Financial Independence, Not Display

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What matters to you?  What you have? Or what you want others to think you have?

This was a conversation I had to have with myself.  You see, I am a goal oriented person.  I set a goal and achieve it. Upon achieving it, I want to reward myself.  One of my bad money habits was buying myself expensive presents with every milestone I reached, a designer bag, a nice watch (or two :/ ), shoes (my kryptonite).  While those things are nice to have, I now wonder what I could have done with the money I spent on those if I had it on me now.  I’m also questioning, did I buy these for whatever intrinsic value I saw in them?  Or did I buy these to show off to the world, let everyone know I have disposable income and I’m not afraid to use it?  While its not completely one or the other, I think it was more from reasons that stemmed from the latter than the former.  I wanted recognition and attention.  The root cause of purchasing a name brand item rather than its non-name brand equivalent that works just as well, in my case at least, was to show off.  Honesty is the best policy so I had to come to terms with the truth.  This need for validation is approval seeking behavior coming from a weak place. I will only be content once I start finding internal validation.  Only then, will I be able to extend the short bursts of discipline that have helped me achieve my goals thus far.  Only then will I be able to reach the financial goals I set for myself.

What matters to me is being self sufficient, not worrying about what will happen to me if I lose my job, or if I have a large unexpected expense.  What matters to me is peace of mind and the freedom to do what I please when I please. I’m not going to lie, I would not refuse social approval or accolades, but they can’t be factors that affect how I manage my money.  They must be byproducts of the good decisions I make based on what actually matters to me.

I like rewarding myself.  But from now on it will have to be small things, and mostly, things that don’t necessary have monetary value.  Nowadays I often reward myself with an extra episode of my favorite show, 30 minutes more of sleep or more time hanging out with my friends after finishing work.  I will be working towards achieving this goal I set for myself.  Nothing makes money like good habits.

Digging Myself Out

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This time I mean it!

I’m on debt payoff round 2 and here’s what I’ve planned and accomplished.

  1.  I created a list of my credit card debt that contained the amount I owe, the interest rate and the target date for when I want it gone.
  2. I called the credit card companies and got them to agree to give me a few months interest free.  The furniture store agreed to not charge me interest for 6 months, Bestbuy and my credit card company gave me 12 months each.  I then prioritized my payments based on the interest rate and the total balance.  The furniture, will be paid off first, the TV and appliances will be paid off second, and the credit card will be paid off last.  Even though I had a lower balance on the credit card from the Best buy, I opted to pay the furniture off first because it had a shorter interest free period.
  3. I divided my total balance from the furniture store by 6 and started paying that amount monthly.  I put all other cards on autopay until I was done.  I stopped going out and started hosting nights in with my friends.  Each person brings beer/wine and chips in for dinner.  We either cook or order pizza.  Doing this allowed me to pay double what I had originally planned to pay so that card got paid off in 3 months.  One down, two to go.
  4. I shifted the amount I was paying towards the previous credit card to the card I used at Bestbuy. I kept the other credit card on autopay.   That card now has less than $250 remaining on it before its paid off.  I continue to host the nights in parties.  I also haven’t gone shopping in 5 months.  I eat out maybe twice a month.
  5. The last card is the biggest and the baddest :(.  I have been paying the minimum amount on this one for about 5 months but plan on increasing the amount I put towards it once I’m done with the credit card from Bestbuy, which is soon.  This one is going to be the most painful one because its literally twice as much as the other two balances combined.  I’ll have to continue hosting my nights in so I don’t go out, no shopping or vacation for the foreseeable future and any bonuses/raises I stand to gain will be going towards it.  If I follow my plan,  the big bad card will have a balance of zero by early next year two months shy of the end of my interest free year.

Once I have accomplished these goals, the plan is to maintain this lifestyle, beef up my emergency fund, and save a 20% down payment for a rental property.  I’ll be on the lookout for money saving/earning tips and pointers.  I’d like to not go back to working on the weekends so I’ll also be reading up on how to invest in stocks and trying out a few investment apps. Please feel free to share any tips that have worked for you.

