This blog is a way for me to share hard learned lessons about money with those who are just starting out on their own. I hope it's a way for you to avoid making the mistakes I made, and to benefit from my experiences

Friday, July 28, 2006

How I got into Personal Finance

I thought it might be interesting to tell the story of how I became interested in personal finance. Back in the 80's and most of the 90's, I neither had much money, nor was I interested in investing or saving it. As typical with many Americans, I had credit card debts equal to about a year's pay. These debts were used to buy stuff I no longer had, or vacations or eating out, etc. I was living better than I could afford.

In 1996 or so, I started wising up. I was working at a job and they had a Fidelity Investments guy come in and talk to us about retirement. I started saving some money in a 401(k), and started looking at the stock market. Also, because I was making more at this time, I started living within my means. My credit card balances were not really going down much, but they weren't going up either. I always juggled them around with low interest offers, so I never paid much in interest on what I did owe.

I proceeded along like this until late 2003. My mother had passed away back in 1999, and where her husband passed away, I was entitled to a sizeable inheritance. At this time, something clicked in me. I decided that I was not going to mess up this opportunity. This was my one and only big chance at getting a large amount of money at one time. I was going to use that money to get out of debt and get on the road to financial security. I started reading books, checking out financial sites, and listening to Clark Howard on the radio. I started making plans for that money.

First, I was going to pay off every debt I owed, which were basically credit cards and auto loans. Next, I was going to buy a home using much of the inheritance as a 20% down payment, because I've known for a long time that a home is probably the best asset anyone can ever own. Up til then I could never save enough or afford the mortgage payments. Then I was going to create an emergency fund that I could live off of for 6 full months. Then I was going to fully fund our IRAs. Lastly, I was going to invest the rest in a variety of mutual funds.

I'm proud to say that except for a few hundred dollars, that's exactly what I did. I continue to drive the used car I had before the inheritance, and so does my wife. I did not buy any fancy electronics or go on any fancy vacations. Well, I did buy a new $1,500 TV almost a year later. Does that count?

I also swore at that time I would never be in credit card debt again. I've kept that pledge, until now. I'm going to violate it because of the creative financing deal I'm embarking on, but I'm keeping that money strictly in a CD and seperate savings account, to be used only for paying back the credit card and earning interest.

I've had to use that emergency fund and depleted a little more than half of it, due to being laid off last year. I'm now working again, with full benefits, and have started rebuilding that fund. I've also joined my new company's 401(k) and started kicking in 15% of my base salary. I also get commisisons, which will be used for special projects, like starting my son's college fund, saving for a new car, and big ticket purchases like that 50" Plasma TV I've had my eye on.

I admit it, I was damn lucky in that my mother had been such a good saver in her life, and such a sharp businesswoman. I'm very lucky she and her husband decided to leave us kids this money. I'm also very lucky for all the help my older brother has given me over the last 5 or 6 years. I could have done it without his help, but only just barely, and only by not having any emergency fund, funding my retirement to the level I have, or having those other investments. I owe a great deal to both of them. I owe it to them both to use what they've given me wisely, and not blow it! Thanks Mom. Thanks Bro.

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