Going from Ordinary to Extraordinary

2015-carnival

“I love it when a plan comes together” – Hannibal Smith from the A-Team

April is Financial Literacy Awareness Month, and Shannon from The Heavy Purse has invited many wonderful personal finance bloggers to write about “Getting Financial Real”. I am so excited that she asked me as well as many other wonderful bloggers to participate this Financial Literacy Awareness Carnival. Please check out Shannon’s post and the other posts by personal finance bloggers by clicking here.

I’m often amazed and inspired when I read about people who completely turned their lives around. They go from being deep in debt, struggling to stay afloat, to digging out of that mountain to become financially free. I’ve never carried a balance on my credit card (actually I did once, but only during the promotional 0% period), and have always been a frugal person who saves his money and lives within my means. The only debt I had was about $16,000 in student loans, but that’s okay, student loan is “good debt,” right?

The Ordinary
After graduating from college, I contributed to my employer’s deferred compensation plan up to the match which was 5%. I even opened an IRA account and contributed a small amount each month. I “invested” in the stock market, if you considering buying “hot stocks” I read about online to be investing. I lived within my means, but was still susceptible to lifestyle inflation. I was doing everything right according to the mainstream financial media. When I went back to graduate school part time, I added another $74,000 of student loan debt which totaled $90,000 in student loans. No worries, everyone says that it’s GOOD DEBT. However, I will say that the degree did increase my income potential and it ultimately was a good choice, but the student loan was a big financial burden. I extended my graduate school loan payments from a 10 year payoff plan to a 25 year payoff plan. I would be debt free when I turn 52! But once again, I didn’t worry since student loan is good debt and everyone I knew extended their payments. I patted myself on the back for all the great financial decisions that I made. I am glad that I was at least on the right financial path, but if you were to ask me whether I was “financially real,” I’d have to say “no.”

Shannon lists the Four pillars of Financially Real as follows:
1) Understanding your financial reality
2) Develop authentic goals that make your heart happy
3) Create a roadmap to guide and protect your idea life
4) Adopt an abundance mindset.

With #1, while I was doing a decent job saving money and not spending it frivolously, I really didn’t know where my money was going. I realized this when I was complaining to a friend about wanting to save more and getting ahead, but having a hard time because of student loans and the amount of money I spent on gas for my long commute. He asked me if I had a budget, I said, no. I didn’t think I needed one since I was living within my means. He asked me to do a quick mental budget calculation of my expenses, and when I did so, it dawned on me that I probably had the ability to save more than I thought.

As to #2, I only had vague goals of retiring at some point in time, traveling and buying a house. These goals seem far away and abstract. I wasn’t sure when it would happen, why I wanted those goals, just that those seemed like goals everyone has.

On to #3, I was always interested in saving and investing so I thought I had a plan, but it wasn’t a true blueprint or roadmap. It was just saving and investing for the sake of saving and investing. Not a bad thing, but not a roadmap.

Finally #4, I would say that I had a scarcity mindset rather than an abundance mindset. My main motivation for saving and being frugal was that I wanted to have more money and didn’t want to lose it. Also, while I was frugal, I was ashamed of it and thought that when I “made it,” I’d finally have the nice material things that everyone craves.

Journey to the Extraordinary
After I came to the realization that I lacked a roadmap and direction, I read and learned a lot from personal finance blogs. While we still do not have a monthly budget, my wife and I do track our expenses and determine how much we should be saving each month. Paula Pant from Afford Anything calls this type of budgeting the “easiest budget ever.” (We use Personal Capital to track our expenses and net worth which makes it a lot easier). We also paid off our high-interest student loan debt. Last fall, my wife and I bought a co-op, and I’d like to purchase a house in perhaps 6 to 7 years when we will likely outgrow our current space. I would also like to be financially independent in 10 years where I can continue working if I want, or leave and pursue other interests if I prefer that instead. Basically, I’d like to have the option of not having to go to work, and having my investments cover our expenses. My wife and I have ramped up our contributions into our 457 plans and Roth IRAs. We will hopefully be maxing it out at some point. We are also saving money in a 529 plan for our son. Recently, I’ve been looking into investing in rental properties. Finally, I’ve come to a realize that I am truly blessed with many wonderful things in life. I no longer think that being frugal is depriving myself because while money is important, it doesn’t buy you happiness.

Please share what motivated you to get real with your financial situation, the results and lessons you learned as you reclaimed your financial power.

30 thoughts on “Going from Ordinary to Extraordinary

    1. livingrichcheaply@gmail.com Post author

      Man I would never want to hear that from my parents! Glad you got financially real after that!

