Post note - I'm curious to hear others' experiences. A lot of the posts on this subreddit are talking about rough situations, so I wanted to post something that was more upbeat in nature. It's a bit long, like most of my posts, but the gist is - slight sacrifice in my early 20s has helped me achieve my own version of financial freedom by my late 20s.
I'll never forget my first lesson in personal finance. When I was 12 years old, I wanted to go to the movies with my friends - they were all going unchaperoned, and I couldn't stand the thought of saying no because an adult had to be there. I asked my parents, and they said, simply, "If you don't need an adult to go with you, you don't need an adult to pay for you."
It was simple; it was easy for me to understand; it stuck with me ever since. If I wanted freedom - true freedom - then I needed to be able to pay for it. When I was 14, I got my first job, as a camp counselor. I got to keep half of my earnings, but my parents took the other half to put toward my education - they sacrificed to put me through private school, but I needed to have some skin in the game as well, even though $400 doesn't really go so far. Throughout adolescence, it was the same story.
I went to a private university - one of the ones where there was conspicuous wealth, one of the ones where, when I said I couldn't afford to get the newest, most advanced gadget, my classmates encouraged me simply to put it on my student account. "Your parents just see the charge, not what it's for!" they said. How could I, though? My parents were already paying for my education (I heard about that all the time!); wouldn't it be dishonest of me to charge something to a credit account for which my parents couldn't even see the line items?
My friends often went on extravagant spring break trips; I worked over my spring breaks. A student group I was in did travel every year, and we did get to go to far off lands, but I was able to go only because I saved all of the money I could scrape together to pay for it myself.
When I got my first job, I was thrilled, but my pay was average. As I got to know my coworkers, most of whom were my age or a couple years older, I saw them spending lavishly. They got top tier apartments and nicer cars; they ate out five nights a week and bought their lunch every day; they went on at least one foreign vacation a year. I thought that they had to make much more than I did, but as time went on, I found that they were hamstrung by self-inflicted financial wounds. Now, they don't truly struggle, but they can't take steps in their lives that they wish they could.
All the while, I was saving 12% of my income for retirement, and though I couldn't save much, I forced myself to put away at least $200 a month toward savings, increasing that number any time I got a raise or bonus. I didn't go on vacations, and I cooked for myself most of the time (developing some pretty awesome cooking skills!). Every so often, I challenged myself to be more frugal without sacrificing my 20s. The result was (mostly) avoiding the lifestyle inflation that came with a series of healthy raises.
Today, I am married and thinking about children. We have taken a few vacations, but only because we earmarked savings to do so. We save 15% of our take-home pay (not including employer matches) in Roth retirement accounts and dedicate 18% of our take home pay toward building emergency reserves (our main emergency account will be fully-funded next month!). Each time we have gotten a raise, we have been certain to allow a little bit for ourselves and to put the rest toward our savings.
Surprise expenses are a reality for us, like they are for everyone. Last year, my car was hit while I was at work; the person who hit me didn't leave a note. The insurance deductible was $500, and due to a variety of reasons, we realized it was best to buy a new car (even knowing it was going to hit the Carfax, the dealer gave us a reasonable trade value on it, which wouldn't be the case once it actually hit the Carfax); to keep payments reasonable, we tossed in an extra $2,500. The next week, we took our dog to the vet for an ear infection, only to learn that she had cancer. The next week, she had surgery. In the span of three weeks, the vet cost upwards of $2,000. And, almost on cue, we discovered that we had an infestation of yellowjackets, the lawn mower broke, and the dishwasher quit.
After all was said and done, we wound up with $6,000 in unexpected expenses in under a month. Thankfully, we had been given sound advice and had planned for just this sort of series of events. We absorbed some of the cost into our monthly budget by sacrificing some of our typical expenses, and the rest came out of our emergency fund, which took about four months to repay.
The point of all this is to send the message that it is possible to build a nest egg without massive amounts of luck and/or an excessively high paycheck. It felt daunting when we were fresh out of college and with debt, but we started to see results after a while. The first milestone was a positive net worth. The next was knowing that our retirement was on track. The next was knowing that a job loss wouldn't mean our ruin. The most recent has been passing one year's salary in net worth. It went on and on until we realized that our hard work has given us what I had always wanted - freedom.
[note: a variation of this post appeared in The Atlantic in June; what appeared there was my original submission, and this is an updated version of that]
[edit: tried to shorten this monstrosity]
Submitted January 04, 2017 at 12:00PM by cjw_5110 http://ift.tt/2ib1IMK
