Quarterlife Crisis

If today's blog seems a little more intense than normal, it's probably because the music for the Insanity workout is playing in the background. Go wifey!! (and Brandon) I just can't help but get pumped about finances listening to this! 

I think today I'm going to take you back a couple of years in the financial life of the Simmons household. We're going back to a time that I often find myself wistfully daydreaming of - the Simmons family 

Golden Years.

 

The Golden Years  went like this: LeAnn and I had been happily married for a couple years, and had gotten ourselves started off on great financial footing. We were diligently contributing to our Roth IRA, investing all of Jaden's child support into a 529 college fund, and saving a healthy amount of money on top of that. We were making about 30% less than we make now, but our net worth was steadily growing. 

When the housing bubble collapsed, and the $8,000 first time home buyer credit came on the scene, I felt like we had to take advantage of the opportunity that it provided to buy a house. I hated the idea of "throwing away" money on rent (I've since learned a lot more about the pros and cons in regards to renting/purchasing, and might go into it another time), and wanted the opportunity to buy a house and pay it off as quickly as possible, with the dream of living without rent or a mortgage for the rest of our lives. We successfully purchased the townhouse we live in now at what we thought was a great value, with the former owners meeting basically all of our demands. With help from the family, the first time homeowner's credit, and our frugal living, we were able to knock off about $30,000 off the principal on our mortgage in the first year alone! Any extra money we had or overtime I made went straight to our mortgage. The Golden Years were at their peak, and paying off the house in less than 10 years seemed more than possible, it seemed probable. We were flying high! 

Unfortunately, in my obsession to pay off the house, I made my first mistake- I decided that with the way the stock market was performing that I'd rather put the $200 a month we were investing towards the mortgage. I further justified the decision because the funds we were investing in had a very high expense ratio and I wanted to pursue investing in index funds instead when I had the money available. We also decided to send Jaden to private school and began using his child support to pay for that. 

It was around this time that I went through my Quarterlife Crisis (thanks John). I had a period before and after Autumn's birth of mild depression and anxiety that manifested itself in such a way that I thought that I was really sick. I went to doctor after doctor and even though they couldn't find anything, I felt so bad that I was convinced I was either dying or had some kind of chronic illness. In my head, my life could only get worse from that point on and I felt like I had to make the most of what little good time I had left. So, when we decided to get a "new" car that would be able to more comfortably carry around both kids, I decided that the first priority for that car was SPEED. At this time, we had an old Nissan Sentra, which we sold on Craigslist for $1200, and a Honda Civic. I scoured the internet and magazines trying to determine what car would best carry around the wife and kids at maximum fun while still maintaining some utility and affordability. (It also had to pass the boss's scrutinization* = ) ) So LeAnn finally approved of what would become our next car, the Mazdaspeed 3, and the self-medicating began! I was dying anyways, so why not see how fast I could get on the highway going to and from work every day? 

Thing was, I didn't have a $20,000 dollar sickness, and we absolutely didn't have a $20,000 car need. So we had dug ourselves a nice hole of debt. On top of that, our car insurance went up, money spent on gas increased, and the purchase of the time share around this time put the final nail in the coffin of our glorious Golden Years. 

While our income was steadily increasing, our slavery to it increased even faster. After crunching the numbers, I realized we had to do something drastic, and we decided to live with just one car: the Mazda (we also sold the Honda Civic, to LeAnn's brother, who was moving in with us and needed a vehicle). We even tried to sell the Mazda, but were unsuccessful. I ended up buying a $1500 mountain bike, with the intention of riding it to work as our second vehicle. 

Crazy thing is, it turns out that the bicycle was the medication I needed. Almost immediately after I began riding frequently my anxiety and depression melted away. All I needed was some exercise!  If I were to go back, I would have scoured Craig's list and other places I could buy used bikes to get something much more affordable. But buying a nice bike was still one of the best decisions I've ever made. 

The Mazda is still on the chopping block because I'd like to have a more affordable car. But I haven't been able to bring myself to take a possibly large loss on it, and I do still really love the car. It's also uniquely difficult to sell a car when you don't have another one to fall back on once it's sold, and I won't be making any hasty decisions on buying our next car. 

Here's to beginning a new era of the Golden Years, ones that will hopefully stay with us until the end!

*Yes, spell check, scrutinization is a word, even if it wasn't two minutes ago. 

Starting Block

Step 1: CRUSH DEBT!!

Though it pains me to say it, I'm in debt. And it's not a little credit card balance we haven't been able to knock off because of a few emergency expenses. Nope. It's a lot uglier than that. I could make some rationalizations for it and tell you the reasons why we did what we did, but when it comes down to it, it's UGLY. 

So how ugly is UGLY?? It's $16,000 ugly. Yep. And that's not even the really ugly part. When you're living semi-frugally, as we have in the past, $16,000 can be knocked out in a year. Want to know what's really, really, really ugly? The handsome interest rate that we willingly signed up for, and the loan period that we agreed to. It's hard to even look at myself in the mirror knowing I put my signature on this thing. But one thing I won't do is pretend to be a money superhero here. I don't think that helps anyone. But what I will do is be open and transparent about where we're at. Because I know that in spite of the crazy money mistakes I've made, I can still be successful. Why? Because we're crazy rich, remember?

