5 Top Changes I Made to Improve My Financial Life (continued)

What are the top changes we made to improve our finances?  Below continues the discussion of the top 5 things we did that I feel had the largest and most immediate impact.  This is the fourth entry of five.

4. Extra Payments on Debt

When I decided to tackle my debt, the first and most obvious target were the maxed-out credit cards.  They did have higher interest rates than other forms of debt that I wanted to eliminate but perhaps more importantly, they clearly represented the bad decisions that I had made and that I was committing myself to not make going forward. As mentioned previously, I worked very hard to reduce monthly expenses.  This represented newly freed up money in the budget each month.  I knew that I had to deploy those resources on a new goal or risk those savings being lost in normal month-to-month lifestyle creep.

I had one credit card that I considered my “main” card and another that was only for emergencies.  Somehow, I had managed to max them both out to the tune of over $30,000 combined.  My normal monthly budget called for a $1000 regular payment on my main card and a $300 regular payment on the secondary card.  These payments were made each month regardless of the balance.  Sadly, I was spending way more than that $1300 per month on the cards.  The secondary card had a smaller credit limit so naturally it carried a smaller overall balance.  I decided to eliminate that balance first and then apply that additional $300 per month to the main card.  By making these lump sum payments on my smaller credit card, while choosing not to add new charges to that card, I was able to eliminate the balance on that card in a little over 3 months.  I then applied all monies that were going to that card, along with the originally budgeted $1000 per month to my main credit card balance.  This card had a larger balance and was my main card for normal monthly expenditures so tackling this debt proved a little more challenging.  However, I was committed to getting out of credit card debt, so I worked very hard to minimize any new charges to this account.  Through these moves I was able to pay off this balance in approximately 6 months.  Since that time, which is almost one year ago at this point, I have paid the balance, if any, on each card monthly.  I have noticed that our spending has started to creep up again and I will need to address that, but I have remained diligent in paying off the cards in full each month.

Once I had the credit cards under control, I turned my eye to our Automobile Loan.  At that time, the balance on this loan was a bit over $20,000 and our monthly payment was just under $425 per month.  My previous budgeted amount for credit card debt plus car payment amounted to $1,725 per month.  It would have made perfect sense to dedicate that entire amount to this new debt until it was gone but I decided to go in a different direction.  I have hinted that I have rental real estate and I will talk more about that someday soon but at this point in the journey I was making great progress, but I wanted to turbocharge my efforts.  One of my rental properties had become vacant and rather than re-rent it, I decided to sell that one unit since the local real estate market was soaring.  Unfortunately, when inspecting the property at the turnover, I noticed that it needed quite a bit of work to get it prepared to sell and take advantage of the market.  I quickly enlisted the help of a firm that I work with to have the work done and simultaneously engaged with a local realtor friend to make sure that I focused on the improvements that would have the greatest impact on buyers.  This work was done in about a month’s time and I listed the house.  On the very first day it was listed, I received multiple offers and I accepted the best one.  I had held this property for almost ten years but still carried a mortgage on the property.  After all costs and paying off the mortgage, I netted a decent profit.  I applied approximately $10,000 of that to the car loan and used the rest to fund a new investment account at Vanguard.  I then began applying the budgeted $1,725 per month to the remaining balance on the loan.  I added to this anytime I could find additional funds in the monthly budget and miraculously I was able to pay the remainder in about 6 months.

While the credit cards carried higher interest rates and a combined balance that was higher than the car loan amount, paying off the car loan was much more satisfying for some reason.  My wife and I scheduled a meeting with our local banker to close the auto loan and walking out of our bank branch that evening, I felt several inches taller.  I realized this was the first time in my adult life that I was without a car payment.

