Getting Back on Track After a Financial Train Wreck
This is a guest post from The Stoic Investor who blogs at the site of the same name where you can find him giving advice ranging from stock selections to working abroad. Stop by and say “Hi”.
Let me start by saying thank you to Steve for giving me the opportunity to do my first guest post. I thought www.moneyinfant.com would be a great place to share my story as I could really relate to Steve’s story. You see even though I’ve turned things around in my financial life over the past year and half, it took a failed marriage and bankruptcy to finally open my eyes to how ignorant I had been in my financial choices over the past eighteen years. The following is a deeply personal story of how I got my act together and charted a radically new course to financial peace.
Three years ago in 2009 my wife and I filed for divorce. What preceded this was several months of stress and arguments originating from (can you guess?) money problems. We both were responsible for the lifestyle inflation that occurred after we married, but I have to assume a larger degree of the responsibility because I entered our marriage with a significant amount of my own debt. I had every kind of debt you can imagine: car loan, mortgage, student loans, back taxes, and personal loans. I had managed these debts for most of my life and somehow managed to balance the debt payments with current needs. However, with the increase in loans from a new truck and camper along with that of increased housing expenses from a larger house, our collective expenses were consuming all of our income and then some. We were in a situation in which our expenses were surpassing our earnings and we were both feeling the stress of this unsustainable situation.
My ex-wife had tried to persuade me to file for bankruptcy for about six months leading up to our separation. I fought against it because like most people I really didn’t want to default on my debt. I felt that it was I who had been irresponsible with my credit and I should take responsibility for repaying it regardless of how difficult it might be. When my ex-wife and I first separated I realized things were serious and I agreed to file for bankruptcy. It was a Chapter 13 filing which means most of the debt was simply restructured and a plan to repay it was accepted by the court. My ex-wife and I got back together to see if we could make things work with the relief afforded us by the bankruptcy. However, changing a family’s finances is like steering a large ship. You can make big changes that will ultimately change the course, but these changes take time, just as a ship doesn’t turn on a dime. Sadly, we didn’t make it through the adjustment phase and a few months later we divorced.
I was now broke, bankrupt, and divorced. I can say without hesitation that this was the lowest point in my life, but the greater sadness is that I still had not learned my lesson. Enter life after the fall.
I knew I needed to make some changes, but I didn’t realize the changes needed to be within me. I decided that working overseas would be a good idea and my first foray into international travel landed me in Afghanistan working as a government contractor. I spent a year dealing with the almost daily occurrence of RPG and mortar attacks and living in a tent with eighty other guys. On the financial side of things it was great. I had doubled my salary and had zero living expenses, food and shelter were provided, and the only bills I had were the bankruptcy payment and student loans. I could have left that year debt free and with money in the bank. The reality was I left with zero savings and had reduced my debt by only a few thousand dollars. Pathetic right? It’s ok to agree. I look back at that guy and don’t even recognize him.
When that assignment ended I realized I wasn’t ready to return home. How could I? I came overseas with the plan to eliminate my debt and returning with some savings to start my new life; I had done neither. I lined up my next assignment and ended up in the Middle East and again making good money. When I first arrived I had plans of getting a new car, new furniture, big screen TV with surround sound, etc. Same old stuff I had wasted my money on in the past. For some reason, of which I’m still not completely aware, I decided I needed to save some money. Then I stumbled upon a few minimalism blogs and decided I really didn’t need much stuff. As the months went by and I continued to curb my consumption my savings started to grow. I read Your Money or Your Life and became hooked on the idea of paying off my debts and having some savings to show for my efforts at work. I then read Thoreau’s Walden and that reenforced the frugal and minimalist tendencies that were growing stronger. Then the discovery of personal finance/investing blogs. It was here that the concept of financial independence permeated my mind and how it could be achieved by consistently saving and investing. I was sold.
My transformation has been nothing short of miraculous. I don’t say this to boast, but you really have no idea of how different my financial habits are these days compared to just eighteen months ago. In that time I paid off the bankruptcy a full two years early, paid off 32,000 in student loans, and built a net worth that was (-)13,400 in February of 2011 to one that is now just over 91,000. I routinely save greater than 70% of my gross income and I’m well on my way to financial independence. This has been accomplished by a complete philosophical shift in how I orient myself to the world. I’ve learned that financial responsibility is not just a means to an end, it is a lifestyle choice that gives one greater freedom in this life.
There comes a time when we all wake-up to the folly of our ways. It took ruining my marriage and the destruction of my credit to finally get me to realize that the way I was managing my financial affairs was unsustainable and would likely cause me more grief in the future if I did not change my ways.
Even though the lessons came at a great cost, I’m thankful for having a second chance to set my financial house in order and prepare myself for a better future.