So here it is: I signed up for a $16,000 loan at 17% interest to be paid over 10 years.

If I were to take my time paying this loan off for the next ten years, I would end up spending almost $30,000. Seriously, how dumb could I be? I recently took a look at our statement online so that I could begin paying it down and I got to see how utterly ridiculous this loan is. For a $281 payment, $233.77 went to interest, and $47.63 went to principal. That means every month I have this debt I am throwing over $200

a month away. Since I started paying on this loan, I've already thrown $1,144 away. 

How in the world am I going to CRUSH this thing? To begin, I recently made my first crushing payment of $3,500. It's a bit of a cheat, because $2,500 of that came from LeAnn's student loan money (yeah...haven't mentioned that debt yet...but that's IT, I promise ;) ). We could discuss the ethics of this decision, but it's one that we're comfortable making right now, although I'd be interested in hearing your thoughts on it.

So that leaves our current balance at $12,430.70. My next move is to draw a $10,000 loan out of my TSP (Thrift Savings Plan) money. The TSP is basically the government's version of a 401k program. 

What's awesome about a TSP loan is that they charge a $50 fee to take out the loan, and then force you to repay the loan with a tiny interest rate (about 

1.3 %) to yourself. So the only interest I have to pay goes straight into my pocket. Obviously, this isn't an ideal situation because I'll be losing all of the possible gains from those investments for the year that I'm paying myself back. But the chance that I'll make more than 17% interest on it is pretty small. So I'll be able to cut my losses with this loan to a minimum. The final $2,480 left on the loan can be paid from our emergency fund, because yes, debt is an EMERGENCY!!

FYI: The $16,000 loan was used to purchase a time share. We could really cut our losses by dropping it altogether, but it's a decision we made as a family as an investment in family vacation time. There will definitely be a post dedicated just to the pros/cons of owning a time share in the future.

I Am Rich

Seriously, I am. According to CNN, it takes an average take-home pay of just $34,000 a year in order to put you in the top 1% of income earners around the world. So, yeah, I'm pretty freakin' rich. Chances are, you're pretty freakin' rich too. 

But when I say, "I am rich", it means a lot more to me than money. In fact, realizing how crazily wealthy we are brings up a lot of serious questions: "Why do I feel so poor/broke?", "Why is there never enough?", "Why am I in so much debt?", "Why do I worry so much about money?". 

Like a good American, I've grown to love STUFF. Fast cars, big screen TVs, and world travel have all been things I've put on my "to-do list" as soon as I had the funds available to do so. In my eyes, with that nice STUFF, I'd be able to reach the pinnacle of my happiness. And that's what it's all about, isn't it? People just want to be happy. 

It's true. Buying stuff makes you feel really good. But think about it: how long do the good feelings last? And does buying a piece of candy still make you as deliriously happy as it did as a kid? If you've had the joy of buying a 40" TV, will buying a brand new 32" TV make you feel good? 

I've earned anywhere from $5/hr to $35/hr since I was a teenager. I've generally been on a steady incline of making more money every year. And yet, I can't say that any of that has had any marker on my personal happiness. Has your overall happiness markedly improved with every raise you've ever gotten? 

This blog isn't actually about happiness. In fact, I can't tell you what is going to make you happy. But what I can tell you is that it's scientifically proven that making/spending more money does not increase your happiness (over the long term). I'm on a journey to test this data in my own life. In the past 1-2 years, I've fallen prey to the idea that more, bigger, and better was what I wanted for my life, and I am attempting to drag myself out of that pit.

What this blog IS about is personal finance. I've decided to embark on a journey towards financial freedom. Financial freedom means having the ability to do exactly what you want with your life. For some, that's early retirement. For others, it's being able to start their own business, or work at a job they truly enjoy, or having the freedom to give their boss the proverbial middle finger if they've had enough. There are a lot of blogs out there that are about this same thing, and they are probably a lot better than this one will ever be. Check out Mr. Money Mustache, Brave New Life, nomoreharvarddebt, and Early Retirement Extreme to name a few blogs from people who have successfully reached financial freedom or are easily on their way to it. What I hope sets this blog apart is that it's coming from a middle income family man with two kids, and that it starts the journey at the beginning instead of talking about the success at the end.

Like most Americans, I've bought the lie that what I really want is STUFF. But I plan on giving that LIE a big kick in the face. I instead choose to use my own brain to put my effort towards things that truly make people happy. If I look crazy, it's because "normal" is actually STUPID.

I have three goals for this blog. The first, and most important, is that it will encourage me to persevere in fighting the LIE. Second, I hope to better be able to explain to my wonderful wife, LeAnn things that I have trouble clearly communicating  to her. (Love you! = )) Third, I really hope that this blog makes you THINK, and that it gets you questioning how you can buy your own personal freedom instead of allowing yourself to be influenced by how we're told to spend our money.