Throughout 2020 I have watched friends and family greatly
affected financially. Some have lost jobs, while others have kept working but
saw their hours drastically cut. And throughout this time they have had to rely
on support from friends and family just to get by. This started me thinking
about hard times I had financially when I was younger that started my change in
how I viewed money. My experience was a breaking point for me. I realized then,
I needed to make a change in how I handled my finances so that when hard times
hit again I would be better able to handle it.
Now, first of all when I right my articles, I am not trying
to stand on a high horse and say do what I do, you will be better in your
finances. I write these articles because I have had hard times just like anyone
else and have learned from my hardships, how to make better decisions as well.
I have also known people who have made financial mistakes and been fortunate to
learn from both.
In this article I want to tell you my very un-American way I
purchased my house and how that decision is also making it possible to pay my
house off in 4 years (a complete surprise to me). How a job shake up that
resulted in a large number of people being laid off and my job being changed
from full-time to a part-time position helped reshape my financial decisions.
How this experience made it where I now follow my mother’s advice to always
have a deep freezer and buy meats and vegetables on sale for hard times and a
pantry full of canned and dry goods.
Back around 2000 I was doing fine, I thought, and had a
decent job to pay my bills. I was in my last year of college, which I was able
to pay my own way with cash. I was not staying on campus so I was only paying
for classes and books. I was cooking at home, driving a paid for car and living
cheap. I lived in a low income neighborhood with a mortgage around $432, plus
about $100 electricity, $60 phone, $10 water and local (free) television only.
Then around the beginning of 2001, before I graduated
college, my job had a layoff. I was lucky and didn’t get laid off, but was
dutifully informed my job was being switched from full-time to part-time. Doing
the math, I realized I still had enough money to pay all my bills and keep gas
in my car. But I was only left with $20 for food for two weeks. That was a
shock for me. So I started thinking of things to do in the short term, while
preparing for college graduation and started the search for a full-time job.
I had about $2000 in savings for emergencies, with a steady
job that’s all I needed. Right? I didn’t want to touch that money just yet.
Keep in mind, I could have called my mother, who always had several deep
freezers full of food and cabinets full of can goods but I chose not to. My
thought process was that there will come a time when my mother will no longer
be there, and I may find myself in this situation again as jobs come and go.
True, my situation isn’t as bad as it could have been, but it was still a shock
and I wanted to work my way through it. If nothing more than to prove to myself
that I can work through anything.
So, I had always been a free hearted person, as my
Grandmother would call it. I had friends and family who would call or come by
periodically asking for $20 here or $40 there, or even more and I would let
them borrow it. Thinking, I was helping
them and that if I ever needed them, they’d be there to help me as well. Hey I
had $2000 in the bank and a steady job, I could afford it right?
So, there were a few people who still owed me money and I
started making calls for the $20 one person still owed me and the $40 from two
other people. The answers I received was, I don’t have it to let you borrow it.
Then when I reminded them, they still owed me money. I got the, I don’t have
money to spare speech and even one person told me I didn’t have to let them have
the money in the first place, that was my fault. So, I just learned lesson one
in life, not everyone you think are friends are really true friends. And even
family sometimes are only around you to get what they can from you.
So then I decided I will see if I qualify for food stamps.
So, I ventured to the food stamp office, parked my paid off six year old base
model sedan among a sea of expensive cars like Cadillac Escalades and
Corvettes, confident I would get some help. Then I have my meeting and disclose
my financial situation. Then I was asked if I have a car. I said yes, but it’s
paid for and I only pay for gas to get to work and school. So I had to give the
make, model and year. Then I was informed my car was worth $5,000 and if I want
food stamps I need to sell my car. A paid for car, really? I can see if I had a
note. So, I was dutifully denied.
All of this was my breaking point and decided then and
there, I will make it out of this situation and will never be in this situation
again. I then started trying to figure out ways to make my $20 stretch. This
took a thought process. My mother was raised by, and learned how to cook from
her Grandmother who was born in 1909. So, she learned and taught me the long
way of cooking with lots of ingredients and seasonings. This doesn’t transfer
into spending $20 for two weeks of food. I will say that I rarely ate twice a
day, usually once a day because of my schedule. I was a working a full time job
and a full time student. I would eat lunch between classes and sleep and do
homework the other times.
