Picture this: the year is nineteen ninety-eight. A twenty-one year old engineering student has just landed his first serious job: a twelve-month internship at a local software company. He knows the basics of life: be good to others, take care of your health, don't spend more money than you make.
Fast forward one year. The student now has a girlfriend with expensive tastes. He has an addiction to collecting the Star Wars Collectible Card Game. His bank noticed his sudden increase in salary and gave him a credit card with a $4500 limit, no annual fee, and 1% cash back on purchases made on the card.
Our heroic young student starts living large. He starts getting poor slowly.
The next year isn't very interesting. He finishes his degree, gets a job with a pretty good starting wage, and settles in. Our hero isn't a total fool. He uses Quicken. He downloads and enters his transactions diligently, pays his credit card bills on time, and pays attention to the numbers.
In June of 2000, he buys his first car. He has only had his job since April, and doesn't have enough money to make the down payment on his own. He borrows $1500 (interest free!) from a generous friend to make the down payment for the car. It isn't anything fancy; a used 1995 Nissan. But he doesn't haggle; he doesn't know how. He pays the price set out initially by the dealer.
The debts are piling up.
Then, one day, something snaps. Our hero realizes that his credit card, which has a 19.5% interest rate, carries a balance around $3000 most months. He pays little for rent, but any extra money seems to disappear pretty quickly. Unexpectedly, the expensive girlfriend ends their relationship. Our hero decides to make some changes.
When it comes time to start payments on his student loans, our hero doubles the standard payment amount. In March of 2001, he pays off his outstanding balance on his credit card. He sets his eyes on a new prize: the 9.9% interest rate on his car payments.
April 2001 changes everything. Our hero is laid off from his job. He is young and confident, though, and while he doesn't try to pay off his car immediately, he does continue paying the doubled student loan payments. He has unemployment insurance, after all. What could go wrong?
In December of 2001, still jobless, our hero starts to worry. He applies for assistance with the student loans, stopping all payments and interest accrual for six months.
It is now January, 2002. Our hero has only a few weeks left before the unemployment insurance payments run out. Still no job, despite several promising interviews. Desperate, our hero applies for a job driving shuttle buses part time. If he gets the job, it will pay significantly less than the unemployment insurance. Since that is running out anyway, our hero is willing to do almost anything.
On February 8th, the unthinkable happens. A job! A GOOD job! An engineering job! The pay is only about 4% less than what our hero was making before getting laid off. Things are finally looking up.
Debts get paid down. In August, our hero gets a bonus and pays off the car loan. In April of 2003, our hero buys a house. In 2004, he starts dabbling in the stock market, making accelerated mortgage payments, and building up a buffer of emergency funds. In 2005, he buys a new home with his parents and starts renting out his old home.
There is more to our hero's story, but this is where it ends for today.
I know you are wondering, dear readers: who is our hero? Who is this dashing, brave, handsome engineer?
He... is me! I'm sure you never would have guessed, but I swear to you that it is the truth. And now you know how I stopped getting poor slowly.