Is there a faster way to get out of debt?  Should I be prioritizing these cards differently? why?  Do you have any suggested reading related to investing, debt payoff or personal finance you think will help me?

Proud Homeowner, Undisciplined Spender

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This was something that seemed so unattainable a couple years before.  But it happened.  I found a two bedroom two bath condo.  The place is large, with skylights, high ceilings, fireplace and an open concept living area.  All my HGTV dreams came true.  What was even more awesome was the fact that the appraiser knocked the price of the place down $20k and the inspector recommended that the HVAC be changed prior to sale saving me an additional $7K.  I was the happiest person ever.  I think this is the best decision that I ever made. It’s a beautiful home that I’m proud to call mine for a price I can afford. The total of the  mortgage and condo fee combined is less than the average cost of rent for a decent place in the DC area. It has also been a major source of income.  I host international students that come to the States from all over the world to learn English through a language program.  I get to make friends I can go visit in other countries.  The stipend I receive from this program pays almost all of my mortgage.  I’m only left with a balance of $51 to cover.  Again, best decision ever!!

I think I might only be able to maintain my discipline during the struggle.  I have yet to learn how to maintain it when all is good and well.  I was in the best position I have ever been in.  And then I went crazy.  I maxed out my credit card buying household items, a sectional, flat screen TV, expensive kitchenware, a bedroom set etc etc.  I also hosted two housewarming parties back to back for 20+ people each time. Top shelf everything.  And to make it worse,  as if all this was not bad enough, I also booked a vacation! It was a great deal I found on Groupon and I thought I needed some R&R after everything I went through. You see what I mean about extra income and the feeling of wanting to spend it all?  I felt like I relapsed into some sort of addiction.  This was a lesson I didn’t learn the first time around and now it’s being repeated.  I now have to dig myself out of this credit card debt I piled up and cannot move up my little pyramid of financial well being until I do so. All my fault.  I have been making some progress on my credit card debt.  I created an accelerated payment plan that will allow me to get back on track. If I can stick with it, I’ll be able to reel it in by early next year.  But the point is that having gone what I had gone through, I should have understood the value of discipline and stayed the damn course.  The opportunity cost of wasting this amount of money alone is immense.  I could be saving money to buy a rental property with what I’m about to spend on this. >(  I really need something to keep me on the course.  

Lessons learned:  Again, practice self control.  Don’t celebrate excessively, rewarding yourself with things you can’t afford is like punishing yourself.  Don’t try to make your home look like a model home for an HGTV show.  The happiness you get from buying stuff does not last.   
Do you have any pointers?  What helped you stay disciplined when you had disposable income and free time?  How do you stay the course?

Then What? A House?

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The day I drove my car off the lot, I promised myself I’ll buy a house the following year.  I started thinking of ways I can save money in time.  At the time I was living in a less than desirable situation, a room share with two other people who did not like each other (ugh the stupid petty drama).  But the place had pluses too. For starters, it was easily accessible by bus/metro.  Most of all, it was $300 flat, like everything included.  I figured I can endure this situation for a little bit longer.   I also made a conscious decision to stop spending so much on food.  Eating out is absurdly expensive.  I was going to cook at least all my meals on weekdays.  I also shopped less and took the bus/metro to work to avoid paying $200 plus a month for parking.  Once I was done downsizing, I was left with two bills and a significant amount of unallocated funds.  Then, the best news!! I got called up by a recruiter for a position one level up from my current one at a different company.  I was starting to get fed up of all the things that were going on at my job (more on this later) so I agreed to undergo the interview process. I got the job and the pay raise that comes with it.  I also got the annual leave I did not take in the form of a check :). In November 2014 I started my new job and decided to start saving seriously.  I technically had to start from zero at this point because by this time I had also accrued some credit card debt (kinda went crazy around christmas) and paid it off with what I had saved so far.  I am a woman with many flaws and a shopping habit that needs to be fixed for good.  I would not eat good food but I can’t pass up a good shoe sale smh.