One savior was a friend of mine who had six kids and taught
me how to make a chicken casserole cheap. It was actually enough for 10 days.
Then there was basic spaghetti without ground beef, which started me on my
journey to find other five ingredients of less meals to stretch my money. So, I
wasn’t eating everything I wanted but I wasn’t hungry either.
Fast forward, I graduated from college and got an entry
level job with the state making $15,000 a year. Then I picked up a part-time 20
hour a week job to go along with it. Since I was still living cheap, I was able
to pay all my bills and eat with my full time job and the money from my
part-time job went straight to savings to build up a hefty emergency fund. This
account eventually grew to $10,000 that ended up coming in handy when I finally
landed a job with the federal government that required me to move across
country. Being able to make this move
with cash was a breath of fresh air. That is when I realized the benefits of an
emergency funds and living on budget.
Now as a federal employee, I kept the same mindset of living
on less. Yes, I was able to upgrade my housing to an apartment in a middle
class neighborhood but I didn’t go out and buy a house immediately. Living in
an apartment for $730 a month plus $60 a month electricity, $30 for internet
but water and cable included. I also had a few other bills like car insurance,
renters insurance, Roth IRA, and fuel for my car, I was still able to split the
rest of my money up into four categories.
1.
Rebuild my emergency fund to 6 months.
2.
Have a small savings account of $2,000 separate
from emergency fund for going out and small things that sometimes come up.
3.
Pay off all bills….car, credit cards etc. to be
debt free.
4.
Contribute to my TSP (or 401k for non-federal
employees), to secure my retirement.
This took some time, it wasn’t an overnight plan. Saving the
$2,000 took less than a year. I saved about $50-$100 a pay check. I took me
four years to save up a nine month emergency fund, four years before I was able
to max out my TSP, which at the time was $17,500 a year, and five years to
extinguish all debt. This all ran concurrent, so that after five years at my
new job I was debt free with a healthy emergency fund and retirement account on
the way.
After this I set my sighs on a buying a house. I started
looking at neighborhoods, I would like to live in and what those houses cost. I
continued saving into my emergency fund until I reached a years’ worth of
expenses at the same time I was building the $2,000 separate savings account
into a house fund. Remember, I was still living cheaply in an apartment with no
debt and a nine month emergency fund already. It took me three more years to
save enough money for 20% down on a $200k house plus an extra $10k for any
improvements needed for whichever house I chose. So, after eight years at my
new job, I was finally debt free with a fully funded emergency fund and closing
on a house with a 15 year mortgage. Then just over two years later Covid-19
hit. Wow. I am now watching not only friend and family but people around the
country facing job losses or cut hours and not knowing how they are going to
make it. Although I am secure in my job it still brought back those old
memories and my determination to secure my lifestyle and future.
With Covid-19 stopping most if not all travel and eating
out, I cooked more and rotated through the food in my deep freezer and pantry.
Brought back all of those five ingredient or less meals I learned to cook years
ago while researching new ones. I also took the extra money I wasn’t spending
on vacations, eating out and purchases from nonsense browsing and just started
adding it to principle on my house. So much so that I realized that now about a
year and a half into Covid that I only owe $40,000 on my house. Holy crap, I
couldn’t believe it. I event started back tracking to figure out how I go
there. Then I realized my old issues sparked a positive change and that if I
could continue on this path by the end of the year, my Christmas present to
myself will be liquidating part of my emergency fund to pay off my remaining
mortgage. This is changing my fifteen year mortgage into a four year mortgage
while still having a twelve month emergency fund for expenses even though the
amount needed is much smaller.
I wrote this article to show that sometimes when situations
come and you feel like you have the world on your shoulders. Those hardships
can turn into invaluable learning experiences if you are willing to pay
attention, just like it did for me.
Ms. Smart