With those bases covered, it was time to start attacking any remaining debt.  When I analyzed my finances more closely, I realized the only remaining personal debt was rooted in my home.  I would be happy to report that this consisted only of my primary mortgage but that was not the case.  I was carrying a large balance on a Home Equity Line of Credit (HELOC).  I had applied for a large HELOC at a time when home prices were skyrocketing, and lending requirements were fairly loose.  I then managed to max out that credit instrument almost as quickly as I did the credit cards.  I primarily used these funds to finance investment real estate, so I always viewed this a “good debt” but it was debt nonetheless.  At present, I am tackling that portion of my debt.  That battle is on-going, but I am making strong progress.  As of this writing, I have reduced the balance on that debt by approximately 30%.  I will continue to make extra payments until this item is eliminated.  At that point, I plan on tackling my primary mortgage in much the same way.  The real challenge begins when I am completely debt free.  I will need to battle complacency and ensure that I do not fall back into past bad behaviors and make sure that I lock in the savings that I have fought so hard to realize and move those monies to investments.  I will discuss that more in the next post.

5 Top Changes I Made to Improve My Financial Life (continued)

What are the top changes we made to improve our finances?  Below continues the discussion of the top 5 things we did that I feel had the largest and most immediate impact.  This is the third entry of five.

3. Make More Money

On almost every personal finance podcast, I listen to, the host will make a comment that the best way to fix your financial situation is to make more money.  It is almost a throw-away comment as if making more money were simply a decision you make.  Make more money…. Why didn’t I think of that?  If you are like me, you are probably working your tail off and feeling frustrated at the lack of progress.  Now I am not in any way complaining about my situation.  I work very hard, but I am also paid pretty nicely for what I do.  Yet somehow there was never enough money at the end of each month.  Where does it all go?  Well, as I mentioned in the previous entry, it seemed like quite a bit went to restaurants, bars and grocery stores.  But then there were other decisions such as financing cars.  My wife and I were pretty proud of ourselves when we decided we would never have more than one car loan at a time.  We almost broke our arms trying to pat ourselves on the back since we were sooo much smarter than our friends in this regard.  Of course, the cars got nicer and nicer as we got older and made more money, so those car payments grew and grew.  There were several other places where our money was flying out of our accounts and all of those added up to too much month at the end of the money, as they say.

We worked very hard (and continue to do so) to reduce our spending.  However, this was not quite enough.  If we wanted to turbo charge our finances and put us in a position where I could possibly retire earlier than age 65, we would also need to make more money.  How do we do that?  Well there is always the idea of creating a side hustle.  Again, if you listen to podcasters, this is the first thing mentioned when they say make more money.  Maybe for some people this idea comes easy but for me, I would love the idea of a side-hustle but WHAT? Also, my day job requires so much time that I would have to factor in the WHEN as well.  I love the idea of building something on the side, but I just don’t have that idea that is nagging at me of what to do.  I guess you can say that I already have a side hustle in real estate investment.  (I haven’t talked about my real estate adventures yet but will do that at some point in the future.)  For now, I need to figure out a way to make more money.  That leaves my current day job.  My situation is confounding in that I am pretty good at what I do and get paid well but I just don’t enjoy it.  I don’t find the work satisfying in the least.  I spent much of my career in Operations.  This is a rather vague department title and most people had no idea what I actually did for a living.  In a nutshell I was in the business of helping businesses run properly.  This varied depending on the needs of the company that I was working for at the time.  It also made job searching difficult during slow economic times because this is an area that most companies feel can be filled from within their current ranks.  In the early 2000’s we hit one of those slow economic times and I found myself out of work.  This lasted almost two years. During that time, I did some freelance consulting, so it wasn’t a straight two years of bleakness.  I also was able to collect a little unemployment during the beginning of this period.  However, it didn’t take long for my family to run through our savings, especially when you factor in how out of control our spending was back then.  So, I came to the realization that I needed to find work and find it fast.  I had to change something in my search since what I was doing was not working.  This led me to broaden my search and start looking for a job rather than just a career position.  Through a friend I learned of an opening at a company that was looking for a Quality Assurance Consultant.  Just out of college I had worked in Quality Assurance for a video game publisher.  This amounted to play-testing video games for 40-60 hours per week.  This was NOT a technical job.  I was worried that I wouldn’t even be qualified for this new role but quickly learned that what was needed was not a technical QA consultant but someone that could organize, train and supervise the internal staff that was tasked with testing the company’s applications.  I interviewed for the role and got it.  It was not a very high paying role, nor was it scheduled to last very long.  But a job is a job.  I was back on the road to being a useful member of society.