So I went back to my old saving habits.  The condo fund was established.  My main contribution occurred in January, February and March, I also put my tax return towards that.  In February I started searching for lenders and got in touch with loan officers.  I also researched some first time homebuyer programs but found out that while I do qualify for them,  I would miss out on properties because the closing process for those programs takes twice as long as a regular process (30 vs. 60 days).  No seller is willing to wait that long in this market.  I also looked at some local programs that had down payment assistance.  But the neighborhoods that they were allocated for were either too expensive or too inconvenient for me.  Finally I decided to just get a conventional loan and see what first time homebuyer perks they were willing to offer me.  At this point my credit score was in the upper 700s so I was pretty confident that they’ll accommodate me.  And I was right.  

The Home Buying Process

A few things I learned searching for and buying a home.

  • Buying a home is not an impossible task.  If you put your mind to it, you can do it.  The only thing you have to be sure about is whether you want to be a homeowner or not.
  • It doesn’t matter if its the sale of a lifetime, if you really want to buy a home, do not make a big purchase for the three months before you put an offer. Just don’t.
  • The process might be an exercise in patience.
  • Search within your means.  There’s nothing more heartbreaking than finding out you can’t afford the home you’ve been lusting after.
  • Make sure that the total monthly payments, Mortgage + HOA or Condo fee is no more than 30% of your income
  • Shop around for the best deal. Talk to at least 5 lenders.  They don’t all have to pull your credit score so your score won’t go down.  If you pulled your credit score recently (Like within a month), you should give them that so they can base their offer on it.
  • Take home ownership seminars.  Some of them may qualify you for your state’s down payment assistance
  • Search for state programs that might allow you to apply for closing cost or down payment assistance based on your income.  Make sure you check out the income ranges/requirements before you rule this option out.  Sometimes, you might still be within the income range for certain programs depending on your marital status, location etc.
  • Don’t be afraid to ask the seller for stuff, like replacing the HVAC unit, the worst he/she will say is no.

What’s next? A Car!

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Paying that loan off was the best feeling ever. I think I logged into my account a hundred times that day just to savor the feeling of not owing this company a dime.  But what was more important was the lesson I learned in the process.  I did less impulse shopping and learned to make long term plans for my money.  I also improved my credit score significantly.  One more month of that lifestyle also enabled me to put 20% down on a certified pre owned car and get a great interest rate on the financing.  I spent about a month shopping for my first car and made a decision by consulting one of my friends who happens to be a mechanic.  I settled on a Scion TC, a two door hatchback coupe and made the purchase.  No more freezing in the cold waiting for the bus to come. 
My car was the biggest purchase I had ever made. So I decided to do a little research before going through with it.  At first I was like “I was responsible for such a long time! I deserve a reward! A fancy car!”  And with that mentality I jumped into the search looking at BMWs, Infinitis, Lexuses etc.  What I found out was that the monthly payment on those plus insurance and upkeep would leave me broke as hell.  I was doing well. But not that well.  Anyway I scratched that and started looking for more affordable options that were still nice to look at and nice to drive around.  The best advice I got from my mechanic friend was to buy certified pre-owned.  Certified pre-owned means a well maintained used car that is less than 3 years old and has low mileage.  Another advice I got was to finance my car with a credit union.  Credit Unions are more likely to give you a lower interest rate and not try to trick you into crazy deals that will end up costing you more than you can handle, which is what some dealerships will try to do.  The dealer I bought my car from tried to get me to finance with him for 5 percent! Ha! I got offered half that at my credit union.  Anyway, her name is Soraya the Scion.  She is my baby.