  1. Shannon @ Financially Blonde

    I call the type of budgeting you do “goals based budgeting” and it’s what I have all of my clients on. The great thing is that we set the budget around a savings goal so it’s a sneaky way to get them to budget all while building their assets. When you have something you are working towards, like a savings goal or debt repayment goal, it makes the other choices easy and the expenses almost adjust themselves automatically.
    Shannon @ Financially Blonde recently posted…Music Mondays – Suddenly I SeeMy Profile

    1. livingrichcheaply@gmail.com Post author

      Thanks Shannon…I like that term: “goals based budgeting.” I think it’s much more realistic and practical for most people.

  2. DC @ Young Adult Money

    Student loan debt is definitely a burden. It has greatly increased my earnings power (you could argue by a multiplier of 3x, even at the “early” stage of my career), but man are those payments annoying! I envy the fact that you are done with grad school, as I’m just starting in the Fall and my wife still has about 2-3 years left for her masters as well. I am so on board with this quote: “Basically, I’d like to have the option of not having to go to work, and having my investments cover our expenses.” I can’t wait to get to that point, though I also want to enjoy the journey of getting there.
    DC @ Young Adult Money recently posted…Now is the time to get “Real” about your FinancesMy Profile

    1. livingrichcheaply@gmail.com Post author

      Yep, while it’s great to have those goals, I often have to remind myself to enjoy the ride too. Working and going to school at the same time is tough…kudos to you guys.

      1. DC @ Young Adult Money

        It’s not easy, but taking less than a full-time load helps! I will stretch my MBA out over 4 1/2 years if all goes as planned. That will allow me to get six years worth of reimbursements from work while not actually taking classes in six separate years. But I may get impatient and speed up that time frame.
        DC @ Young Adult Money recently posted…Is Roku the Key to Cutting Cable Forever?My Profile

    1. livingrichcheaply@gmail.com Post author

      That’s what I experienced as well. Even though I was frugal, I still had some leaks because I wasn’t paying attention to where my money was going.

  3. Shannon @ The Heavy Purse

    I’m so glad you and your wife got Financially Real. It truly makes a difference and having direction makes it so much easier to stay motivated and focus. I will tell you that it surprises me how many people only have generalized goals. Sometimes it is because they don’t think they can change goals, so they don’t set any. Goals are fluid but it is important to know what you’re working towards. Not only to help you know how much money you need but also to help you stay the course and follow that roadmap. I also think people underestimate the affect of a scarcity mindset. It truly seeps into everything we do and how we see life. I’m glad you’ve adjusted to one of abundance and building the life you want for your family. Thank you again for your participation and support. I truly appreciate it!
    Shannon @ The Heavy Purse recently posted…2015 Financial Literacy Awareness Carnival: We Are Financially RealMy Profile

    1. livingrichcheaply@gmail.com Post author

      Thanks again for inviting me to participate this year. Good point about goals being fluid…while we think things will stay the same, often times life happens and you have different goals. I’m still working on having an abundance mindset! =)

    1. livingrichcheaply@gmail.com Post author

      Haha, I loved that show! I’ve always said that your mindset is probably the most significant change you can make when it comes to finances.

        1. livingrichcheaply@gmail.com Post author

          Absolutely, time is much more valuable nowadays with a little one.

  4. Abigail @ipickuppennies

    We just really didn’t have a choice. I was on disability when I met my husband. He had defaulted student loans and a terrible money mindset. Together we got on a path to pay it all off and change his habits. But there were a lot of medical expenses along the way thanks to our various conditions, and after two years, he ended up on unemployment.

    It was a long, slow road to repayment. And now we’re about to hit another huge medical expense ($25,000).

    So my goal is to be able to fully fund a SEP IRA in 2016. I know it sounds small, but we’ve lost a ton of time saving for retirement thanks to our various income/debt problems (and then the purchase of a house that is constantly surprising us with something). If we can save $13,000 in retirement and maybe $5,000-10,000 in our main savings, I’ll be very happy. And then will increase the goal for 2017.
    Abigail @ipickuppennies recently posted…Hiding awayMy Profile

    1. livingrichcheaply@gmail.com Post author

      That’s tough when you’re dealing with a disability, medical expenses, etc. Sorry to hear about the medical expense. I don’t think fully funding your SEP is “small”…I think in your situation you’re trying to make lemonade with lemons so good luck to you.

    1. livingrichcheaply@gmail.com Post author

      So true…I experienced that as well when my son was born.

  5. Pingback: 2015 Financial Literacy Awareness Carnival: We Are Financially Real – The Heavy Purse

  6. Fervent Finance

    I came to my senses when I discovered this great online community. I realized just because mainstream was mainstream, didn’t mean those ideas and information was smart. I realized I didn’t have to be a doctor or a lawyer with a deep six figure salary to become financial independence. It just takes time, planning, spending less, realizing what you really value, and trying to increase your income along the way to speed up the process.
    Fervent Finance recently posted…Financial Independence Day – September 2026My Profile

    1. livingrichcheaply@gmail.com Post author

      I feel the same way. I was doing well when I read the mainstream media articles about saving, but finding this online community with people with bigger goals made me rethink what I was doing.

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