The main goal of this role was accomplished in fairly short order, but the company liked my work and quickly moved me into the role of Project Manager.  They were creating a new online platform for their customers to order services and needed someone to shepherd the project through.  That was over 10 years ago, and I have worked as a Project Manager ever since.  I have brought my Operations experience to the table and liken my approach more to Management Consulting than IT Consulting.  My current position has been a long serving role for a client who has come to rely heavily on my skills and experience.  Each time a project ends, they come up with another that they would like me to work on.  Throughout my time on the main project I was hired for, they had offered my full-time jobs in various roles.  They have experienced much turnover in their IT Leadership role and each time there was a change, they offered the position to me first.  I explained that I was not interested and that I did not think I was even the right resource for the role long-term.  At the conclusion of my main project with them, they were once again in need of someone to fill the IT Director position.  They decided to try a different approach and asked my company if I could fill the position as a consultant, rather than being requiring a full-time employee.  My company spoke with them and learned that this was a contract that they would only consider if I were the consultant and they needed a commitment of at least one year.  My company asked me to consider the role, knowing I was not very interested in it.  However, this was an important client to our firm as well as to me personally.  So, I considered the role and decided that I would do it.  I also realized that for this to make sense, I would need to negotiate a more reasonable package.  I knew that I was dealing from strength in that the client only wanted me for the role.  Additionally, this was a much higher profile role than a Project Manager so I knew there was an opportunity to structure a package that made sense for the client, my firm and myself.  A contract was negotiated and all parties appeared to be pleased with the results.  The terms of the contract; both the rate and the security of a one-year term; have played a very large role in helping me to pay off debt and has been a major spoke in the wheel of my journey to financial freedom.

I will be back soon with the remaining posts to discuss the five top changes I have made to improve my financial life but in the meantime I wanted to post something a little lighter and discuss some of the media I am consuming presently.  If this proves fun, maybe it is something I can repeat on a semi-regular basis.

What am I reading?

At the moment I am re-reading Your Money or Your Life by Joe Dominguez & Vicki Robin.  I read this for the first time about a year ago when I began the journey to change my financial life and it had a huge impact.  It had such a large impact that I have recommended it to several people and as one of my new year’s resolutions committed to reading it again in 2018.

 

What am I listening to?

I have really gotten into podcasts over the past year.  My current favorite podcast is Choose FI. I find this podcast to be incredibly helpful, producing many great tips and life hacks as well as pointing me in the direction of other great blogs, podcasts, books etc.  Once I stumbled upon it, it took me a bit to binge listen through from the first episode to the present and now that I have done so, I miss having a new episode at the ready every time I open my podcast player.

 

What am I watching?

I did not intend for this post to be all about finance but to be more of a look into what media I am consuming.  In looking at the above two responses, I guess I it shows that I do consume quite a bit of financially focused media.  What I am watching currently changes that a little bit.  I just started watching Tom Clancy’s Jack Ryan on Prime Video.  In my first sitting, I managed to run through 5 of the 8 episodes before needing a brain break.  It is an excellent show and I have really enjoyed it.  I have read all of Tom Clancy’s books that exist in the Jack Ryan universe and found the show to be a great new addition to that body of work.  My wife is interested in watching as well so that will be a great test to see if the material stands up when viewed by someone unfamiliar with the books or even the previous movies.

5 Top Changes I Made to Improve My Financial Life (continued)

 

What are the top changes we made to improve our finances?  Below continues the discussion of the top 5 things we did that I feel had the largest and most immediate impact.  This is the second entry of five.

