My Personal Finance Journey part 3

My personal finance journey will never end (actually I guess it will eventually). I’ve come a long way over the past 28 years (read here and here for more on where I’ve been). I’ve got a long way to go yet. Today I’ll talk about where I’ve been over the past couple of years and where I see myself going.

Starting to get a handle on money (Age 26-28)

Two years ago I graduated from Arizona State University with a bunch of student loans and no idea what I wanted to do with my life. Today I still have quite a few student loans (but nowhere near as many as I had at graduation) and only have a few ideas on what I don’t want to do with my life. I’m making progress, but it’s felt like things are happening at a snails pace, which can certainly be frustrating.

After graduation I started working for USAA Federal Savings Bank in their mortgage department. I’d had several years experience in banking at that point (after working for a local credit union for about 4 years) and so I took the first job I could find. That said, I was ecstatic to have landed a job at USAA because I’d heard nothing but good things about them and because I really enjoyed doing business with them.

Unfortunately being on a phone all day will take its toll on you even with the worlds greatest members. After about a year I was fed up with the job and frustrated because I felt like all of the skills I learned while earning my degree in business were being wasted. I expressed my concerns to my manager and tried to find a different job better suited for me within the company. Unfortunately I was never able to land a different position.

I started applying for jobs elsewhere.

Very recently I accepted a position at a small tech/advertising startup, even though I had to take a $10,000 a year pay cut. I’m much happier with work now, but have had to make a few adjustments to the lifestyle my wife and I had become accustomed to.

Surprisingly, after looking at the numbers we figured out we could actually continue to save as much money as we’d been saving, if not a little bit more.

After coming to this realization I realized this little tidbit of information:

It’s easy to slowly improve the lifestyle you are accustomed to, without realizing you’re actually improving it.

This is similar to boiling a frog alive (I’ve never actually done this PETA, please keep your clothes on). You know the story, if you drop a frog in boiling hot water it will jump out. If you drop it in water that is room temperature and then turn the heat on the frog won’t realize what is happening and it will boil to death.

A raise at work, a bonus or just some side income can provide you with extra spending money and help to improve your lifestyle. Over time you’ll become more and more wasteful, collect more and more stuff you don’t need until one day something happens and you lose a chunk of income or worse, an entire income source.

It’s smart to automatically increase the amount of money you are saving every single time you increase your monthly or annual earnings. You worked hard for that raise, or that bonus and you should feel like you can finally treat yourself to something nice. That said you should always be thinking about and planning for the future. So take a portion of your increase and put it away, automatically.

This is what I’ve accomplished

I feel like I’m just starting to get a handle on my money situation. I’ve paid off some debt, saved an emergency fund and even started saving for retirement.

Here’s a list of what I’ve accomplished thus far:

  • Paid off my car (no car payments at all!)
  • Saved a 5% down payment and bought a house
  • Saved approx 6 months expenses in an emergency fund
  • Paid down about 35% of my student loan balances
  • Contributed every year to my 401k (when offered) and an IRA occasionally
  • Paid off all credit cards

This is what I hope to accomplish

These are my goals for the near future (the next 5 years):

  • Save enough money to buy a new car with cash, when I finally need a new one (or at least 75% down)
  • Max out my IRA contributions every year
  • Increase emergency fund savings to 9 months worth of expenses
  • Pay down my student loans by another 50-60%
  • Continue to keep credit cards at zero balance

That’s all folks. I’d love to hear your thoughts, your goals or even where you’ve been. Please share with your friends as well, thanks so much!

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