We are nearing approximately one year since I started on this path toward financial independence, so I thought it might be a good idea to stop and see how far I have come thus far.
At the onset of this journey I was in panic territory. As I have stated previously I have always prioritized saving and investing so I assumed that I was in good shape. However, at this point last year I received a call from the property manager overseeing some of my rental properties informing me that one of my units needed a new stove. This is a small property and it only required a smaller appliance. “No problem,” I said. I hung up and immediately called a supplier. When trying to check out, my credit card was rejected. I tried another one, same result. I quickly went online to check my Home Equity Line of Credit and sure enough, it was maxed out as well. I had no money, no credit, etc. How did this happen? I was GOOD with money…. perhaps not!! It was that point that I decided that I needed to make some changes.
I started this change by decided to sell one of my rental properties. I had a tenant just move out of one property, so I decided to go see it. It was well “lived in” so it would definitely require some investment to get it sale-ready. My enthusiasm was quickly drained as I remembered that I had no cash available to me and no credit either. I spoke with another investor who also had a repair side-business. He was willing to finance the repairs. The loan was akin to a hard money loan in that it carried heavy interest rates but based on my calculations and the estimates from the repair company on the timeline for the work, it seemed to be worth it. Fast forward and the work was done beautifully, and I put the property up for sale. On the first day of the listing I received multiple offers, all above the asking price. This was the start of a strong real estate market in the area where this property was located. I accepted an offer and moved quickly to closing. Once that happened, I used the proceeds to pay off my credit cards, which amounted to approximately $30k. I used remaining proceeds to open an investment account at Vanguard. The next move was to set up an automatic transfer of funds into the Vanguard account. I couldn’t afford much at that point, so I set it up to move $100 on the date of each payday going forward.
I then turned my attention to the next item of consumer debt that I had. This was a bank loan on my wife’s car. This amounted to approximately $25k at that time. My monthly budget at that time included payments of $1000 on my main credit card, $300 on my secondary credit card, $300 on my line of credit and just over $400 on the car payment. So, for those four items my monthly budget was $2000. Since the credit cards were paid off, this freed up additional resources to put toward other items. I started chunking payments toward the car loan. If I used the credit cards, I made sure to pay them in full each month and then make the usual $300 payment on my line of credit and then I would funnel all remaining monies to the car loan. In less than a year, the car loan was paid in full.
At that point I had a choice to make. I could either take the same approach and start chunking payments on my line of credit, but I decided that I would at least take the $400 per month that I was paying on the car loan and move that into the investment account. So, I inched my automatic transfer by an additional $200 per pay period.
So here we are one year beyond where I started, and I have paid the credit cards off in full and have paid them in full each month since then. I have retired the car loan and added monthly moves into my investment account. During this time, I have also upped my 401k contributions from 10% to 12%. Every few months I increased this by 1% and then get used to the change in my take home pay amount. As you might have guessed, there is almost no impact at all in taking an additional 1% out of your paycheck pre-tax. I know my journey is not extreme and not uncommon in this community, but I am pretty proud of the progress I have made and seeing it written out in this post re-energizes me to keep this train rolling. I cannot wait to write a similar post at this time next year and see what progress continues to be made.