2. Food: Reduce Groceries, Restaurants and Fast Food Spending

My first step in trying to get my financial life in order was to track where my money was going.  I pulled all bank and credit card statements for the previous few months and tracked every dollar.  I was blown away to learn that I was spending almost $2,000 per month on restaurants, fast food and bars.  These were not extravagant $500 dinners with the wife but lazy decisions to just order Chinese food instead of cook at home or to just swing by a drive-through for a quick lunch while running the kids around town.  Awareness was the first step and this revelation blew me away.  When I shared it with my wife, she had a similar reaction.  We agreed to be more thoughtful and plan our meals better.  We reduced this dramatically and kept it low for many months.  We still eat out when we want and don’t feel guilty about it but on the odd evening when the workday ends and dinner hasn’t been pre-planned the discussion about dinner doesn’t automatically turn to where will be order from.  We are more likely to head outside and grill something quick like hamburgers and hot dogs or throw together a quick pasta meal.

Additionally, our grocery spending was a little bloated.  My wife does the majority of the grocery shopping but as I tracked my spending, I noticed that in addition to her regularly scheduled grocery shopping trips, there were 10-15 side trips to the grocery store.  These little jaunts usually averaged $50 per visit.  Everyone runs out of milk from time to time and needs to run out quickly but each time I did that, the gallon of milk was joined by some snack or dessert that was not only detrimental to our budget but also our waistlines.

We did a few things to change in this category.  We joined Costco, switched from the regular grocery store to Aldi and we planned our meals a little more thoroughly than we have in the past.  Costco is great for savings but can also be dangerous if you are not disciplined.  I found that the first few times we visited, we would come out having spent almost $200 per visit.  They have so many things and the deals appear to be so great that we would simply fill our cart and be happy that we were getting great bargains.  However, when we got home and unpacked, we would realize that we bought several things that we just didn’t need.  We now enter the store only if we have a list and we do our best to stick to the list and get out.  Now, our average visit costs about $100 and we only buy things we need and use on a regular basis.  This shopping visit includes things that make sense for us to buy in bulk such as milk, eggs, toilet paper, dog food and others.  The savings is significant.

Similarly, the switch to Aldi combined more conscious shopping with a store that has better pricing.  Aldi is not available in all areas but we are fortunate enough to have one in our neighborhood and is located in the same area as the regular grocery store that we used to visit.  So there is no additional inconvenience to go to one versus the other.  Aldi doesn’t present the same marketing tactics as other stores and as such, it is easier to go in and stick to a list.  It is pretty rare when we pick up something that hadn’t planned on buying before we went in.

Overall, I would say that we save approximately $200 per month or $2,400 per year on groceries. Add to that a savings of approximately $1,500 per month or $18,000 per year on restaurant and fast food spending.  We are not very extreme in this area and only made small changes and the impact has been significant.  There are some excellent blogs and podcasts out there that are more extreme in the area of meal planning, couponing, etc that would increase our savings but even the small changes we have made have led to savings of over $20,000 each year.

 

Total Annual Savings:  $20,400.00

 

What changes have you made that were the most impactful?  Feel free to add them in the comments.

 

5 Top Changes I Made to Improve My Financial Life

 

What are the top changes we made to improve our finances?  Below begins a discussion of the top 5 things we did that I feel had the largest and most immediate impact.  We will detail a different change in each of the next five posts.

 

1. Cut the Cord

When I started analyzing my expenses I knew there were some easy wins to be had by analyzing and changing our entertainment expenses.  We subscribed to an all-in-one cable package where we had Cable TV, Internet and Telephone through our local cable company.  I had been trying to convince my wife for years to eliminate the telephone since this was only used by her and even that it was seldom used when compared with her cell phone.  She was very attached to this and came up with several very creative excuses.  My favorite was that she liked to cradle the phone between her ear and shoulder while multi-tasking and could not do this with a cell phone.  I basically just wrote this off as a loss and moved on.  However, when I became dedicated to making some changes in our financial lives, she reluctantly agreed to eliminate the home telephone, at least on a trial basis.  At this time our cable bill was approximately $248 per month.  Add to this our monthly Netflix subscription of approximately $10 per month and our annual subscription to Amazon Prime at $100 and our total annual expenses in this area came to roughly $3,200.  We decided to keep our Prime membership and Netflix subscription and also to add Sling TV service.  We chose Sling since it offered key channels such as ESPN and others.  The level of service that we selected came to $20 per month.  Next we had to tackle our internet.  We decided to stay with our current provider but upon reviewing our monthly bill we noticed that we were paying $15 per month to rent their cable modem equipment.  Through some quick searching we found a cable modem on Amazon (luckily taking advantage of Amazon Prime Day deals) for $40.  We purchased this item and with one quick phone call had it set up with our provider and returned their equipment.  Our internet only charges were $40 per month.