A Few Speed Bumps on My Journey

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I believe I’m blessed.  Whatever hardship I went through was not more than I can handle and the resulting consequences weren’t without their lessons.  I wasn’t tested just for the sake of being tested.  I was given an opportunity to learn, early on in my life and my career, before I had too much to lose.  I have learned to frame my outlook in life with this attitude and I think that has helped me deal with what I’m going to talk about next.  

Simultaneously with my financial struggles, I was also going through some health issues that I couldn’t take care of immediately.  A large part of this is due to the fact that I was unemployed, had no health insurance and didn’t feel like spending money on my health was a priority (not the best decision in retrospect). But another side of it was also the fact that I did not want to tack on another problem to deal with before I figured my way out of this one.

The problem was this.  I was stressed and it was showing on my body.  My hair was falling out and I gained a ridiculous amount of weight almost overnight.  I didn’t gain weight like a normal person where fat is stored in the midsection and is difficult to get rid of and all that.  I just literally swelled up everywhere. My face, my feet, my hands.  I would touch a part of my body too hard and have a dimple there that would take minutes to fill up. This went on for two months before I finally secured a job with benefits and went to see a doctor.  At first they told me I had hypothyroidism. Its when your thyroid gland doesn’t produce enough hormones to balance your metabolism and causes you to swell up like a balloon. They put me on medication for that.  That reduced my swelling almost immediately and got my weight under control.  But further testing revealed that my problem was a lot more complicated.  Apparently, my kidney was letting too much protein seep out and that was indicative of more serious problems. I had biopsies and got tested for everything under the sun, stds and cancers included.  And what was finally discovered was a few things.  1. I had Lupus SLE (more about this later) 2. I had crazy anemia that may or may not have been linked to the Lupus (still trying to figure that out).  

Like I said however, I think this is an opportunity to learn.  Lesson one is to always take care of yourself.  Even when you’re pushing yourself to the limit to accomplish big goals, its a good idea to be honest and in tune with yourself.  Lesson two is just reinforcing my current state of mind.  Never be at the mercy of an entity for your needs.  If I had been the type to worry about my personal and financial health from the get go, I would have had an emergency fund to cover such expenses and not have assumed that my employer’s insurance will take care of me.  Lessons learned.

Victory

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After I got the job in January, I spent the first few months catching up on past due bills and paying back people that lent me money after my savings ran out.  I then paid off $3500 in credit card debt.  But all the heavy lifting did not come until that fall when I finally decided to take on my private student loans.  I’m not gonna lie.  Most of of the days in this process were pretty depressing.  I wasn’t happy at my real job and the side hustle was making me feel like a slave.  On top of that,  I had decided that I will make no major purchases before paying Sallie Mae off so I did not buy a car.  Fall was cold.  But the winter was brutal.  Waiting a half hour for the bus in the freezing cold while being smacked around by the wind was not fun. Not one bit. There were also some nights when I was at the bus stop alone at night, that I’d feel like I’ll get beaten and robbed, or worse.  But going through this was what made the victory even mo
picstitchre sweet!  

Each month I’d approve a payment for about $2200 and it would chip away at my grand total.  What I found out in the process was that the minimum payment I used to make on the loan wasn’t even covering the entire interest that was accrued within the month let alone getting to the principal.  So in essence, I was paying interest on interest and my principal balance wasn’t going to get lower.

When I got my loan below $6k, they made my monthly payment $0, because they want me to stop so the interest can catch up. No sir.
I still remember that day.  Waking up and logging into Sallie Mae’s website and seeing -$1.18 as the remaining balance on my private student loan.  I did it!  And just to be petty I paid a dollar more than I should have (hence the negative number and not a $0) and thought about charging them compounded interest daily lol.  Sallie Mae had to write me a check for that amount heheh. Seven months of living like a social recluse and working every single day resulted in the payoff of my private student loans! Praise Gawd!! I didn’t start taking screenshots until I paid off about $4K but I’ve put up a before and after in here.