.”

That’s why we have an allowance system  that works, um, well it worked I guess…

Anyway, I still never realized this goal of early retirement/financial independence was being realized through Mrs. SSC’s planning. Essentially, when she showed me that this whole time we have been living our comfortable life on about 50% of our income, and investing the rest – I realized that our dream could really happen.

For us, it’s simple. We like our jobs, but love spending time with our kids more. We realized that we can keep our current lifestyle and become stay at home parents when we reach our “number” that lets us have enough money to live on from ages 43 to 60. Right now, that’s in 5-7 yrs depending on the stock market and other things out of our control. Best case scenario, in 4 yrs, we can start house hunting in our pretirement town. Worst case, it’s closer to 7 yrs. I say pretirement, because neither of us wants to stop working, however, if we can work at something we like and not worry about raising a family on that income alone, that’s what we’re looking for. Whether it’s teaching part-time, working in a fly shop, maybe a micro-brewery, essentially something that ties in with my likes and hobbies without worrying that it isn’t making much money.

A couple of weeks ago, my wife found a new financial planning/retirement calculator that she has been loving running different models with. It’s easy to use and you can set it to modes like “I always want to live off of $XXk/yr or I’m flexible to live off %/dividends in stock per yr”. You input your values and it runs it from beginning of stock market to current day and lets you know how many times your plan would fail. Through the 20’s, the 80’s, the recent downturns etc… you can see how you would fare. It also shows your ending wealth, assuming you die at 90. You may be able to change that age too, but again, Mrs. SSC’s domain tinkering with these tools, so I won’t quote anything. (OK, she just told me it is called cFIREsim)

However, what it showed me was eye-opening! It was the first time since all this jibber-jabber about ‘early retirement’ and ‘stay at home lifestyle’ was brought up that I realized “Holy Sh!t, we REALLY can retire before 45!” Seriously… Like a cold, wet fish smacked into your face. It is the first time I realized that this was a reality, even though I’ve been a silent conspirator for years now. For those of you with kids (sorry ladies, this is a guys only moment), it’s like when you’ve been feeling the babies kicks through the belly, see him/her moving around, deciding names, putting together cribs, painting rooms, coming up with baby registry lists, etc… It’s all still abstract until birth when you actually see your child, hear their cry, touch them, and it hits you, “this is real”.

Make your own Retirement Baby and watch it grow bigger each day!

My financial independence baby showed up a couple of weeks ago, and holy crap it’s REAL. We can do this without adjusting our current lifestyle. We found our number, worked backwards, and in 4-7 yrs, we can say adios to the 9-5 dual income lifestyle. Maybe you can do the same, but it will be your way, your pace, and your decision on what that number is and how quickly you want to get there. We found ours and are counting down to slowly sipping coffee on our back porch.