Total cost before the changeover:

• $2,976 per year for Cable, Internet, Phone
• $120 per year for Netflix
• $99 per year for Amazon Prime
• Total: $3,195

New costs:

• $40 one-time charge for new equipment
• $480 per year for Internet service
• $239.88 per year for Sling TV
• $120 per year for Netflix
• $99 per year for Amazon Prime
• Total: $978.88 the first year, $938.88 thereafter

Total Annual Savings:  $2,256.12

 

*NOTE:  Internet service prices were raised to $46/month.  One phone call to my service provider and I was able to negotiate that down to $36/month if I signed a 2-year contract.  Since I have had the same provider for 14 years, I didn’t think this was an issue.  Additional annual savings of $48.

 

As someone who has made leadership my life’s work, I take it very seriously. It is a craft that requires intense focus, daily attention and strong adherence to principles. While several principles play a role in leadership success, the key principle I believe in is explaining the “why” behind actions taken or decisions made.

A Key Principle

Jocko Willink discusses this principle very clearly in his book Extreme Ownership:  How Navy Seals Lead and Win. The underlying point of this principle is that any miscommunication needs to be owned by the leader. It is their responsibility to explain the reasons behind their decision or request. If the subordinate understands the why, they will get behind it and put in their full effort.  If they don’t understand the why, and its downstream impact on their world, they may still execute the tasks but you will not necessarily have their full buy-in. In worst cases, the subordinate may even sabotage the effort.

To ensure a successful outcome, I often sit for hours with the managers and team members in my charge. We talk through any confusion or objections to be certain they understand the impact of the requested task on the business as a whole. We do not break the huddle until I am confident the task is understood and the necessary buy-in is achieved to execute the task successfully. In my 30 years of experience in leadership positions, this approach has resulted in great success. Not only are tasks usually executed properly, but team cohesion is enhanced and strengthened.

Manager vs Leader

By contrast, you have managers (I make the distinction here very clear, because these are not leaders in my eyes) who rely on position or title to get things done. They commonly use phrases like “because I said so…” or “you don’t need to know my reasons…”  I find these leaders to be insecure in their position or worse, they don’t fully understand the “why” of the situation themselves. Often, they didn’t bother to go back to their manager to ask follow-up questions and now fear being exposed.

This type of manager will never be successful for sustained periods of time. They may rise to power briefly based on an ability to get things done in a certain organization, but that type of leadership is almost always accompanied by a total lack of ability to attract and retain good people. Too often, they hire and promote weak team members who don’t question directives or seek the “why”. This cycle will repeat itself over and over until the organizational culture is “Just do what I say.”

A Consultant’s Perspective

As a consultant, I work with many types of organizations. Often, the “just do what I say” organizations think there is a magic pill to fix their problems… hire a consultant. However, this type of organization is least suited to heed a consultant’s advice. It is often dismissed with the rationale that “they just don’t understand our culture” or “they don’t have all the necessary information.” Typically, managers in these organizations recognize the value of the advice but are incapable of admitting they may be a strong contributor to the issues. If the consultant is good at their practice, they will continue to offer advice—whether it is heeded or not. A true professional, will work hard to alter their message or delivery approach to ensure the message gets through.

