This guest post from Mike C. is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. This is a follow-up to Mike's November reader story about his debt-free marriage.
If you've consumed enough personal finance books and blogs, you've repeatedly read that being debt-free opens you up to a world of new possibilities and opportunities. That not carrying the burden of unnecessary debt allows you to make choices and take risks that just wouldn't be possible otherwise. Also, that having money in the bank to cover unexpected costs or gaps in income gives you the breathing room necessary to try new things.
Whenever you read stories like that on PF blogs, it can feel like touchy-feely academic hogwash. The entire concept of “opportunity” is so esoteric and vague that it's hard to work it into a financial philosophy that is otherwise so well defined and measurable.
Late last year, I shared my story here on GRS about my climb out of debt, getting married, and building a solid financial foundation for my family with the goal of reaching a full year of expenses in savings. I mentioned briefly how paying off the debt and building just the six months of savings opened up many new opportunities, but I didn't really specify what those opportunities were.
At the time, I thought they would be chances for Elisa and me to travel and experience new places and meet new people around the world. That we'd be able to buy a home in a few years without it draining out bank account. I thought it meant maybe going back to school for a masters degree. Funny enough, it meant none of those things.
Before I get into all of that, an update on our story…
Where we are now
In November, I left off being debt-fee and having six months in our emergency fund with the goal of reaching the one-year mark by the end of 2011.
Moving ahead just four months and here's where we are now:
- One-year emergency fund! Through some more very aggressive saving and a few good moments at work, we managed to reach the one-year mark in our savings account early. Now, this total is one year of minimum expenses where we eat a lot of ramen (also assuming no unemployment). The fact that my wife and I can financially survive for one year with no income provides great peace of mind.
- Still no credit card debt! We use my credit card for most regular purchases to get frequent flyer miles, but we pay the balance off in full every month.
- One car payment that will be done with by the end of 2011! Elisa's previous car was a lease and that expired in 2010. Due to our life and needs, the car had to be replaced and we picked up a new car. Through good timing, and a significant employee discount (her father works for Ford), we got a great deal and paid enough up-front that we'll have the remaining small-car loan paid off by the end of the year.
As you can see, we've made significant financial progress in a very short period of time. We're sitting on a solid cushion of cash and are still living way below our means to continue to build assets and eliminate the one bit of debt we do have now (the car). Not an exciting story really since there's no struggle against overwhelming odds anymore. We've moved on from Frodo throwing The One Ring into Mt. Doom and are now in the “Samwise lives the rest of his long life in the idyllic Shire” phase of Personal Finance.
But enough about the boring maintenance (or Samwise) stuff, lets talk about opportunity! This is one of those topics that when you finally “get it”, is quite exciting.
Financial preparation leads to new opportunities
Back in March, the company I work for sold the portion of the business I'm involved in to another company. Through years of hard work and ever-increasing responsibility, I became one of the key employees involved. So much so that I was made a very generous offer to move with the business to the new company. The catch? My wife and I would have to move from Michigan to Texas by mid-June. Not exactly a ton of time to uproot your entire life and move half way across the country.
By all accounts, moving is expensive. Moving half-way across the country is very expensive. And establishing yourself in a new city is intimidating, costly, and time-consuming. If we were talking about 2008 Mike, I would have still been sitting on $14,000 in debt, no savings, no plan. Quitting a secure job at that point and moving all the way to Texas just wouldn't have been possible. Sure I would have been able to pay off my credit card debt, but I wouldn't have any cash in the bank, and I wouldn't have a support network of friends and family in this entirely new place.
Being financially in the hole created fear. Not “Oh god, the monster's going to eat me if I turn out the lights!” fear, but the creeping, back of your mind feeling that things are not right and you just don't want to rock the boat much or else it'll tip and then you're really screwed. That fear blocked me from taking chances and recognizing opportunities.
Taking this new job is a fantastic opportunity. It advances my career, and it brings us to an area that has jobs in the field my wife is interested in switching to. It puts us both on a path to achieving our shared and individual goals and offers exciting new challenges that wouldn't have existed in Michigan.
This is an opportunity that I wouldn't have been in a position to take advantage of just a few years ago. Making better financial choices, moving away from impulse purchasing and into conscious spending and focusing on long-term goals instead of short-term wants freed me to do something new and challenging (and a bit scary!). And on top of all of that advanced my wife and I along our financial roadmap by more than five years in just a few months! I know I can do this because even if the world turns upside down on me, even if everything goes horribly awry, I can support my family. We will not go hungry or be without a roof over our heads. I can take a leap because I know, far below me, there is a net that will keep my wife and I safe no matter what.
When faced with a choice, an opportunity to do something new, how often do you say “I'd love to but…”? How often do moments come up in your life where you think to yourself “It'd be so amazing if I did this, but I just can't afford to. I don't have the money/have too much debt/can't take the risk”?
Remember when you were in school and the world was laid out before you and you thought you could do anything you set your mind to? How you saw opportunity around every corner and you just had to reach out and pick something, put your mind to it and make it happen? That is honestly what reaching financial freedom brought me back to. I no longer feel trapped. No longer hemmed in. The opportunities that were always there are suddenly apparent to me again because I'm not too afraid to look for them.
So keep this in mind if you're working towards financial stability and aren't sure what there is to look forward to after getting our debt to zero and your emergency fund to three months or six months or twelve months: The world presents you with amazing and interesting opportunities every day. Having freedom from debt takes away obstacles and relieves you of a burden of fear you may not even realize you have. Life after debt may be full of boring “Samwise” financial stuff, but the opportunities that open up before you will present you with all kinds of new adventures.
As a postscript of sorts to this story, I've mentioned to JD in emails how much value I've found in GRS specifically after reaching my debt-free point. It seems like the world of personal finance is structured around either digging out from under crippling debt, or in how to invest massive sums of money. To me, Get Rich Slowly fills that very essential middle-ground quite often: Life after debt, but before you're rich and can retire to an island paradise. It emphasizes that personal finance is an ongoing journey and that successes aren't dollar figures, but personal moments like finally taking that trip to New Zealand, starting your own business, or owning your home free-and-clear. It takes the “Samwise” stuff and makes it interesting and compelling. For which I feel we should all be very thankful.
J.D.'s note: I usually yank the sappy “thank-you” stuff before posting reader stories, but I liked Mike's sentiments here. So instead, let me say “thank you”. I'm grateful that Mike (and others) find value in the site. But really, it's you folks who make it awesome.