Saturday, March 21, 2009

Money Matters: Financial Origins

Welcome to LA Cheapskate. My vision is for this to be a resource for readers who want to learn to increase their financial knowledge, improve their financial habits, and in general, achieve a better quality of life by changing the way they think about money.

I'll start with a little background on myself to give you an idea of where I am coming from and where I am headed. I am a former Pacific Northwesterner who spent most of my life in Oregon and Washington. I grew up in a two parent home, typical middle class family of five with two sisters. My mother worked a typical 8 to 5 accounting job and my father was a self employed car hobbyist and mechanic. Having a mother in the traditional workforce taught me a lot about commitment and responsibility. Having an entreprenuer for a father taught me a lot about the value of mastering a craft and the rewards of being self sufficient. We had our times of good fortune as well as weeks of getting by on Cup O' Noodles and Rice Puffs Cereal.

Most people would categorize me as an overachiever. In high school and college I chose to focus on my education and extra curricular activities rather than jumping into the work force. I figured if I was going to make the investment to get a higher education, then I wanted to do everything I could to get a return on that investment which would eventually lead to a career and pay itself back. I worked my tail off in class and through academic scholarships, government assistance, and some low interest student loans I managed to come away from a $100,000 education, with only $15,000 of debt.

For the first few years after college I pursued a Masters Degree in Theology as I considered a career in ministry. But around the time that my husband, Don, and I got engaged, is when I really started thinking for the first time about what I wanted out of life and how finances fit into the picture. I came to discern that what was most important to me was being able to spend time with my family and friends and to live a healthy and balanced life. A vocation in ministry would constantly compete with my purest of needs requiring the ultimate sacrifice of time spent with my own family for the ability to tend to others. I realized for the first time that I wanted a job or a career that would not be the center of my life, but rather a means to support the life that I wanted to live.

During the early years of our marriage, my husband and I fresh out of school entered the job market and began working our way through the entry and mid level jobs scratching by on nominal wages- me in bankinge and Don in the marine and fabrication industry. One of the first things we learned when combining two people into a single household, was that not only did we enjoy the benefits of having two incomes, but we now also had twice the debt. I won't say who brought what with them, but I still remember the first time we sat down to do our debt schedule together and discovered that between the two of us as young twenty somethings, we had a combined total of approximately $90,000 in debt and no assets to speak of.

I think it says something that I can look back on that figure now and barely blink an eye. We made a decision right then and there that we were going to manage our debt and not let our debt manage us. We determined what our financial priorities were, set goals, and crafted out a budget. We didn't always have the same feelings and agree on everything financial but it helped us to be on the same page and focused from the beginning. We consolidated what we could up front in low interest student loans to get our monthly payments under control and then just started attacking each account in order with the lowest balance to eliminate as many debts as we could one after another. Certainly it was a high pricetag to pay, but we achieved greater financial wisdom and better financial habits than we ever would have otherwise.

Both of our careers continued to advance as I went from banking in general to a more specialized career in equipment financing. Don went from purchaser to assistant warehouse manager. Then one day he got the call from the company that they wanted him to consider relocating and taking a management position in one of their LA facilities. The offer came out of the blue and because we had our finances under control, we were able to take the offer and start a new chapter in our lives.

With our move to LA, both Don and I both made the jump to middle management at the same time and saw our salaries increase to more than double anything we had made previously. Within the first six months it even tripled when Don was promoted a second time to a technical sales position. We encountered a long season of prosperity, enjoyed life a bit, payed down our original debts to less than half of what we started with, and for the first time in our lives started building a savings account. In the first three months of my job I was laid off due to company finances and we learned how to negotiate with one income without getting sidetracked from our goals while I looked for work. Happily I landed in a much better position which came with longterm stability and further opportunities for career advancement.

For more than a year we never once had to worry or stress about money. Anything we wanted we could have and we didn't have to think twice. We made our first major purchase as a couple financing a car together and started taking deliberate steps toward our second major purchase, saving $10,000 towards a down payment for a home. However, while Don continued to do well in his own career, the company began to suffer as our nation entered a period of economic crisis. Once again, we became a statistic of the economy when Don was laid off along with 20% of the workforce. Thankfully we had already been through this once and had the forsight to know that it would happen again in our lifetime. We knew we would survive but the biggest disappointment was knowing that our dream of homeownership which we were finally getting so close to was now going to be put off for some time.

You would think the loss of income would be really difficult. It has its moments but it's not that bad. I certainly look forward to future times of prosperity and I firmly believe that this transition will lead to better opportunities for my husband as it did for me. Of course I am human and I desire stability like everyone else. But I have learned through life experience that it takes much less resources than we are led to believe in this culture to achieve stability. It is indeed possible to live a very full and rich life on very little income, if you are conscious about what is important to you and a little bit disciplined and creative with how you apply your resources. To me, the best sign of financial freedom is when your money is working for you instead of the other way around. We spend so much time trying to figure out how we can get more money so that we can get the things we want. In my life I've tried to make a very simple shift to identify the ultimate things that are truly important to me - time with family and friends, health, joy, security - and let my money work for me by finding ways to stretch my dollars further and achieve these things for the least amount of cost.

I hope in the posts to follow that you will start to contemplate and understand your own relationship with money better in order to achieve greater financial freedom and a more fulfilling life.

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