Exception vs Rule

Unfortunately, that type of leadership consultant is the exception rather than the rule. More often, the consultant gets frustrated with the lack of action or change and simply gives up. They stop offering advice and rationalize their action with thoughts like “they will never change, they don’t really want to change, or they simply want to appear that they are open to change.” The key is to be part of the exception group. Trust in your process and the proven leadership principles you have learned over the years. Don’t let the current short-term situation negate the past experiences when it worked.

A Lonely Road

The challenge with this approach is that you oftentimes feel like you are alone on an island or speaking a different language. Leadership can be a very lonely position, that is at times often accompanied by questions and doubts. The key is to persevere and trust in your training and experience. Seek advice from a mentor to reinforce your resolve. Stay true and always remember, if the client had it all figured out, they wouldn’t have needed your assistance to begin with.

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.

I thought to begin this blog, it might make sense to list out various decisions that I have made in the past that led me to believe I was “good with money” or those that I didn’t mind making because I had already labeled myself as being good with money.

 

One such decision surrounded car buying.

 

I come from a family that has always struggled financially.  My father was a mechanic and my mother was a hairdresser.  We were not exactly being recruited for an episode of Lifestyles of the Rich and Famous.  Making us even more conscious of this was the fact that we lived in an incredible affluent area.  We grew up on the North Shore of Long Island, NY.  This is a section of the country nicknamed the Gold Coast.  The parking lot of the public High School that I attended looked like an auto show.  There were BMW’s, Mercedes, Jeeps, etc.  One classmate actually got dropped off each day in a limousine that her father rode to his Wall Street job.  Despite this class differential, on the 17^th birthday of each child in my family, we received a car from our parents.  It was not a new car by any means.  As mentioned, my father was a mechanic, so leading up to each of our birthdays he would find a fixer-upper and he would work on it after hours until it was considered road worthy enough for him to trust it to carry his child around.  My car was a 1978 Volkswagen Dasher.  It was a great car with many little characteristics that I remember to this day.  The first was that although it had an automatic transmission, there was an issue that forced the driver to shift gears manually.  For example, from a stopped position, I would have to put the car is 1^st gear, then shift to second gear and finally up to Drive once it had some momentum.  While this may have embarrassed some teens, I loved it.  The other “feature” this car had was a stereo that had a cassette single stuck in the tape deck which allowed just one single song to play if you wanted music.  If you chose to listen to this one song, the speakers were such that it sounded like the artist was singing under water.  It was really quite the ride.

Having had this vehicle and comparing it daily to the much nicer cars of my classmate is something that always stuck with me.  I often day dreamed about getting a new car once I had the income to do so.  Once I got my first real job after college, I quickly went out and purchased a gently used BMW.  It was beautiful and of course it was financed.  I made those payments religiously.  It cost approximately 50% of my take home pay and ensured that I would be living with my parents much longer than should have been necessary, but I did not care.  This was the first of many car financing arrangements.

 

Fast forward to later in life when I got married.  My wife had her own car and it was fully paid for.  As we sat down to discuss our future finances, we determined then and there that we would only ever have one car payment.  We would not upgrade (and finance) either of our cars until the other car was fully paid for. The fact that this type of thinking was very much better than most of my friends and family, I patted myself on the back for having such a strong financial base to work from.

 

If I took the time to go back and calculate exactly how much money I have paid in interest on those loans and then take the further step of calculating the present value of those dollars had I invested that money instead, it would most likely be a shock to my system that I may not recover from.

 

My current auto situation is much better.  Approximately two years ago, my wife was in “need” of a newer car.  I started doubling my monthly payments on my car loan and got it paid off fairly quickly.  This allowed us to search for a newer vehicle for my wife.  We purchased a 2011 Ford Explorer and of course we financed it.  Now that I have embraced a more frugal lifestyle and decided to follow the Financial Independence principles, I have started to power pay the loan for that car.  In a very short period of time, I can now report that I have paid the note off in full.  The very next day, I adjusted my auto-investment into Vanguard in the amount of the monthly payment I used to make on the car.  While I do have an SUV which is not the most economical and the car is probably newer than we need, I consider this a small victory.  Onward and upwards.